By Mitch Rosenbleeth,Tom SnarrCorrie DeCamp and Companies across virtually every industry sector in the United States have been cutting costs aggressively over the past three years to stabilize and grow profits in a tough economy. After years of "cutting" their way to prosperity, many companies are now re-focusing on top-line revenue growth to create shareholder value - a strategy that is highly in line with conventional wisdom, since a 1 percent increase in price often has a greater impact on the bottom line than a 10 percent decrease in cost. However, growing revenues profitably has never been as straightforward as taking dollars out of the cost structure. To achieve this, companies have launched a variety of growth initiatives: improving the customer experience; implementing up-selling and cross-selling efforts through call centers; increasing customer touch points through direct and telemarketing channels; improving sales force efficiencies; speeding new product introductions. Unfortunately, few of these initiatives have made a meaningful and sustainable contribution to ongoing revenues. Implementing a customer strategy and making significant strategic change is more difficult than most believe.Many companies have turned to Customer Relationship Management (CRM) solutions to solve such problems. CRM can be a powerful tool to understand customer needs and help derive additional value from customers. Developing the right customer strategy, aligning your organization to serve your customers, and establishing the supporting processes and tools for the strategy are all integral components of CRM. The promise of value creation through improved customer alignment and strategy plays out in enhanced capabilities in a variety of areas across the organization: 1) Improved customer acquisition and targeting enables extended reach and coverage, improved hit rates, funneling performance, and improved price realization. 2) Enhanced sales force efficiency can mean streamlined sales processes to achieve more transactions per salesperson. 3) Improved customer loyalty leads to greater retention of existing customers, reduction in support costs, and improvement in overall share of wallet through cross-selling and upselling.The ChallengeHowever, as many companies have learned, CRM is not a magic bullet. Managers who started out viewing CRM initiatives as the answer to all their problems are now bemoaning the ongoing cost and lack of useful functionality of their CRM solutions. Many CRM initiatives fail, and they generally fail for a predictable set of reasons:Relying on CRM when it is not the right tool for the job. Many companies commit to CRM solutions when in fact there are more appropriate tools to address the problem at hand. For instance, if you're trying to solve an acquisition or loyalty problem, you may be better off using an analytic tool and your existing data, rather than investing in a CRM tool that is not appropriate to the task. CRM is be a tremendously powerful tool when asked to perform the tasks it was designed to perform, but there are limits to its capabilities, and managers should understand exactly what CRM can and cannot do before committing to a major initiative.Counting on the software alone to produce value, rather than using the technology solution to support a sound, market-driven strategy. The lessons of spectacular ERP failures, under-utilized existing analytic capabilities, and countless other alphabet-soup initiatives have time and again demonstrated the perils of the technology tail wagging the business dog.Counting on a CRM package to deliver results "out-of-the-box." Perhaps out of fear of creating a configuration incompatible with future upgrades (another old ERP lesson), companies rarely commit the necessary effort or expense to fine-tune their implementations to capture the greatest value from the significant investments they make in their CRM solutions.Neglecting to integrate CRM throughout the business processes (sometimes halting a CRM implementation or declaring early success just to stop the bleeding. What's more, companies often inadvertently lock-in inefficient practices through their CRM implementations. Failing to segment customer data effectively - that is, seeking a "360 degree view" of the customer, when the majority of the benefit may stem from just a small portion of the data collected. In fact, collecting too much data is not only costly and burdensome; it can cause a company to lose focus on what's really important in realizing value from customers.For most companies, deriving maximum value from a CRM initiative means pinpointing a few key factors to know about the customer: often a small number of data will yield 90 percent of the value companies seek. Once a company understands the key factors that will make a difference, they're in a strong position to assess the exact technology needed to create the value - to build what's needed or to better leverage what is already in place. Once this assessment is complete, they're ready to proceed with CRM implementation and integration with existing systems.What Now?The challenges inherent in CRM implementation are equally daunting for companies that have already begun the process and for those who are still contemplating whether to take the leap. Regardless of where the company stands with regard to CRM, it is key that the firm has a market-driven customer strategy, along with a detailed understanding of all the requirements of the new tool-not just its features and functionality. Ideally, companies should start with a vision of how they would like to improve the value they provide to their customers and from there calculate exactly how the new tools will enable that strategy. They should understand exactly how much value these new capabilities provide to the organization, in terms of efficiencies and effectiveness and down to the bottom line. This understanding is key to getting the most out of any investment in CRM technology.The CRM Value AssessmentCRM value assessments can be applied to CRM initiatives at any stage of planning or development. Whether the company is just beginning to shape a customer strategy or whether they've had a CRM system in place for a year or more, the assessment can provide the company with vital information. To capture a comprehensive view of their CRM capabilities and how they serve the strategic and business objectives, a CRM assessment should encompass at least six key areas of evaluationVision and Strategy - Is the value add for customers well defined and measurable? Does the CRM strategy embody concrete, quantifiable targets? Is the CRM vision in line with the company's overall strategy?Overall Concept - Are marketing, sales, customer service, and IT all integrated into the CRM initiative? Are customer segments and service levels clearly defined? Are division leaders charged with responsibility for the overall success of the initiative?Organization - Are the new workflows integrated across functions? Are all processes aligned to customer needs? Are the new workflows and process implementations clearly defined?Change Management - Is there broad consciousness in the organization of the dimension of the change, including co-worker responsibilities? Are co-workers fully educated in the CRM concept, processes, and tools?Technology Concept - Is the CRM software fully integrated with existing the IT systems architecture? Is there a realistic plan for the software implementation?Risk Management - Is the project team formed and the project scope clearly defined? Is the control structure adapted to agreed-upon targets and methodology? Has an adequate risk management process been adopted and monitored?By assessing a CRM initiative along these six key dimensions, the assessment offers a complete diagnostic framework, tracking where the company stands on a continuum from entry-level to leading-edge CRM implementation. Working through an assessment of this type jointly with senior management often has several positive effects:Brings the senior team together in a common understanding of program goals and objectivesClearly demarks the sources of customer value and hence reemphasizes the key success factors for the CRM initiativeEstablishes (or reestablishes depending on your specific case) joint ownership and accountability for program successOur experience suggests that any such alignment be evaluated and be based on a market-back view of customer needs. Once the initial baseline and market requirements have been completed, the next step is to size the gap by comparing your baseline state with your desired placement on each assessment dimension. After prioritizing each dimension based on sound business criteria, craft a plan to make required investments (or reduce effort, if they're over-delivering along certain dimensions) in capability enablers as necessary. Once finished, the company will be positioned to establish an ongoing CRM management program and to implement business unit governance, measurements, and ownership to ensure that hard-won changes continue. With the results from the CRM value assessment and the associated implementation plan, the company's CRM goals will be on an improved path to success.For further information, read Capturing Value Through Customer Strategy by Booz Allen Hamilton.