Evaluation, Measurement and Refinement

Effective metrics help organizations build KCRM strategies and solutions that help understand customer needs, differentiate between customers via customer segmentation, predict customer loyalty, identify problems, predict future events, understand the true customer value, and monitor marketing effectiveness.

Measures reflect success: Metrics define success and failure. Effective metrics must reflect what is important to customers, and in turn, to your business. Employees will maximize things that are measures, which may not necessarily be those that are important.

Traditional financial metrics are insufficient: ROI, NPV, Tobin’s q, and total cost of ownership measure only the hard and quantitative factors at the cost of soft, qualitative ones.

Benchmarking is a starting metric but not an end in itself: Benchmarking allows you to compare the performance of different business units but is subject to problems related to selecting the right targets and the lack of detailed analysis. Although you can begin with benchmarking, you must eventually adopt a more comprehensive set of measure. The stages of knowledge growth framework provide a high-level assessment of your customer relationship management capability and customer knowledge to determine areas that need most attention.

Devise a Balanced scorecard customized to your business: The balanced scorecard method provides the most comprehensive set of measure that take long-term and short-term objectives, financial and nonfinancial measures, lagging and leading indicators, and internal and external perspectives into account. Your business’ initial set of metrics must eventually lead toward the formulation of the cards within a custom-built balanced scorecard.

Effective metrics can facilitate the right customer-focused initiatives if they are analyzed using an integrative relational cause-effect approach such as the balanced scorecard.

Pitfalls: Having no metric is better than having relying on one that is absolutely wrong. The choice of a wrong metric can have more ill effects than positive ones. Metrics when applied to knowledge work, or in general, are vulnerable to 10 common pitfalls. To avoid those pitfalls, concentrate on what your customers value, not what you want to sell. Make sure that KCRM initiative is well aligned with business strategy and incrementalize the project.

Leadership, Change management, and Corporate Culture

 Success of your business’ customer knowledge management initiative partly depends on strong leadership, cultural adjustments, and rewards that recognize and reward relationships enhancement with customers and partners, and knowledge sharing. The following six points summarize the crux of leadership and change management issues that are critical for KCRM.

Technology tools are artifacts, not your business’ culture: Successful KCRM initiatives need fundamental readjustment of corporate culture, strong leadership, and financial and nonfinancial reward structures that together gain the hearts and minds of employees and motivate them to share knowledge.

Fear inhibits knowledge sharing: Fear for their job security is a single dominant inhibitor that can keep employees from sharing valuable knowledge to them. Reward structures must be reset to recognize and reward employees for sharing their knowledge and expertise with colleagues, customers, and channel partners. Building a knowledge-sharing culture in your business begins with linking knowledge sharing to personal rewards for employees and partners, encouraging risk taking and educating and addressing people before technology problems.

The Customer Relationship Visionary’s responsibilities span technology and organizational culture issues: Customer relationship visionaries must champion customer knowledge management and relationship building, help devise appropriate metrics, eliminate collaborative impediments and technical barriers, integrate business processes, and support change management to put KCRM embodying culture in place.

Culture change cannot be mandated: Customer support representatives, marketing managers, corporate sponsors, senior management, KCRM proponents, early adopters and zealots, and cynics must all be included. Repeatedly highlight evidence that links performance improvements to new practices; explain where the old culture came from, and why it served your business well then but how it is no longer helpful.

The five touchstones: Five fundamental touchstones must be kept in mind 1.Setting reasonable expectations 2.Using these expectations to arrive at requirements, 3.Stabilizing procedures and then moving on to processes, 4. Accuracy in assessing resource inputs and time frames, 5.Alignment of reward systems and economic incentives.

Encourage customer centricity: Encourage employees to truly think like their customers by encouraging identification and differentiation among customers, managing expectations through internal and external metrics, and viewing complaints and problems as learning opportunities.Successfully imbibing these norms in your organization’s culture, practices, and work will provide the complementary assets that can help you build networks of accessible knowledge and lasting relationships with customers and channels partners- assets that provide inimitable advantage to traditional and e-businesses alike.   

Results-Driven Development and Deployment

KCRM systems can be hefty investments. 7 key points should be kept in mind during the deployment phase

Deployment must encompass technology and nontechnology issues: Training, reward systems, and integration of business processes and systems must be explicitly considered during the deployment phase.

Decomposability facilitates modularity: Complex systems must be decomposed into chunks-technology modules that fit together and can be implemented together as a single whole-to allow results-driven systems that solve current, not past problems.

Prototyping provides inexpensive rejection insurance: Prototyping requires that team developing a system put working version of their unfinished product or its functional subparts in the hands of future users. In the case of KCRM systems, this user population might include internal staff, external partners, and occasionally, customers.

