CRM in the Federal Sector - Insight into Action

By James RayTerry Bandy

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The Customer Service Imperative:Federal sector suppliers lag behind the private sector in adopting CRM as a driver of value. Traditional Customer Information Systems (CIS) have been premise centric as opposed to customer centric. In other words, the focus has been on transactions (from customer setup, shipping, fulfillment and billing) versus the development of customer relationships.

Yet customers are becoming increasingly sophisticated as they continually experience the benefits of enhanced customer service in other areas of their lives. Procurement changes have also had an impact. Many federal sector buyers are able to bypass traditional channels and procure directly from the private sector. Traditional buyers in the federal sector are beginning to demand enhanced customer service and more channels of interaction from their providers. To successfully address customer demand and prosper in the competitive environment, suppliers must implement holistic CRM solutions that support a well-rounded CRM strategy and address process and organizational issues.

One federal sector agency that is currently meeting all of these challenges in its transition from supplier to provider is the Defense Logistics Agency (DLA). Through its CRM and Business Systems Modernization efforts, the DLA is creating a marketing strategy to enhance customer loyalty, introducing tools that support that strategy, and enhancing customer service.

Strong CRM capabilities will enable other federal sector agencies to increase customer satisfaction and operational effectiveness by:

  • Developing customer loyalty through multi-channel customer support. Failing to protect the existing customer base from alternate procurement routes increases pressure to recover costs from a reduced customer base and further erodes competitive positioning.
  • Improving sales performance through effective tools. With new choices available to their customers, providers must strengthen sales capabilities to preserve and grow revenue. Tying procurement representatives to comprehensive customer profiles and field data yields quicker real-time demand assessment.
  • Enhancing the productivity of customer service operations through streamlined processes, enabled by sophisticated workflow and an intuitive user interface. Customer self-service can also reduce demands on staff, resulting in cost savings that can enhance competitive position while increasing customer satisfaction.

Shifting Business Models from Operational-Centric to Customer-Centric

Federal agency providers must develop enhanced customer relationship capabilities in an environment of intensifying cost pressures, decreasing budgets and increasing demands. Being selective about CRM investments, and recognizing the return on these investments, presents any agency executive team with a formidable challenge.

In recent years many agencies, including the DLA, have adopted an operational-centric model in which the most important element is to improve operations to reduce costs to the taxpayer. Agencies must undergo a shift from an exclusive focus on operational efficiency to include efforts that yield improved customer effectiveness. New investments in CRM solutions must leverage the customer information available from legacy enterprise Customer Information Systems (CIS) platforms. Agencies that recognize the interdependence of these systems are better positioned to migrate from the operational-centric to customer-centric business model.

One of the distinct benefits of shifting to a more customer-centric business model is that improved understanding of customers and their behavior will actually yield opportunities to better align business operations with anticipated customer requirements. The DLA's CRM initiative will allow it to gain customer insight and then translate this insight into action. For example, DLA has completed a market segment analysis to better understand who its customers are, what their specific needs are, and how DLA can best meet their needs.

Understanding the various market segments allows agencies to develop the most appropriate channel for conducting business with a given customer group. Certain customer segments and transaction types may be best served through various electronic channels (such as self-service web portals, live chat, and email) while other customer segments and transactions may require direct interaction with customer service representatives.

Impact of Customer-Centric Approaches and CRM Adoption on Federal Agency Performance

What is the result of adopting customer-centric orientations in federal agencies? Operational efficiencies are more easily achieved when the agency is able to effectively interpret demand signals and align operations to meet anticipated demand. Flexible staffing models that respond to variable customer demand (for sales and service) are one example of improved operational efficiencies. Agencies are able to provide higher levels of service and improve customer satisfaction. In short, agencies are better able to fulfill their mission to the American public.

Agencies that make the commitment to this organizational transformation must also be vigilant in managing their investments in CRM solutions. They may accelerate organizational results from their investments in the following ways:

  • Align investments in Information Technology (IT) with CRM Strategy/Customer Value Propositions.
  • Before committing to IT investments, agencies must establish the objectives related to customer strategy. Understanding the various customer segments served by the agency, and the unique value proposition that is appropriate to each segment, will provide much-needed guidance for making choices about IT investments.
  • Improve the alignment of business processes and organizational structure with organizational strategy and technology solution(s).

When value propositions for the customer segments to be served are well-defined, the business transformation team can better align business processes and organizational structures to deliver these value propositions. IT may enable new organizational forms and business processes that deliver greater value at lower costs.

  • Utilize effective program management for concurrent projects to manage risks and identify and resolve issues that threaten to delay realization of benefits.

Taking Action

Given the importance of becoming customer centric, it is not sufficient to merely undertake a CRM initiative. Private sector companies across many industries have attempted this and failed badly. Viability in the new market depends in large part on their successful transformation to a customer-centric organization.

Agencies should address seven critical success factors to ensure their journey is successful:

  • Define success

    In order to measure the success or failure of a CRM program, agencies should define what a successful CRM program means for their organization. It is essential to clearly identify the business objectives and associated metrics that will ensure an objective assessment of the program's impact.

  • Assess current health

    Once metrics have been defined, agencies should measure their current levels of customer service and establish a baseline set of metrics from which to measure improved performance.

  • Employ a phased approach

    Agencies beginning a new CRM program should start with a series of small, manageable projects that allow them to experience early success, build momentum and enthusiasm, and instill confidence that the long-term goal can be attained.

  • Build a well-rounded program

    Strategy, process, technology and organizational change should all be dimensions of a comprehensive CRM program. Deployment may be achieved in a phased fashion (e.g. strategy project first), but ultimately each dimension must be addressed and they must all be aligned with each other so that the end result is a comprehensive solution.

  • Solicit input and obtain support for CRM initiatives from all stakeholders

    Lack of sponsorship can kill a CRM initiative, as can lack of user acceptance. Solutions that do not result in an enhanced customer experience will not improve service or operational efficiency.

  • Treat CRM as a program, not a project

    It is important to think of CRM not as an event that ends when a technology solution is deployed, but as an ongoing, ever-changing business program that is integral to the overall agency, customer-centric business strategy. The success of a CRM program should be continually monitored and measured long after it is initially rolled out.

  • Make a commitment to change

    To achieve business transformation, agencies must embrace a customer-centric culture and take the steps necessary to execute effectively. Only then can they truly realize significant and measurable gains from their new CRM program.

Conclusion

To survive in the new federal sector environment, agencies must focus on becoming customer centric as a means to protecting and expanding revenue. Through steadfast commitment and by attending to critical success factors, agencies can transform themselves to truly customer centric organizations and increase customer satisfaction.

James Ray is vice president of Inforte's Business Services practice.

Terry Bandy is senior vice president and general manager of Inforte's Federal Sector practice.

Copyright © 2004 IDG Communications, Inc.

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