On the surface, customer relationship management sounds simple enough: Place the customer at the forefront, implement business practices accordingly, and watch profits, revenue and loyalty rise. Yet in an early rush to adopt a "be all and end all" solution, many financial institutions encountered a technological tangle, followed by failure. But after a period of trial and error, viewpoints are changing. In the process, FIs are learning to drive technology toward CRM's long-term goals.
When CRM achieved "buzzword status" in the late 1990s, big business was intrigued, and FIs were no exception. After all, if enough high- tech gadgetry came into play, wasn't CRM a sure-fire proposition? There was a catch, however; as a concept, CRM had become a catchall. The derivative "eCRM," created to describe Web-enabled operations, did nothing to clear up the confusion.
As the movement gained momentum, "everyone used the word 'CRM,'" says Kimberly Harris, a senior analyst for Gartner, based in Stamford, CT. As a result, vendors with vastly diverse concerns, such as operational functions, call centers and analytical areas, were defining a world of solutions with three small letters. Harris recalls the scenario a year ago, when financial institutions sought her advice on how to implement CRM. Often, she says, she received a "hodgepodge list of vendors who did completely different things, but ... the financial institutions didn't understand the different pieces of CRM."
This lack of understanding quickly gave rise to unrealistic expectations. "I think managers in financial institutions felt that once they implemented the right technology, that in and of itself was a CRM strategy," says Ian Rubin, director of International Data Corp.'s online financial services advisory programs. "If I invest a lot of money in a huge database ... that was my CRM strategy. Or if I then invested in some software that would help me sift through it and interpret it, then that would be my CRM strategy.
"What people realized-I think it took them a while to realize-is that CRM isn't really a technical solution," Rubin says. "There's technology that's a part of it, but CRM has a lot more to do with behavior and marketing, and focus internally at the institution, and training of sales reps and customer service representatives. The technology is just a small part of that."
So although the race was on, few people knew where to begin, much less how to find the finish line. And analysts aren't the only ones to recollect this lack of direction. "Initially when CRM hit the market, when it became a big industry trend, I think everyone ran out and looked for a technology solution to deliver this 'CRM,'" says Chris Braccia, director of product marketing for Harland Financial Solutions. "And the thing that they weren't implementing was strategy. And I think that is one of the main contributors as to why a lot of institutions were sinking a lot of time and money into CRM strategy and really not getting much out of it."
Looking and learning
Atlanta-based Harland Financial Solutions began to develop Touche, a tailored CRM solution, approximately 18 months ago. At that time, the company's analysis showed a gap in the market because "there weren't really, at that time, any industry-specific applications tools- solutions sets-out there," Braccia says. Many financial institutions already had purchased solutions that required a large degree of customization, along with considerable investments of time and money. "That's problem one," he says. "And remember, when you don't really have a solid plan behind that, an overall CRM plan, you can see how that can feed on itself as a problem."
With such a pattern in place, warning signals are evident, Braccia says. "You could end up going down this path of continuous development, and you go into a development cycle, but you never actually implement anything."
Point Information Systems, headquartered in Wellesley, MA, also has introduced a customized prepackaged CRM solution. Jonathan Clarke, director of financial services, is responsible for the company's drive into the financial services market. The product, e-point FS, was launched worldwide in June, after approximately a year of research, design and testing.
Before he joined Point, during 12 years working for a provider of IT solutions in the financial services industry, Clarke encountered some stumbling blocks. Specifically, his experience was in the area of sales force automation, but the lessons also apply to CRM in general.
Recalling past situations, he says, "You go along and you do a lot of good work up front, and then you introduce the solution. And somewhere along the line, the vendor and the people making the selection forget some of the objectives in the business processes and all of the reengineering that they were looking to achieve. As a result of that, the solutions go in, but either they are simply not used or they don't achieve the productivity."
System deficiencies can add a new level of problems, says Don Morrison, president of marketing and business development for Chordiant Software, based in Cupertino, CA. Morrison says fault lies with "systems facing the employees," as well as "systems hosting the self- serve capabilities direct for a consumer." These are "completely inadequate because they really haven't been addressed in the last five to 10 years to form a customer-centric view. They're really production systems."