The waterfall method family is a no-go: These big-bang delivery methods worked well in more stable business environments but inhibit the stable translation of requirements into system features. They also encourage implementers to focus on technology itself rather than on the business level changes required to actually derive business value from the new system. Variants such as the V method, the matrix model, and information packaging methodology also suffer from similar weaknesses.

Results-driven incrementalism overcomes these problems: RDI helps build incremental but cumulative results through system-level chunking in the form of business releases, reduces risks of failure, and simultaneously addresses organizational and technical deployment issues that are measured by key performance indicators.

RDI is well suited to e-businesses: Intensive, bursty, and rapid deployment of the system with built-in reality check at each stage reduce the logistical complexity in building such systems.

Avoid common pitfalls: Over engineering, poor communications and coordination processes, lack of cumulative characteristics, relegated releases with the highest potential payoffs, and ignored human issues are commonly observed problems in the deployment phase.

Iterative perfection, not perfection from the start, should be the focus of deployment. Result-driven deployment reduces time-to-market and allows businesses to begin reaping limited benefits even before the entire system is deployed

 

Blueprinting the Technology Infrastructure

At any given moment, you cannot bring to mind all that your organization knows about any given customer or partner, KCRM technology attempts to help overcome that limitation. The following points are germane to the blueprinting step of the KCRM system’s design

KCRM technology must be experience centric: The objective is not one of boosting throughput and efficiency but that of enhancing the customer experience that leads to increased customer retention and loyalty. Interaction consistency, meeting and exceeding customer expectations, a balance between persona contact and automated efficiency, and future adaptability must therefore be considered.

KCRM is not limited to individual customers: It encompasses suppliers, partners, and   even competitors that the system must help acquire, retain, enhance, and maximize their relationship with.

Technology broadens reach: Technology’s role in building KCRM systems is that of broadening reach, enhancing the speed of knowledge transfer and real-time knowledge application, enabling informed decision making, mapping sources of tacit knowledge, communicating and integrating diverse channels and touchpoints, and facilitating collaborative success, Interoperability and leverage of existing systems are a crucial necessity. The system itself must be confused with intranets, extranets, data stores, or groupware.

Informal communications must be facilitated: web collaboration tools, multimedia, pointers, e-communities, voice-over-IP, and intelligent routing exemplify some mechanisms that facilitate informal associations in web-centric environments.

Business intelligence tools must be applied selectively: Flexibility, expert dependence, processing overhead, ability to deal with complex problems, accuracy, speed, tolerance for dirty data, and response time must be considered when making a choice about a business intelligence tool. Several tools such as artificial intelligence subsystems, intelligent data warehouses, genetic algorithm tools, neural networks, expert systems, case-based reasoning applications, rule bases, and intelligent agents can be combined to endow the customer knowledge management system with business intelligence capabilities.

You cannot use what you cannot find: Powerful search and retrieval mechanisms facilitate tracing and retrieval of valuable, actionable codified customer knowledge as well as codified “people pointers” to tacit knowledge. Various combinations of metasearching, hierarchical, tagged-attribute, combinational, and content searching may be used. Attribute tag searching allows searching through tags that define concepts not inherently captured in the content of a knowledge object.

User interfaces should meet actual user needs: Functionality, consistency, relevancy of context, navigability, customizability, and stickiness are key considerations.

The system must be future-proofed: Rapid technological change has brought and will continue to bring new information sources, as wells as unpredictable communication, information transfer, and knowledge-sharing services and requirements that accompany them. Open standards; mission focused design, results-driven design, modular integration, and a pragmatic outlook help build a system that can adapt to unpredictable future needs.     

Building an Implementation Team

KCRM initiatives are necessarily collaborative: Implementation teams must be representative of the actual needs for strengthening customer relationships through customer knowledge management. They must include mid-level and high-level managerial participants, and external business partners who represent a variety of functional specialties.

Chasm: a figurative separation between adopters and skeptics of a new technology or paradigm. People who adopt that new technology or paradigm are said to have the chasm. For example, when the internet became available to the public, people who actively created it come first on the curve and were called innovators; People who adopted it immediately (“crossed the chasm”) can be described as early adopters or visionaries, those who followed; masses that soon followed are described as the early majority.

Laterality: The ability of team members to accommodate other members’ different backgrounds, values, skills, perspectives, and assumptions to effectively collaborate across functional and organizational boundaries.

Team must be boundary spanning: Implementation teams extend beyond your own business’ boundaries; internal and external coordination must be facilitated by high team-level laterality. Pre- and post-chasm membership ensures that there is a healthy dose of optimism and a healthy dose of skepticism and realism in team-level decisions.

