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|In: Industry Commentary|Last Updated:

If you don’t have a new idea, coin a new acronym.

Last year’s fad was C-level positions. We had CKO (chief knowledge officer), CPO, (chief privacy officer), and CCO (chief customer officer), and it was a wonder nobody added CSO (chief sanitation officer) to the list, all reporting directly to the CEO, re-titled “chief ego-gratification officer” since that’s the only possible reason a CEO would install all of these people in the executive suite.

That was last year. This year we’re augmenting CRM (customer relationship management) with other relationships, like PRM (partner relationship management) and VRM (vendor relationship management). With all due respect, the point of CRM is to scale up what the family butcher did with our grandparents — build a strong relationship based on intimate knowledge of each customer, leading to repeat business while turning “cross-selling” and “great service” into synonyms.

The corner store achieved this result with the proprietor’s unaugmented brain. Replicating this strategy with millions of customers, thousands of sellers, and a half-dozen communications channels is a difficult proposition, with no parallel in the more manageable situation of dealing with partners and vendors. Besides — I want my vendors to worry about their relationships with me. VRM inverts this responsibility in an unwholesome way.

CRM is a business strategy. It doesn’t start with customer analytics, which are all about the customers you happen to have now, nor does it start with a software installation. It starts with design, as any good strategy should. Just as a product strategy begins with a design of the product line, followed by a design of each individual product, so a relationship-based strategy should begin with identification of targeted customer profiles, followed by design of the desired relationship with the customers within each of those profiles. That means figuring out how you want those customers to think of you, and then designing a set of experiences and interactions that will lead them to think of you that way.

And since CRM is a business strategy, its intent isn’t to improve your company’s key measures. When you improve measures you’re thinking tactically. Strategies redefine goals, which means changing what you measure.

With CRM, this means shifting focus from transaction margins and process efficiencies to customer retention and growth in customer lifetime value.

Sound risky? It isn’t. If you stop losing customers and make more money from the ones you have, you’ll increase your profits. How can you avoid it?

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|In: Industry Commentary|Last Updated:

When I was a kid I played chess, or at least a game that used the same board, pieces and rules that chess players use. I wasn’t all that good at it: I lacked the aptitude, I lacked the necessary patience, and mostly I was too lazy to study the game.

I substituted ingenuity for study of the game. Pitted against a superior antagonist, I copied his moves, figuring I’d stay even until I spotted an opportunity. Clever, don’t you think? I figured that since only tens of thousands of people had played the game over the centuries since its invention, the odds were good nobody had ever thought of this strategy before.

My opponent thought it was clever, too. “Mirror chess, hmmm?” he asked. Then he moved. “Checkmate,” he commented.

Mirror chess can’t win, which is why most companies that copy the strategies of more successful competitors don’t succeed. Right now you see this with technology companies entering the services business. IBM makes more selling services than technology, after all, so it must be a good strategy, mustn’t it?

Well, no. It’s a very bad strategy, precisely because it’s a good strategy for IBM. IBM is already there. So are EDS, CSC, Accenture, my old compadres at Perot Systems, and a zillion other companies as well. The services marketplace is overflowing with entrenched competitors. It’s mirror chess, and a losing strategy.

Does this mean a company should never copy a competitor’s moves? Not at all. There are at least two very good reasons to do exactly that. One is defensive: Sometimes the game is poker, and a competitor raises the ante — perhaps by improving service, or reducing time-to-market, or finding a way to dramatically cut costs. You can’t win by copying the move, but you might lose completely by failing to do so.

The other reason is offensive. Early in the life of a new marketplace a competitor proves a concept, then gets fat, happy and complacent. Whether it’s Microsoft taking over WordPerfect’s and Lotus 1-2-3’s turf, intranets taking over from Lotus Notes (see a trend?) or AOL taking over from CompuServe, moving into a good marketplace dominated by a weak competitor is a great strategy.

In chess the opponents start off with equal strength. In business that’s almost never the case, and level playing fields are for those who lack the wit to find one tilted in their favor.

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