As a result, Morrison says, "When you walk through a call center of a major financial company or a bank, you're still looking at 3270 screens. And a 3270 screen can only give you one screen at a time of information. It's technology from the 1970s." But the demands on employees are a far cry from 30 years ago. In addition to outdated systems, Morrison points to "complexity that the bank has created in a more modern sense," including a large field of products in the marketplace and extremely sophisticated marketing programs.
"The thesis I would bring to you is that the systems have to be tremendously improved at the point of customer interaction," Morrison says. "And, obviously, we have focused on that problem," he says, referring to the capabilities of Chordiant's Unified CRM Solution.
Clarity of purpose
Fortunately, progress often follows the pitfalls. "You don't have a solution that works in the first year," IDC's Rubin says. "You make mistakes, and you go on, and you realize, 'OK, it's not just a technical solution, but there's a business strategy behind CRM as well.'" Improvements are emerging, he says. "People are getting smarter and more educated, and that is helping."
Gartner's Harris agrees. "What you're seeing is greater awareness now-the fact that many financial institutions are learning the complexity of CRM." The shift, she says, has moved from simply evaluating technologies to "developing a business strategy and vision for what CRM means. The complexity and the level of knowledge in the industry has grown dramatically in the past year."
The realization that software can't set strategy should lead FIs in the right direction. The next step should involve how CRM will work in a day-to-day environment, says Kathleen Khirallah, senior research analyst for TowerGroup. "That's where it becomes more obvious that they need to think about how they're going to change the way they do business and what they need to do to reinforce that."
Gartner has designed a model of effective CRM that employs a mix of basic components. Harris explains: "When you look at CRM from a technical level, it can be broken down into building blocks." These, she says, include channel-specific technologies, front-office technologies, back-office technologies and the middleware pieces that bring them together. "So you have to know, when you start talking about CRM, what piece of CRM you're talking about. You can't just say, 'I'm looking for a CRM technology,' because basically, that could be anything." By examining and understanding CRM's components, banks can develop a "high-level business strategy before they even get to the technology level," Harris says.
For Clarke, successful CRM contains two key drivers. The first one concerns the customers-what they want and how they desire to be served. The other element is a bank's ability to deliver on those expectations. "It's really a balancing act between the customer expectations and the perspectives they have of you as an organization and how you actually want to deliver your service back to them," he says.
A unified front
Although FIs and vendors alike are learning the ropes, the very nature of bank infrastructure presents more obstacles. Rubin poses one question that transcends technological issues. "How do you actually execute a strategy that looks good on paper but has to cross into a lot of political domains and a lot of lines of business that, up until now, had very different reporting requirements and hierarchy up to the head of the bank? It's really hard to do," he adds.
Internal politics and ownership of the CRM project play critical roles, according to Rubin. "Let's say that a customer opens up an account in a branch but really never goes into that branch and does 95% of their interactions at the ATM and on the Internet. Well, who really owns that customer? Is it the branch where they identify themselves geographically? Or is it the Internet channel where they do all their transactions?" Decisions on CRM strategy are tied to both budgets and careers. "So it's very challenging," Rubin says. "Even when banks know what has to be done and they know the right thing to do, getting the troops behind it is still another challenge."
Chordiant focuses on hurdles that FIs face in a business sense and in an IT sense, Morrison says. He explains that in a business sense, most large financial services institutions are an amalgamation of many other divisions or businesses that have been acquired. In an enterprise sense, they aren't acting as a single business when facing the customer; they are acting as multiple divisions or multiple collections of companies under a brand or a market.
"The problem these organizations have is how do they maximize the customer relationship ... when they're acting as five, six, seven different units," he says.
These differences won't escape today's bank customers, who are growing more savvy, Khirallah says. "As the world has evolved, customers are becoming much more demanding in their expectations of the bank, and they really are expecting to see more consistency across the different touchpoints." Service representatives and those in sales must be "on the same page" in terms of interactions, she says. "Otherwise, consumers aren't going to understand why there's inconsistency in the institution."
Gaining an edge
Statistics commonly indicate that most CRM projects fail. When failure occurs, Khirallah says, "it's probably never a situation where the software's not functioning properly." Rather, lack of success can be linked to the environment within the bank. FIs must transform the way they do business, she says, and develop a long-term vision that reflects this change.
