Business is moving into a new paradigm, abandoning the previous cost focus for a market-focused approach. This is the view of Chris Reay, a director of Marstec, the constraints management company which is part of the Global Technology Alliance.
He presented a paper at a customer relationship management (CRM) conference recently hosted by Global Technology Business Intelligence (GBI), where he emphasised the importance of adopting a systems approach.
"Expectation levels are rising, while tolerance levels are dropping, optimal customer relationship management (CRM) will not be achieved by plugging in some CRM software. There is the potential for releasing unused capacity with a systems approach."
Reay points out the methods of leveraging the business relationship with the three primary business entities that are all conflicting. Shareholders have a capitalist ethos, expecting return for their investment. Employees get their return from income and benefits, which is a more socialist ethos. For customers, the notion that "customer is (or should be) king" reigns. Reay emphasises that a balance has to be found between the three components.
The implementation of CRM is necessary as today`s customer is mobile and able to change suppliers in a competitive business arena if unsatisfied. However, CRM presents with a number of difficulties in satisfying customers, streamlining operations and managing the investment risks involved in service improvement simultaneously.
Reay says: "Acting on a strategy based purely on forecasting is risky. Quantifying these problems is important."
Causes stem from contradictory needs and modes of operating:
Need 1: Grow sales
. This is the market-imposed mode of operating, which is expansionist in that its purpose is to grow market share. Here the market imposes the constraints.
Need 2: Control costs
. This is a self-imposed mode of operating and a contracting mode of controlling costs to increase profits. Here the business imposes the constraints.
Reay says compromise is not the only alternative and argues against the pure cost focus paradigm, "This is still seen by many businesses as the primary means of being profitable, but it really has limited leverage. Larger and continuous leverage exists in revenue growth, rather than in cost cutting. Why strive for `same with less` if you can achieve `more with same`?"
He says the correct approach, rather than trying to optimise piecemeal, is to take the strategic decision for the business to have a market focus. This is important as there has to be recognition along the whole value chain of the centrality of the customer and this attitude must pervade the whole organisation. Customer satisfaction metrics are applied to measure throughput and the results of customer-centric practices. CRM encompasses much of this approach, but the constraints imposed by the market must be managed in the business.
A systems approach provides a methodical and measurable approach. Before any CRM initiative is embarked upon, these questions must be asked and quantifiable answers used to drive the process:
Why change?
What to change?
What to change to?
How to cause and implement the change?
Any change should be justifiable and goals must be defined in terms of throughput, operating expenses, investment and net profit.
Reay explains: "The process takes the current reality and develops from it, with logical interventions, the future reality. The business constraint is identified, quantified, and a plan implemented to optimise the business throughput. If the conclusion is the need for a CRM intervention, then let`s go for it."
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