Balancing conflicting requirements in an art: various requirements of designing a KCRM strategy and system will contradict others. Managerial and technological skills must be well balanced. Senior management involvement helps diffuse political tensions and conflict among team members.

Leadership must be unanimously accepted by all participants:Many team members may not be from your own organization. Rather than spinning wheels over who is in control, the team leader must act as a facilitator for collaboration, not as an issuer of directives. Managing internal dynamics, translation of needs, task delegation, user and customer involvement, and co-assignment of customer classifications are some of the responsibilities that fall on the leader’s shoulders.

Risk must be prioritized jointly: use the risk assessment framework to determine threats and risks that are within the team’s control and those that are not. Once the controllable risk are being well managed, address the less-controllable ones by “selling” the project to front-line staff and being attuned to external business changes. 

Audits and Analysis

You cannot know where you want your KCRM investments to take your business unless you know where your business stands now. This is where the audit and analysis step helps.

The audit provides a snapshot of the present state: A customer knowledge audit provides the basis for planning, aligning and implementing KCRM by taking both explicit and tacit knowledge about customers and business partners, and business processes into account. The first audit can then be used as a reference point for evaluating future investments in building networked knowledge and relationship capital

An audit involves three phases 1.Initiation 2.Reference measure and method selection, and 3.Execution of the audit. These consist of 7 steps: defining the audit goal, assembling an audit team, identifying all relevant constraints, defining customer clusters or segments, determining the ideal state, selecting audit dimensions and method, and finally executing the method to document customer knowledge assets.

Customers can be classified into three broad categories: 1. Customers that are most valuable(MVCs- those who give most of your business at present those you want to retain, reward, and provide the highest level of service), those who are most grow able(MGCs), and those with zero or negative long-term value to your business(BZCs-ones whom a business is better off without).

Different customer clusters are treated differently. MVCs, MGCs, and BZCs must be identified, differentiated, addressed, and interacted with differently to maximize their value to your business. Additional value can be delivered to MVCs and additional value can be extracted from BZCs.

 The capability classification framework can help document knowledge assests in a trackable format.Functional, regulatory, positional, and cultural capabilities can be documented using this framework to facilitate future comparisons and for tracking progression over time. 

Aligning Strategy and Technology Choices

Four barriers to KCRM Actualization

1. Environment: Market Trends, Competitive Threats, Regulatory Controls

2. Strategic context: Product/Services, Market Opportunities, Customer Segments, Value Proposition alliances

3. KCRM Strategy:  E-Business Strategy, Competitive Differentiation, Knowledge, Digital Capital, Adaptability

4. KCRM Technology: E-Business Infrastructure, KCRM Architecture, Interaction Channels, Integration

Outcome Indicators of Effective KCRM Strategy Formulation

The objective of implementing a KCRM strategy is to enhance and apply a business’ digital capital, that is, its relationships and knowledge. The outcomes supported by KCRM include assimilation and deployment of digital capital that provides your business a source of sustainable competitiveness.

VRIN Framework

Knowledge strategy begins with a business vision, a penultimate long-term strategic intent. Effective KCRM must result in networked knowledge and relationship capital that is valuable, rare and inimitable which would help the company to gain competitive advantage. In an attempt to build digital capital it must ensured that there is no other substitutable digital capital available for the competitors to imitate.

Analyzing The Business Environment

The four goals of CRM- identification, differentiation, interaction and customization have evolved ever since the introduction of e-commerce and now further with the evolution of e-business.

Gap Analysis: The process of analyzing what is and what should be in terms of strategy, markets, knowledge assets, and relationship assets. Evaluating these gaps provides the business with an accurate picture of market segments that it can viably compete in.

Strategic gap: The gap between what your business must do and what it can feasibly do in order to fill existing market

Knowledge gap: The gap between what your business must know and what it actually knows about its customers and business partners

Relationship gap: The gap between the strength of relationships that your business must have in order to fill the existing target market gaps and the relationship capital it has

Exploitation vs Exploration

The degree to which your business exploits its existing knowledge and relationships for short-term gains is known as its exploration level. However, exploitation must also be accompanied by exploration of new business possibilities of internal and externally assimilated knowledge and creating of new knowledge through various mechanisms and interaction channels.

Mapping Knowledge Assets:

Knowledge is categorized into three clusters 1.Innovative: this will eventually become common place as it is replicated by competitors over a period of time 2.Advanced: Innovative deteriorates to the level of advanced level 3.Core: Innovative knowledge further deteriorates to become core knowledge, which is offered by every player in the same market place. What is innovative today will become core tomorrow.

