A Three-Step Customer-Centric Approach To Acccelerating Organic Growth

Company Background

Our client is one of the largest companies in the world, ranked second in the Fortune Global 500 with a family of brands that are recognized and respected worldwide.

Over the past ten years, this company has transformed itself via a series of acquisitions into a global energy company; employing over 100,000 people and operating in more than 100 countries worldwide. In 2005, revenues were reported as $255 billion, from which the company generated profits attributable to shareholders of $22.3 billion.

Business Issue

For many years, the company's success stemmed from a clear focus on financial performance supported by a series of bold and astute acquisitions. But, by 2002, the company had exhausted the potential to grow profits further by acquisition. At the Annual General Meeting in April 2002 the CEO announced, "2001 was also a year of transition for us - the end of the period of mega mergers, and the start of a period of organic growth."

One area identified as a potential source of growth by the company's leadership was better customer management. Our client recognized that they were not maximizing the value of their customer relationships and needed to improve their customer management in order to grow organically. The challenge of assessing the benefits of improving customer management was partly owned by the company's group marketing and in 2003 the customer management team was created. This team wanted to take advantage of the experiences and best practices of an expert in the field, so they chose Inforte to help them achieve their objectives.

Inforte's Solution

Inforte worked closely with the company's customer management team to learn how change transpires. Leveraging this insight, Inforte helped develop a three-step, customer-centric approach: a case for change, the customer management framework and the CRM technology framework.

A Case For Change

Inforte and the client constructed a program of research and analysis to provide the evidence needed to create a case for change.

The analysis began with the hypothesis that better customer management can generate profitable organic growth. This was tested from three key perspectives:

• Inforte undertook detailed research of the company's customer management capability - the current state, desired state and change complexity - across marketing, sales and service functions for 14 different business units in Europe, the America's, Asia and Africa. This provided a clear performance baseline from which progress could be measured.
• Inforte also interviewed senior personnel in 90 B2B and Consumer Goods comparator companies, including a number of best-in-class customer management exponents, and from this developed a number of case studies. These case studies illustrated the size of the gap between our client and comparator companies and provided a strong catalyst for improvement.
• Inforte analyzed the financial benefits of companies with clear and focused customer management strategies across industries. The companies analyzed spanned the full spectrum of customer intimacy from those in lower gross margin industries with limited scope to invest in customer management to higher margin industries that could afford to achieve intimacy across a wider range of activities.

The synthesis of all this data made a clear case for change that convinced senior managers that better customer management would help deliver profitable organic growth. In addition, the research also highlighted that linking service more closely to sales would provide a major profit opportunity.

The Customer Management Framework

Inforte and the company's customer management team developed the Customer Management Framework (CMF) - a set of tools and methodologies that our client's businesses could use to develop customer segment strategies. The key steps of this collaboration:

• A customer proposition model was developed to help the company's business define its future customer value proposition. The key inputs to this are customers' needs and priorities, how these are being met currently by competitors and the company's current offerings. Together, these help define the customer value proposition needed to help acquire, grow and retain profitable customer relationships in the future.
• The next step, prioritize which activities are most critical and how well they need to be performed. This is achieved by using the Activity System Model, which defines the key activities within marketing, sales and service and describes different maturity levels for each activity to reflect increasing levels of capability maturity.
• To ensure effective performance management, the final component of the CMF covers customer metrics that define: how the major outcomes of customer acquisition, growth, retention and profitability should be measured; the key strategic drivers of these outcomes and how they should be measured; and the detailed metrics to monitor performance of each underlying activity.

Following the development of the CMF, Inforte supported the company's customer management team in deploying the CMF customer-facing businesses, where it has been warmly received as a means of structuring and stretching their thinking about customer management.

The CRM Technology Framework

Within the company there is a varying degree of customer management front-office technology. On each occasion a business would develop a road-map, build an ROI model, develop an implementation framework and work with partners to design the solution. In the absence of a centralized approach valuable learning was being lost; potential synergies in purchasing, scoping and implementation approaches were being wasted; and poor decisions were made.

Supported by Inforte, the company's solution to this was first to access potential CRM vendors and select one as a group CRM application partner and secondly, develop a CRM center of expertise supported by appropriate tools and methods - the CRM Technology Framework.

If a CRM initiative is deemed necessary, the CRM Technology Framework helps our client determine the appropriate approach to its implementation. To do this, the CRM Technology Framework encompasses four key components:

• Solution Definition: a tool for determining the optimal approach for the business to take in implementing its solution.
• CRM Footprint: a tool that links the preferred CRM vendor application modules to the customer management activities that the strategy has identified as important.
• CRM Costs & Benefits: a tool that helps the business to calculate the ROI that will emerge from their CRM implementation.
• CRM Roadmap: a pro-forma and a process for planning and articulating the CRM plans of the business.

As a result of this process, the central customer management and IT functions can now provide effective support and advice to businesses on the subject of CRM. Underpinning this support is a rigorous set of tools that can be consistently applied whenever a CRM investment decision is required.

Words Of Advice

The rate of global consolidation means many companies will increasingly find themselves with a limited scope to grow further by acquisition and they will need to find alternative sources of growth. Better customer management is one growth accelerator that these companies should look at closely.

For companies seeking to improve their customer management capability, a phased approach is instructive. In each phase, an important asset is gained - essential for any company that is seeking organic growth. Initially, the case for change helps companies build momentum by understanding what's needed to enable effective customer management. The customer management framework then prioritizes activities to enable differentiated value propositions to be delivered and ensure objectives are met in each segment. Finally, the CRM technology framework ensures a strategic approach to CRM investments to deliver a strong, positive ROI.

Better customer management helps a business accelerate organic growth through improving its ability to acquire, grow and retain the most profitable customer relationships. The foundation of better customer management is a strategy that clearly prioritizes investments that directly impact the desired outcomes. The analytical rigor and degree of integration of the tools developed for our client ensured the development of a clearly structured, action-oriented, end-to-end strategy that will help a business acquire, grow and retain the most profitable customer relationships.