Assignment 2
June 20th, 2007Due Monday@class, June 25, 2007
You are allowed to complete this assignment with your project group
Four Sections, Four sets of questions
Part I Introduction to CRMs
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Sidebar: Want to know something? It’s hard to define CRM. Some say it’s a piece of software. Some say it’s a philosophy or concept, that “it’s wherever the customer directly touches your business.” Is your enterprise app simply a piece of automation? Or is it a package of “best practices”? Your “world view” about enterprise apps will shape your approach to project approval and implementation. As for defining CRMs: I can give you a conventional answer and you’ll read some good answers in your readings. In the beginning, we had Sales Force Automation (SFA) software: this was CRM. Now SFA is a subset of CRM. SFA enables the salesperson to track large lists of customers and deals. A standard CRM should track sales, forecasts, commissions and quotas, and have a contact management system. Nevertheless, there are still a few “best-of-breed” CRM systems that are merely SFA tools. The first CRM functions included: order management; sales automation; merchandising, and billing. It later came to include relevant customer history and data analytics. CRMs that power websites often include: dynamic personalization (e.g. “My T-Mobile”) and web analytics. The list goes on and on. The graphic below is basic representation of the kinds of elements within a CRM. CRM Applications & Data “What industries are leading the way in CRM implementations? As in most leading-edge technology implementations, the financial services and telecommunications industries set the pace in CRM. Other industries are on the CRM bandwagon include consumer goods makers and retailers and high tech firms. Which industry is behind the curve? Heavy manufacturing.” (CIO Magazine article: “What is CRM?”) Two Sides to Online Customer Service People also debate the relationship of CRM to customer service. You’ll see the debate: CRM does not equal customer service. Duh. It’s always been more than just the software. There are actually two sides to this coin. An increasing number of CRM packages help companies set up web-based customer service and troubleshooting guides. For example, the following project was headed by one of our computing students. A large engineering tool company set up some rather extensive troubleshooting web pages. As far as they can figure, the average online problem resolution costs them under $15 per person, even if the person later makes a phone call. This is a liberal, or high figure, and I can confirm it through viewing the actual data. For folks who start with a phone call, the average cost was over $40 and that was a very low figure. Furthermore, customers who went to the web first to resolve their problem were likely to have their problem resolved in a fraction of the time and report greater satisfaction. This did not seem to vary with problem complexity. Can you see the unintended problem here? The bogey is when the online customer service is so good, that people are much more satisfied with the online experience than the in-phone experience with the company. The good online customer service simply raises expectations regarding quality of service. Can you guess what happens? What can you do to help with this? It’s the other danger with good web-based customer service. It’s when the software is better than the help processes around the human service reps…which only further enrages the customers. |
Required Readings
The first three sets of readings are really really light. The first and third readings require that someone “bites the bullet” and registers at the Wharton site to grab the article.
1. Read this two-pager from the Wharton Professors: Making customer relationship management work. The Profs at the Wharton School of Penn discuss the state of CRM in today’s enterprises. You’ll need to sign up and perhaps search back for the article.
2. The Self Destruction of AT&T Wireless - “Success is a horrible teacher” and if this is true, then all of us have learned from the twice-failed installation of Siebel at AT&T wireless. I’ve asked a number of people about whether this article was accurate. The general response has been that the CIO (in the article) isn’t as culpable as detailed in the article. On the other hand, he wasn’t popular among the IT troops and so perhaps it captures the spirit.
3. Why Some Companies Succeed at CRM (and Many Fail) - “What makes some companies so much better at managing customer relationships than their competitors? Put a different way, how are companies like Enterprise Rent-A-Car, Pioneer Hi-bred Seeds, Fidelity Investments, Lexus, Intuit, and Capital One able to stay more closely connected to customers than their rivals, in ways that significantly influence the profitability of the firm? It’s a question that Wharton marketing professor George Day answers in his paper. His research notes, among other things, three distinct approaches to customer relationship management (CRM), each with dramatically different results.” You might need to sign up and perhaps search back for the article, although I’m hoping I got you the right link to go directly without revealing yourselves.
Supplemental Readings
These are not required readings. The following two just clarify some of the issues around CRM implementations.
Four Myths about CRMs - A two-pager with pithy advice about choosing CRM software.
The Truth about CRM - This mirrors the principles outlined in “Four Myths about CRMs” but it’s dramatized by real world examples. It’s longer but is more narrative rather than a glorified outline.
Homework Questions
1. Integrate the AT&T wireless with one or more of your readings. How did AT&T wireless contradict best practices? Can you and your group create a few lessons learned from the AT&T wireless story?
2. Why in the world would you want to even install enterprise applications into a mid-size or large enterprise? Thought question: offer a handful (no more than 5) reasons for having enterprise application?
3. Is CRM software really just software? Is the CRM vendor represent a software company? Or does it properly represent a process management or even management consulting company? Feel free to argue both side of the coin. Given your answer, does it create your own best practice for due diligence in choosing such a vendor?
II. Hosted vs Traditional?
Salesforce.com is the most famous hosted CRM application. Some people laughed when it first came out. Nevertheless, it didn’t take long for Salesforce to create a believable niche. Since then, Siebel has been acquired and has also delved into web-based, hosted CRMs.
Siebel and SalesForce.com
Excerpted from the June 2002 Issue of Business 2.0
by Andy Raskin
Back in April 2001, Tom Siebel, chief executive of software giant Siebel Systems, predicted the demise of Salesforce.com. “There is no way that company exists in a year,” he said.