Planning is imperative, but Khirallah also notes that vendors, "for a long time, were really focused on 'sell the software, implement it and move on the next field.' And, I think rightly so. That's how they rewarded themselves." Most vendors saw their role as "making the implementation go smoothly and integrating the software into the existing bank environment," she says.
So, in the past, vendors largely ignored the idea of business transformation or process redesign, Khirallah says. But banks may need assistance-a company that can help "tune the environment ... and make structural changes if necessary, so the software can really do the job that needs to be done. Up until fairly recently, I have felt that that's a real failure on the part of the vendors not to provide those services," she says.
Khirallah has shared her idea with vendors, and "usually their answer has been, 'Once the implementation is done, the banks really don't want to pay for additional hand-holding.'" Her response: "'Yes, but if you can guarantee their success because you provide that level of hand-holding, you will also have referenceable sites going forward. It's in your best interest to have those banking clients who are just delighted because you've actually held their hands for the entire process-and not just installed and run on to the next job.'"
Point's Clarke also embraces an expanded role. "It's imperative on our parts as vendors-and people who can offer so much potential in the marketplace-to go back and almost reeducate our marketplace. It's not just simply a question of dropping in a piece of software and you've solved your problem."
He elaborates on the concept: "The technology piece is the intersection between the business strategy and the processes you want to implement and the actual customer experience. So, of course, it is very important. But it has to fit into your overall business blueprint and almost, in a sense, be subservient to the overall business strategy and the organization or culture that you have in the company and act upon that-not try and drive it."
Before deployment of their CRM solution, Point consulted with industry experts, Clarke says. "Certainly, the analysts we were talking to were saying, 'You know, you've really got to go out and educate your audience about what it takes to get these projects in and implemented correctly and successfully.'"
Directives and direction
When FIs effectively implement CRM, Khirallah says a common approach is to appoint two project leaders, one from the IT side and another from the business side. These two individuals are in direct communication with their respective departments within the bank, as well as with vendors. "There may only be two leads, or one lead, actually running the project," she says. "But they are representing and in dialogue with other constituencies within the bank, just to make sure that the needs of those parts of the organization are going to be met once the implementation is finished."
IDC's Rubin describes a similar best-case scenario-one that includes "someone as high as a senior vice president of the bank" who assumes leadership and coordinates efforts. Communication also takes top priority. "The branch is not going to purchase any major solution until they talk to the people in the ATM group about how this solution can be leveraged in that group," he says. "And you're not going to do it until you talk to the cards group, until you talk to the Internet group." For example, Rubin says, within Fleet Bank, "there's a group now that coordinates all these types of strategies."
And what about a CRM strategy for smaller institutions-ones that may lack the resources of bigger banks? "In one sense, a community bank has an advantage in that their size does make them a little closer their customers," Rubin explains. "Not that they don't have need for these initiatives. But I don't think, by and large, that they feel the requirement on them as much as larger banks do," since many consumers believe that smaller banks are "more in tune with their needs." In the longer term, Rubin says, "community banks and also credit unions ...will look at these cross-channel solutions. And, yes, they will go to their core processor and, over time, expect them to have a CRM strategy that really permeates all channels."
Back to the future
In the realm of CRM, Clarke sees old-fashioned business sense enhanced by technology. "If you think about it, CRM-customer relationship management-is essentially a term that's been invented by an industry. It's always been there," he says. "Somebody told me when I first started working on this subject, 'Banks knew more about their customers 100 years ago than they do today.'"
Why so? "Very simple," Clarke says. "People used to walk into a branch. They probably grew up in the very same town. Probably their parents knew somebody else, like the bank manager. They went in regularly because there was no other option. They chatted because people had more time in those days. They knew each other as individuals and persons, so the whole banking environment was much more intimate. And as technology has come along, the actual degree of intimacy and the understanding of customers have moved away. Now, of course, we have a lot more information. But does that actually mean we understand them? No."
But rewards lie ahead, Clarke adds. "If we start to integrate all of the various systems and the various sources of information, so that we have a consistent view-a consistent knowledge base and understanding of what's happening-then hopefully, we have the opportunity to start winning back the customers' perception. Because I think that's important as well; it's all about what the customers perceive."