Knowledge maps provide relative comparisons. Depending on whether your business emerges as an innovator, market leader, competitive threat, struggler, or an exit candidate, you can determine whether the cost of pursuing a certain market and decide on whether to invest in playing catch-up or focus on a different market segment.

Drivers of Knowledge Management

The knowledge based, web connected business environment is one that favors knowledge rich but asset poor organization structures. Seventeen drivers account for the knowledge economy based, technological, structural, process-focused, and increasing returns economic characteristics of the e-business environment.

Functional Convergence: Convergence of knowledge workers from different areas of specialization and across traditional departments such as marketing, sales, finance and manufacturing. To bring together collective expertise, employees work n parallel to complete assignments that span traditional departmental and diverse organizational boundaries.

The web makes new ways of relationship building feasible:

Self-service, collaborative communities, intelligent personalization, and knowledge based adoption provide individualization at mass-market cost-efficiency.

Self-service: FedEx distributes its powership software free of charge to all customers. Customers can electronically schedule shipments, maintain address books, manage accounts, track packages, order supplies, and print shipping labels on FedEx-provided label stock.

Collaborative Communities: web also facilitates formation of Virtual communities at a relatively low cost. Amazon.com is a classical example of such communities that can form around interest areas in the B2C context. The customers can see what other customers with interest similar to hers actually purchased. By allowing customers to leave feedback and opinions on a particular product (reviews), amazon.com creates an implicit community of buyers who share similar interests.

Adaptive Real-Time Cross-Selling: offering related items at the time of sale can be managed in the web environment. If you are buying a laptop online, the system recognizes the related items, such as screen guard, pen drive, external hard disk, speakers and offers them to the buyers as you get ready to check out. By being able to integrate purchases, the system may reorder items that were most frequently purchased along with a given item, and offer them first. In addition, some web businesses offer special bundle deals on such purchases. The key point here is that the web provides a highly suited environment for cross-sell offers, and these can be made more effective by integrating aggregated knowledge gained from past buyers.

Intelligent personalization: Technology tools such as intelligent agents apply artificial intelligence techniques for learning about customer behavior though passive observation. Microsoft Word’s assistants-though not always a pleasant example—are examples of such intelligent agents. As a customer interacts with a system, the agent (or set of agents) begins to deduce patterns in his behavior. Based on these deductions, agent based tools can increasingly personalized offers for that user.

Introduction

This book explains the application of knowledge management in e-business relationship management which focuses not only on customers but also on channel partners such as distributors, suppliers, collaborators, and ally business partners.

E-Business: Internet-facilitated integration of processes, applications, and information systems to facilitate rapid collaboration, coordination, and relationship formation across traditional organizational boundaries. Electronic commerce is a subset of e-business.

Knowledge Management: Management of business, customer, and process knowledge and its application for adding value and competitively differentiating product and service offerings.

Customer Relationship Management: The process of managing relationships with existing customers to maximize their loyalty, increase revenues from them, and retain them while selectively attracting new customers.

Knowledge-Enabled Customer Relationship Management (KCRM): Managing customer knowledge to generate value-creating lock-ins and channel knowledge to strengthen relationships and collaborative effectiveness. Knowledge-enabled CRM is more of a business model/strategy than a technology-focused solution.

Customer Knowledge Integration: As customers increasingly contribute knowledge to businesses that they transact with, it is still the business’ job to be able to assimilate and integrate this knowledge. Firms that can convert knowledge in the heads of their employees and customers (human capital) into actual capabilities (structural capital) and relationships (relationship capital) are the ones that will lead the way.

Relationship Management in E-Business: The Web is a marketer’s dream for relationship building for three reasons: (1) inexpensive, individual addressability, (2) two-way exchanges between buyers and sellers that supercede the broadcast strategy of traditional marketing, and (3) its instantaneous, real-time nature.

Click-stream Analysis: Analysis of a series of mouse clicks from customer’s computer when she is visiting a Website to discern behavioural patterns. These patterns may, for example, reveal that she puts an expensive dress in her shopping cart every time she visits the site but never checks out with it.
 

Seven broad areas of KCRM are described along a conceptually simplified seven-step road map. The road map consists of three phases

Phase I: Evaluation and strategic alignment

1.       Aligning Strategy and Technology Choices

2.      Audit and Analysis

Phase II: Infrastructure development and technology deployment

3.      Designing the Team

4.      Blueprinting the Technology

5.      Development and Results-Driven Deployment

Phase III: Leadership, change management, measurement, and refinement

6.      Leadership, Change Management and Culture

7.      Evaluation, Measurement and Refinement