One year later, however, Salesforce.com is alive and healthier than ever. The last three letters of the company’s name remain defiantly unchanged, as does the startup atmosphere of its San Francisco headquarters. CEO Marc Benioff’s dog trots through the office, exposed brick lines the walls, and some male employees still wear those French-blue button-down shirts. According to Benioff, the privately held company did $23 million in business last year, and cash from prepaid revenues more than offset cash outflows. (Read: We’ve got plenty of money, but we’re not profitable quite yet.)
Most important, Salesforce.com’s mission — to deliver account management, sales-pipeline, and customer relationship management (CRM) software via the Web — looks like it has staying power. The company has more than 4,000 paying customers, evidence that there’s real demand for Web-based CRM software. It’s significant, too, that Tom Siebel even considers the much smaller company worth mentioning. Yet Salesforce.com is doing well in a market niche — small to medium-size companies — that Siebel’s software is too complex to dominate.
Michigan-based Textron Fastening Systems, a $1.7 billion supplier of screws and rivets, is an ideal Salesforce.com customer. Textron had 150 salespeople typing order forecasts into a single Excel spreadsheet. It took a week to roll up the data. With Salesforce.com’s system, it now happens online and in real time.
While Siebel software can do the same thing — and lots of other things — it can be more trouble than it’s worth for small companies. “Siebel requires a big implementation, more money, and a lot more forethought than Salesforce.com,” explains Denis Hanna, Textron’s sales director. “We didn’t want to get into that.”
Yet there’s a problem with small businesses: They’re small. With 200 user licenses, or “seats,” Textron is one of Salesforce.com’s largest accounts. (Some Siebel clients buy tens of thousands of seats.) The average Salesforce.com customer buys only 15 seats, at $75 per month each.
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Siebel vs. Salesforce.com (2002) |
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| Siebel is much bigger, but Salesforce.com has found a sweet spot serving smaller companies. | ||
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SIEBEL
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SALESFORCE.COM | |
| REVENUE 2001 | $2 billion | $23.1 million |
| REVENUE Q1 2002 | $478 million | $10.5 million |
| NUMBER OF EMPLOYEES | 7,400 | 200 |
| NUMBER OF CUSTOMERS | More than 3,000 | 4,500 |
| AVG. COST PER SEAT | $3,500 | $75 |
| INSTALLATION COST | $710,000 average | $56,000 or less |
| SOURCES: Siebel Systems; Salesforce.com; Gartner Group | ||
Required Browsing
Feel free to cruise around the web sites. One or more of your group members may elect for the free trial of SalesForce to get a quick look.
1. Siebel Home Pages - Where else to learn about Siebel?
2. SalesForce.com - Where else to learn about SalesForce.com? Did you want to play with the free trial?
Homework Questions
1. What type of solution would be applicable to your company? Would your company use a hosted solution? Why or why not?
2. Create a set of guidelines for deciding between a hosted versus traditional CRM solution.
3. Create a set of guidelines for choosing between a set of hosted CRM solutions. This of course assumes you’re interested in a hosted solution.
III. Supply Chain Management and Starbucks
On Monday, July 25, Chris Jones will be our featured guest. Chris was the architect at Aspen Technologies, the leading supply chain management solution in the oil and chemical industries. He is now at Amazon.com, in charge of a key piece that enables order fulfillment. He was a business professor at Wharton, Simon Fraser, and the University of Washington.
This mini-case gets into an IT holy grail: a seamless, integrated IT.
Starbucks was once cited as one of the best examples of piecing together an integrated supply chain via a Best of Breed approach. They proposed that different pieces manage each part of their supply chain. “Starbucks decided that none of these ERP packages could meet its needs. Instead, it opted for a best-of-breed approach, which meant pulling together nine separate components.” Considering that the reading is pretty thin, it simultaneously underscores some core issues: integration; implementation approaches, and the use of IT.
Their CIO, Deborah Gillotti, was named one of the 100 best CIOs in the USA. In the case, we also have mention of Ted Garcia, senior vice president of supply chain operations, Tim Duffy, director of supply chain systems and support.
1. The Starbucks Caselet - This reading is in your packet. it emphasizes their best of breed IT approach to Supply Chain Management. It’s really a brief two pages.
3. The Green Mountain Counter Caselet - This reading is in your packet. This small coffee company used a single vendor and they’re downright happy about it, thank you. This is barely 1 1/2 pages.
Homework Questions
1. What’s the setting for Starbucks and its IT? Why is a comprehensive supply chain management solution so critical for Starbucks?
2. Starbucks has taken a “best of breed” approach to their supplier management solutions. Looking at the case, do you agree with them?
3. From the readings and your own unique insights, what appear to be the relative advantages and disadvantages of using a “best of breed” versus “single vendor” approach? What do you think of the suggestion to have a “hybrid approach”? How do you resolve the difficulties between both positions?
4. Many companies choose to install its CRM portions first. Why do you suppose this is the case? From a “rational” perspective, what makes better sense? CRM first, SCM later? SCM first, CRM later? Feel free to argue both sides of the matter.
IV. Production Management of MIS Departments
Chris Oleson (and his co-authors) will be visiting us on Wednesday, June 27. What is their business? This group helps MIS departments go about the business of smoothly operating…period. The group has finished the book and we eagerly await its publication. The readings and the first question come from Chris Oleson
Required Readings
1. New York Times go Off-line
2. Glitch delays email at AOL
3. Bound to Fail
4. Salmon dies - you might need to log in to the Seattle Times.
Homework Questions
1. “What are the top 3-5 things you are looking for in your next automobile or truck?” I kid you not, this is the question. I suspect he may be getting philosophical here.
2. What questions do you have for Chris Oleson?
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