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I’m not in the mood to write a new column this week. So you get to enjoy a re-run, this time one inspired by my father, who first coined the term “Customer Elimination Management” among many other great turns of phrase.

Dad, this one’s for you.

– Bob

* * *

Ready for some Customer Elimination Management (CEM) — the term coined by soon-to-be Direct Marketing Hall of Fame inductee (and father of yours truly … congratulations, Dad!) Herschell Gordon Lewis to describe Customer Relationship Management’s evil twin? Have I got a story for you. It’s about a growing, privately-held retailer dealing with, as the retailer’s controller put it to me, “one of the nation’s largest bank systems, soon to be shrinking if this continues.” Call it First CEM Bank (FCB).

The retailer was expanding into a new market where its primary bank couldn’t provide deposit services. FCB could, and another FCB branch had previously contacted the retailer expressing strong interest in providing a different service, so the controller called them to make the arrangements. FCB responded by asking for a great deal of financial information. None was relevant to a depository relationship (the retailer wasn’t, after all, requesting a line of credit) and all was inappropriate for a privately held company to disclose unnecessarily. When the controller declined to provide the information, FCB declined his business.

The retailer’s business could have been significant, as its primary bank’s reach is incomplete. The controller, wanting to be fair, and also incredulous, pursued the discussion to make sure there was no misunderstanding. Here’s the response — paraphrased to disguise identities at the request of the retailer’s controller:

“I am pleased to respond to your query, as you’re asking legitimate questions. When we spoke you informed me your company was unwilling to provide financial statements. We like to establish deep comprehensive relationships. Providing us financial information about your company is a prerequisite to opening a dialog. I suggest you work with another bank, which should be able to handle your request.”

The controller told me that yes, another other bank was very happy to talk to him, and they are now discussing the possibility of expanding their relationship beyond the original services and market.

Ready for the best part? FCB has received a lot of ink over the past several years for its advanced and innovative implementation of Customer Relationship Management.

You knew that was coming, didn’t you?

How can this kind of corporate stupidity coincide with a strategic focus on CRM? It’s easy. All that’s needed is leadership that holds employees accountable to a system of well-defined metrics, and a clearly stated set of corporate policies designed to drive the metrics forward.

All that’s needed, in other words, is to follow what most management consultants consider best practice for well-run companies.

Here’s how I’m guessing it worked at FCB. CRM focuses on a measure called “Customer Lifetime Value” (CLV) (sometimes called “Lifetime Value” or LTV). It’s an estimate of the discounted value of all future cash flows expected from an average customer or class of customers. I’d bet FCB’s focus is on increasing CLV, its strategies for increasing CLV are based on one-to-one marketing that requires extensive customer knowledge, and its corporate policies require that knowledge early in a business relationship, figuring no knowledge leads to no marketing leads to no increase in CLV.

Which is to say, FCB started with the right idea and promptly forgot that good customer relationships aren’t built on marketing and customer coercion. They’re built on earned mutual trust, with an emphasis on “earned.” Marketing becomes communication, which includes listening alongside the personalized sales messages. The numbers? They follow as a natural consequence. As is so often the case, trying too hard to move the measure results in damage to the business.

As head of IT, you’re going to be in the middle of your company’s CRM implementation. And you’ll be tempted to encourage an emphasis on those aspects of customer relationship management that center on information technology. That’s fine, to a point. It’s easy, however, to tell when you’ve gone past that point.

It’s when the numbers and information technology take precedence over your company’s customers.

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|In: Industry Commentary|Last Updated:

And now, a few disparaging words about the Digital Millennium Copyright Act (DMCA) and especially the bills, passed by some states and under consideration in many more, to extend it — the so-called “DMCA 2” laws.

Yes, I’m incorporating a political perspective into this column, as I did a couple of weeks ago in the context of Oracle’s attempted acquisition of PeopleSoft. In response to those who encourage me to “leave politics out of it” … I didn’t put politics into IT in the first place. It’s there, and hard to ignore in situations like this.

The DMCA and DMCA 2 aren’t, at their core, liberal/conservative or Democrat vs Republican issues. They’re part of something more serious and pernicious: The increased influence of large corporations on the conduct of government, and correspondingly decreased influence of private citizens and small corporations.

Plenty of others have brought up DMCA 2, and I have nothing original to add to the discussion. If you haven’t paid attention, the claimed purpose of these laws is to make it even more difficult to pirate works of entertainment; the apparent purpose is to further restrict the rights of consumers to treat items they’ve purchased as something they actually own; and the reality of how they’re written would make firewalls and network address translation illegal.

Contact your state legislature and (if your company has them) lobbyists and tell them to kill this bad boy. While you’re at it, tell them to muzzle Orin Hatch and shoot dead his harebrained idea to let media companies remotely sabotage PCs they suspect contain pirated music. Talk about a great way to make the life of a CIO miserable …

The DMCA itself has less impact on working CIOs. Other than its linkage to the Windows XP end-user license agreement — the part that allows Microsoft to update your operating system without your knowledge or permission — there isn’t a lot in it that affects you as head of IT.

Except that it sets a bad example for CIOs. Why?

Think about what the DMCA does. In the long run, it will harm existing entertainment conglomerates more than it harms consumers, for two reasons. The first is that while the illegal duplication of music is a real issue, trying to counter advances in technology with legislation is, in the long run, self defeating. At some point existing entertainment companies will find themselves simply irrelevant, made obsolete by technologies they refused to embrace.

The bigger problem is the mis-match between what the recording industry wants to sell and what customers want to buy. The recording industry is selling CDs — physical collections sold in retail stores. Many of their customers want singles, and they want them downloadable. Even those who prefer to buy honestly have a hard time doing so.

There are a few new websites in this business. If they’re connected to the major labels or retailers, the connection is well-hidden. Regardless, I wish them well — they’re the right response to the problem. Buying legislative protection from Congress is the wrong one.

We’re in an age in which many businesses have extended their range of strategic options beyond winning in the marketplace. They pursue legislative and legal avenues rather than adapting their products and services to marketplace preferences and technological innovation, and they succeed. Their success has made them lazy.

Especially from advocates of “limited government,” as most large corporations are (or at least they are when the subject is paying for government), asking the government to protect them when they could be developing their own technology and strategies to protect themselves sounds pretty whiny to yours truly.

All of which may be interesting, but hardly an issue for IT departments. Except that it parallels similar, and similarly unhealthy trends found in far too many corporate environments.

The DMCA sounds to me a lot like the desktop lock-down policies advocated by many IT leaders. The music industry is trying to use legislation to prevent customers from getting what they want through other channels instead of finding a way to remain the supplier of choice. What is desktop lock-down? Many CIOs are either unable or unwilling to understand what end-users are trying to accomplish. Instead of finding ways to make working with IT preferable to bypassing it, they use the corporate policy manual … legislation … to prevent end-users from taking full advantage of information technology.

The music industry has told its customers, “We think you’re a bunch of thieves, so we’re combining legislation to increase the penalty for theft with technologies designed to prevent you from getting what you want.”

What are these CIOs saying to their end-users? The same thing: “We think you’re a bunch of corporate miscreants, so we’re combining policies that increase the penalty for misusing your PCs (with misuse being up to us to define) with technologies designed to prevent you from doing your job the way you think is best.”

The DMCA sets a bad example. Some CIOs have embraced it. Don’t be one of them.

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