Kiran Bulusu’s Blog

I often see some startup companies especially EDA companies ,which have big aspirations of going for IPO sometime down the lane ( ofcourse every CEO with help from CFO talks about taking the company to IPO)….but if we analyze how some companies are run in terms of their strategies, it wouldnt take much time to realize that their goals are not aligned with their vision….these startup companies forge a relationship with biggies in their field as partners/alliance . They dont (dont want to ) compete with the big companies in terms of their product offerings..they offer complimentary products which go along with the main stream products…essentially they are nice to have and not must have…so how can these companies grow and build a good revenue stream??

For example, take four companies companies , startup company A, a relatively young company B which is still pre-IPO , some tier II company C ( normally categorized based on revenue) and a tier I companies D and E . Company A has many products which all might be integrated and sold as suite of tools or maybe point tools which can be sold seperately depending on how the sales folks want to … all/most of the products they offer work along with the products of C,D and E. The current situtation in the EDA market is, company A is building relationships with B,C,D and E and is positioning itself strategically sothat it has no competitors and it doesnt get biten by the aggressive Tier I or Tier II companies….But what company A is not realizing is..this way of forging relationships doesnt help the company in long run as they wont have much space to grow and they cant increase their revenue stream by just refining their existing products or adding nice to have features…Company shouldnt get lost or spend all of its energy on how to survive…it should rather formulate a strategy which helps the company to survive and generate revenue ( by having a cashcow product) and then it should be able to quickly have products which can differentiate itself from the rest and compete either alone or with the help of alliance it has formed earlier…

In our example earlier, If companies C,D and E cancel their partnerships and they start to offer the features which company A has planned, it doesnt take much time for the company A to look for potential buyers… Companies can forge relationships and alliances, but when creating strategies, it has to do it in such a way that it has space to grow and the alliance helps it in creating even more powerful products and has created uncontested market space…. To create that you need :

1. World class R&D team : From my experience, I see that customers prefer products which which cuts costs ,time or both if you are in EDA…There are many EDA companies whose value proposition lies in simple economic fundaes like reducing time and money spent on other main implementation based tools…there are about 10-12 startup companies operating in EDA space
with this value proposition..

2.Marketing ppl who can brandize the product, a good example is that of XeroX…When they entered India, they marketed it so much..ppl often refer Photocopying as Xerox..you can see Xerox machines everywhere ( not photocopying machines!!) …whatever you do, the customer
should be able to feel it…it should revolutionalize the way your customers think about it…Apple IPOD is one decent example,

3. Sales folks who can sell ice to eskimos and

4. Appln engineers : who can help customers and make them realize the product value ..thereby bringing more business/revenue to the company..remeber the 80/20 rule…80% of the revenue comes from 20% of the customers…so make these exisiting customers happy and bring in more customers by delivering the product value…

and Ofcourse, you need to have good CEO who has vision thats executable and backed by good executives who can strategize the business and take it down the straight path …path which leads to IPO…..

A nice management strategy model by W. Chan Kim and Renée Mauborgne …I wonder if Apple is following this strategy model …There are lot of MP3 players in the market before Apple released the much hyped IPOD… It created a new market by releasing this nice and tiny gadget which can do lot of other stuff other than just playing Mp3 songs….till few months back it didnt have any competitors (uncontested market space !!)…its sales figure clearly show that it has dominated the market and made the competition irrelavant….by the time the other companies entered the space of harddisk based Mp3 players, Apple released IPOD Nano ( flash based) …Again Apple opened another new market..flash based …created a new demand with customers ….Apple IPOD has created so many applications like I-Trip, Voice Recorder etc..and new markets are emerging ..for example , Video IPOD….If my memory is right..Apple has teamed with NBCII to broadcast some of its shows and news in portable format …no wonder it will be subscription based ..but it has opened new streams of revenue…

Apple was sucessful in creating the market, open new streams of revenue, align it with companys goals..but its pricing model isnt still good..it has to slash down the prices even more….Intel for example, cuts back prices heavily when it releases new stream of processors……
Apple should do the same …..

The De-Coupling point principle put forth by Clayton M. Christensen, Christopher S. Musso and Scott D. in their article “MAXIMIZING THE RETURNS FROM RESEARCH”, says that “The company developing a new technology must plan to integrate forward from the point at which a new technology is developed, across every interdependent interface in the chain of value-adding activities out to that point at which there is a modular interface with the next stage of value-added.” They say that, it is the activity just before the decoupling point where the most attractive profitability in the value chain can be achieved. The reason for this is that performance in a modular product is not determined within the product’s architecture, but within the subsystems from which the modular product is assembled. At the stage of value-added just before the decoupling point, performance differences are determined primarily by the interdependent architecture and less by the components that are used.

