Why Do CRM Projects Fail (And How to Fix Them)

Customers are the lifeblood of any business, so it makes sense to have information in place that tells you as much as possible about your customer - their needs and experiences. With the advent of computerization, it was expected that some of the earliest software applications manage customer data.  These systems evolved from simple client lists to the sophisticated management systems of today that can store everything from client demographics and shopping behavior, both instore and online, to data gathered from social media.. Obviously no company now can be without a customer relationship management (CRM) system, a critical business tool.

Since the introduction of CRM systems in the 1990s, the implementation failure rate has been disturbingly high. While you would expect that the failure rate would fall off as the products and the market matured, the same reasons crop up again and again as to why CRM projects fail.

Here are some statistics on CRM failures over the last 13 years.

CRM Failure rates as recorded by various research companies since 2001 (source: SKUId)

These statistics may not reflect CRM implementations that fell short of expectations, where the companies live with below-par performance and little to no ROI. However, it is not all doom and gloom; there are companies who have achieved very successful implementations by avoiding the common pitfalls that can derail a CRM project. All of the companies listed in the graph above, identified why their CRM implementations failed, from this we can learn how to avoid or fix these common points of failure. For instance, Forrester (2009) mentions these four factors as key contributors in why CRM projects fail:

  • Lack of a coherent CRM strategy
  • Lack of attention to process
  • Focussing on technology, rather than people
  • Failure to adopt, once implemented.

Causes cited by other sources include:

  • Lack of executive commitment
  • Poor data quality
  • Lack of alignment with the existing IT architecture

In fairness it must also be pointed out that most of the points above can also be applied to any IT software project. Today, even with the adoption of agile development and best practices such as ITIL, software implementations are still risky projects, and thus is a contributory factor to why CRM implementations fail.

What is more, few people truly learn from history. In 2004, Philip Bligh wrote a book called "CRM Unplugged", where Chapter 2 discussed why CRM fails and how to fix it. He illustrates a set of risk factors collected by Meta Group in 2001 ( acquired by Gartner Group in 2005).

Factors contributing to CRM Project failure "CRM Unplugged", Chapter 2 , p 34, author P Bligh

What’s the recurring pattern? No strategy, no process improvement , and poor executive support. In case you think that this information is outdated, things get worse instead of better. In 2014 Success Accelerators and C5 Insight found, not only that over one-third of CRM projects still failed, but that some companies had experienced 2 or 3 successive failures.

Surprisingly, there is a key factor that none of the research mentions explicitly, although all the above points arise as a result of it, and that is the disruption a new CRM brings to the business.

A Good CRM Implementation is a Disruptive One

Any company that intends to implement a CRM that will replace one or more legacy customer databases or older CRMs generally underestimates what a major change this will bring to the business. When you consider that nearly every employee depends on customer information to perform their jobs correctly, the true impact becomes apparent. Now add in the double whammy of new digital and social features that made you select this product in the first place. You’ll need the buy-in and participation of everyone who interacts with customers directly as well as those who use customer data in the course of their work. They are going to require training, and once the new CRM is implemented, there will need to be some change management to ensure the implementation sticks and encourages adoption.

However after all that, we still have not gotten to the root cause of the problem. If you are a disciple of Lean thinking, here is one of the "5 Whys" for your root cause analysis.

"Why are you implementing a CRM in the first place?"

The answer to this is why CRMs fail; it is because you need to be customer-centric, and becoming customer-centric is hard, very hard, so many customer-centric initiatives fail.

The reason why changing from an organizationally-centred or product-centred approach to one where the customer is truly at the heart of your business is so difficult is because you have to turn your business model "Outside-In". Somehow, "outside-in" sounds much more of a stretch target than "customer-centric", and has been written about by others since Ranjay Gulati, such as George Day.

Why CRM Fails and How to Fix It

Now that we have identified the critical success factor for CRM implementation, namely that it is actually about moving to a new paradigm where customer experience defines your business, we can address those key failure factors.

Develop your Strategy and Vision

This has to be a company-wide initiative, not something that starts and ends in the C-Suite. By including the workforce, all of whom are going to be affected by the change (if done correctly), you will keep them informed and involved. The people who actually capture customer data, provide customer support and run marketing campaigns know all the customer pain points as well as their own frustrations with the current processes and systems. Give them a voice to suggest what the future should be. This will resolve the problem of poor adoption once the application is live. Thinking that a new CRM is a technology project is wrong, and a key failure factor; it's about the customer and your employees.

Appoint Sponsors and Champions

In order to keep the project top of mind, you need some committed individuals to sponsor the project and be champions in each of the business units. This is a major business change and the CEO should step up to the plate for the best results. Lack of sponsorship and commitment is a guarantee of any project failure and not just a reason why CRMs fail.

While we are discussing commitment, make sure that the CIO is bought in too.

Align your Processes with the Customer Journey

While you may have a comprehensive catalog of mapped business processes that support your product-focused business, these will have to change to support the customer experience. This is both fairly simple and very effective; since much of your legacy process will fall away, and you will discover obsolete business rules and roadblocks while focussing on activities that relate to the customer journey, rather than selling product. The overall result will be leaner process, lowered costs, and improved revenues.

Start with a Proof of Concept

Try and avoid a "big bang" implementation. Start with one business unit and get that right, then steadily roll out to other areas of the business. You may want to use your value chain as a roadmap, starting with marketing and working your way through to customer support, but it depends on your particular circumstances. For instance, marketing departments generally have many disparate applications which use customer data, from demand generation to campaign management, and a good CRM implementation should replace most, if not all of them. The proof of concept approach is especially recommended when you have multiple client databases and a need to consolidate them.

Avoid Garbage in, Garbage out

One of the key dissatisfactions with customer data in most organizations is lack of trust. This is because of poor data quality. Data must be "cleansed" before moving it from the old customer base to your new CRM, when consolidating several databases. This is to ensure that you  only have one set of accurate customer data. Fortunately there are data cleansing applications available that make this step easy, and your CRM vendor may well have one of their own to help you in this task. The whole point of implementing a new CRM is to be able to build a unique view of your customer, which will make them feel valued; this is not going to work if you have the wrong personal data loaded.

Keep to the Pathway

While the suggestions above do not cover all the risks of a CRM implementation project, make sure to address the major issues, such as lack of commitment, lack of buy-in and most importantly a lack of a plan. All of this together with the understanding that you have embarked on a voyage to a customer-driven business rather than an exercise to shunt customer information from one application to a newer one, you should have enough success factors for a successful CRM implementation. You are investing a great deal of time and money in this project and you want to see results.

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