Applying the lessons

The new conventional wisdom is that most firms will find that the efficiency-boosting benefits of the internet will be offset by the margin-deflating effects of reduced market friction and enhanced buyer power. Furthermore, only a few firms will use the net to create unique and lasting advantages. Like all simplifications there is an element of truth here, but it also distorts the full picture.

Instead of pessimism and fear we found enthusiasm across all markets. A large majority of our respondents saw more opportunity than threat, and 25 percent saw the internet as a major opportunity. These firms have embraced the net for a variety of reasons, but mainly to keep up with rivals and leverage their existing capabilities. Consequently the internet is now the most popular means of reaching and interacting with customers. But the biggest lesson is that the rewards of increased customer retention, growth and profitability will go only to those who are already the most proficient at managing their relationships with their most valuable customers. Only with a superior capability can a firm fully exploit the potential to tighten connections with better service, remember customer histories and requirements to deliver personalized solutions, and improve the synchronization of dispersed points of customer contact. This has several messages for firms trying to catch up or stay ahead.

First, the technology of the internet is only a tool; it is not a competitive strategy or the capability to deliver the strategy. Thus the starting point is to know how well your capability compares to your rivals ( both where they are now and where they are going to be based on their intentions, plans and observed actions. Don't rely solely on your sales and service people. Instead, go directly to the best and most demanding customers and ask for a frank assessment. Be sure to ask about their best suppliers who are not competitors and learn how they manage their customer relating capability. These "best of breed' are worth benchmarking because they set the standard by which customer expectations are formed.

Second, assess the quality of the present customer relationships. Are the most valuable customers really committed to the firm, or are their connections merely passive because of habit and inertia? This is the context for assessing whether internet-enabled services based on new market models such as reverse auctions or emerging technologies such as broadband and mobility will strengthen or undermine existing relationships. This is especially important in B2B markets with complex organizational buying processes. Suppliers who built close relationships with purchasing agents during a supplier reduction program are especially vulnerable. The threat often comes from senior management, who may overrule purchasing and impose a reverse auction to get lower prices.

The third implication is that the success of initiatives to deploy the internet and CRM technologies are more about organizational alignment than data base management, systems integration and software selection. Internet-enabled CRM has to be managed as a cross-functional initiative that deepens the overall capability. This is especially so in organizations where functional divisions and interests prevail. If marketing historically blames sales for not closing

leads, sales blames marketing for not generating enough leads and service blames them both for too-high expectations, the promise of the CRM technology will not be realized. By some estimates 55 percent of all CRM projects will disappoint[8]. The stakes are considerable given that CRM systems may cost $35,000 or more per call-center agent to deploy and that much again to maintain them during the next three years. It will take strong leadership including the assignment of a senior manager to spearhead the initiative, cross-functional structures and collective incentives to motivate the functions to work together and ensure a return on this investment.

Finally, we have learned it doesn't pay to be paralyzed by channel conflict. Customers prefer a choice of channels and expect all channels including the internet to work together. To achieve this synchronization the place to start is a deep understanding of what the target customers want from the channel system, and then work back to assess how well the current channels meet those needs. The next step is to decompose the entire set of channel functions into their component parts. Only then is it possible to see where digital channels best fit; are they better than what is available for generating leads, or providing an online storefront or aggregating demand via hubs like Commerce One? Such an approach to integrating the internet into the channel system is far better than bolting it on as a separate channel. An integrative approach to digitally enhancing channels requires the same level of cross-functional coordination as CRM initiatives that use the internet to coordinate all customers touch points. Indeed, competitive advantage comes by integrating and aligning the internet with the overall strategy; and doing so better and faster than the competition.

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