EDA industry is very competitive and is more technology driven than any other field in the IT industry. As the design complexities increase, designers demand more innovative and complex tools and as the time to market pressures are increasing (for many chips it is less than 6-9 months), EDA companies are always under great pressure to roll out sophisticated tools to understand and solve design complexities . Having said this, it can be easily understood that EDA industry works in tight integration with the Design companies and the manufacturers. Each chip is designed in a different way and the Methodology engineers propose new
Methodologies and flows which indirectly puts pressure on the EDA industry.

Now let’s look at various perspectives: An EDA Startup Company can roll out sophisticated software for a specific stage in the ASIC/FPGA/Structured ASIC design flow. The problems typical EDA start-up companies’ faces are: They have to make sure that the algorithm on which they built the software delivers both the performance (how fast the tool can analyze the design sources say RTL or Netlist) and the design capacity it can handle (20 million gate design is very typical now-a-days), the output of the tool should be compatible with the tools from the four big giants (Cadence, Synopsys, Mentor and Magma) so that the designer can take the output from the tool and use it in the next steps of the design flow with the implementation tools. The tool interoperability issues are always a painful task for the EDA engineers.The success rate for the EDA startups is very less for the reason said earlier. They have to see a way where their tool suite can be seamlessly integrated. So for EDA startups, the De-Coupling point lies in effectively addressing the design complexities, able to handle higher capacity and performance that the competitor tools. But the companies have to keep in mind that de-coupling point might shift to higher point in the value chain.

For an already big company like Cadence, Synopsys and Mentor, their de-coupling point doesn’t lie in the new tool offerings, but rather understanding the design flow gaps in the already offered tools and quickly filling it out and thus enabling a better and fully integrated platform.

If anyone out there has any ideas/opinions on the de-coupling point…please comment….

Was reading a book on TQM (Total Quality Management) and here are some of the fundamental principles put forth by W. Edwards Deming: During late 1940’s, Japanese realized the principles put forth by Deming and all of us can clearly see quality of many Japanese Electronics products.

Deming’s TQM Principles:

1. Create constancy of purpose by investing in the future.
2. Quality must become a philosophy of total dedication.
3. Don’t inspect bad quality out; build quality in from the start.
4. Don’t award business on price alone.
5. Improve constantly on production and service.
6. Institute training.
7. Institute leadership.
8. Drive out fear.
9. Break down staff barriers.
10. Eschew slogans or targets.
11. Eliminate numerical quotas.
12. Encourage pride of workmanship.
13. Promote education and self-improvement.
14. Transform the company from the top down, involving everyone.

Working as Application Engineer made me realize the importance of each of the above. I don’t know have insight to Six Sigma process, but I believe , it must have been based on the above 14 guidelines .

I was once very crazy about all the gizmos available in the market and always want to own the latest available in the market.That was the time when I was a student still doing my masters . As time passed by, I’m no longer driven by the looks and the technology used to build a product. This doesnt mean I dont appreciate the technology that is being developed and used. The same cell phone/PDA which amazed me couple of yrs back doesnt amaze me anymore. I always endup questioning myself like why the heck did I spend so much money on these stuff in which I dont use even 50% of the features .

I realized that there are two kinds of people.One set of people just simply love them, they are not really bothered about the fact that that they are going to use only 50% of the features.These people buy the stuff just because they love them.Thats it.

The other set of people, are more usage driven. When they go for shopping, these people look at the fact how many features they are going to really use.They then look at the trade-off interms of price and features offered and their usage of them . They then decide whether it is really worth of buying.

Though they are lot of people who will be in between these two kinds, from my own experience , I would say they are in a transistion phase.At the end , they fall into either of these buckets. Companies can easily turn the first set of people into customers , but the fun part for Marketing & Sales folks comes when they target the second set of people.I dont have the statistics to analyze how the consumers are divided into each of these classes.But it will worth learning the strategies which these companies employ in getting increased sales.

Why Change?

1. Why do organizations change?

2. Does my organization need to change?

3. What happens if we don’t?

A company also need to be answer,

4. How important is IT to the success of our industry / organization?

5.What kind of change will it introduce into the organization?

Looking from the IT perspective, one should try to answer the following questions:

6. Are IT resources appropriately placed in the firm?

7. Are leaders capable and ready to deal with the change management challenges?

The reasons for change can be either through Internal Factors or External Factors. IT influence in large organization is pervasive, affecting the smallest department and decision-making processes to an extent not visualized few years ago.

Dynamics of Change:

The general market structure and industry dynamics and the way they work are listed below:
The old industry value chain is:

a) Sequential

b) Functionally organized and transitional in nature

c) Vertical organization structures within organization boundaries

The new industry value chain is:

a) Process based

b) Integrating the enterprise activities

c) Boundaries are becoming fluid

d) Partnership and the rise of virtually integrated industry

Strategic impacts of existing IT system are based on the strategic relevance and impact on the following 4 categories. The goals and who has to exercise them were also listed below for all the four categories.

1. Factory: IT is important but they are not fundamental to the firm’s ability to compete

Goal: Improve performance of core processes

Leadership: Business unit executives

2. Strategic: Totally depending on it

Goal: Transform the organization or industry

Leadership: Senior executives or board

3. Support: Strategic Impact of IT on operations and future strategy is low.

Goal: Improve local performance

Leadership: Local level oversight

4. Turn Around: Not absolutely depending on totally uninterrupted, fast response-time.

Goal: Identify and launch new ventures

Leadership: Venture incubation unit

The various questions that arise here are, Do the perspective and skill of the IT team, IT users, and general management team fit the firm’s changing strategy and organization and the IT application, operating environment, and management processes?

Is the firm organized to identify, evaluate, and assimilate new information technologies on a timely basis?

Are the strategic planning, the management control and the project management systems defined and appropriately implemented and managed?

Are appropriate organizational structures and coordinating mechanisms in place to ensure IT is appropriately aligned to the needs of the firm? What is the importance of change management in the organization?

The Two Perspectives of Change: Organizational and Individual.

Questions at Organizational Level:

What is the required investment?

How will this change impact our financial performance?

What is the return of the investment?

When can the change be completed?

How much improvement will be realized?

How will this change impact our customers?

Questions that arise at Individual Level:

What will this change mean to me?
Will I have a job?
Do I have the needed skills and knowledge to succeed in the new environment?

Incremental Vs Radical Change:

Type and size of change determine the level of change management levels

a) Order of magnitude of change

b) Incremental needs less

c) While Radical needs more

Tactics for Managing Radical Change: The pace of change depends on the process that is,

1) Tactics, or techniques used to encourage an organization’s member to accept change

2) Complies with current organizational values and norms, skills, structures and incentive is evolutionary

3) Change that challenges or undermines the status quo, creates a new vision, and accomplishes fundamental change is revolutionary

Change Process: Various stages at Organizational and Individual Level.

Change is a Process:

1. It Takes time

2. Stages Involved in this process: Individual Level, Organizational Level.

Ideally both are going their stages at similar speeds.

Various Organizational stages are:

a) Business Need,

b) Concept and Design,

c) Implementation,

d) Post-Implementation.

Various Individual stages are

a) Awareness: of need for change — reasons, and degree of comprehension

b) Design: to participate and support — motivating factors and consequences and level

c) Knowledgement: about how to change — skills and insights

d) Ability: to implement new skills and behaviors — evaluate level and determine shortcomings

e) Re-enforcement: to keep the change in place — incentives and constraints to make it stick

Organizational Change Management Phases

Phase 1: Preparing for change

Define your change management strategy based on scope, risk, readiness, resources, and sponsorship
Prepare your change management team (selected and trained)
Prepare your sponsorship model

Phase 2: Managing a change

Develop change management plans

Take action and implement plans, communication plans, coaching plans, training plans, sponsor roadmaps,

Resistance management plans

Phase 3: Collect and analyze feedback

Diagnose gaps and manage resistance

Implement corrective actions and celebrate successes

Integrating Change Management with Process Improvement.

Business Improvement Process Steps

1 = Problem or opportunity identification

2 = Project planning and team formation

3 = Data gathering and business solution design

4 = Process and system development

5 = Implementation and measurement

Change management component

Organizational and change assessments

Team readiness and sponsor preparation

Awareness building, communications and training

Coaching, feedback and employee involvement

Resistance management

Change Management strategies to Improve Strategy Execution: Change Capacity, Change Absorption Paradigm and Absorption Threshold.

Change Management to Improve Strategy Execution:

1. How will enterprises develop an understanding of their current capacity for change?

2. How will enterprises accurately assess the scope and impact of a change initiative?

3. How will enterprises increase their capacity for change?

4. How will enterprises ration, orchestrate and manage change to improve strategy execution?

Change capacity: is defined by Employee willingness and ability to change.

It is affected by Organizational history and culture, leadership credibility, attitudes and trust toward management, perceptions of urgency, employee skills, and a collective experience of change.

Steps Involved to increase the Change Capacity:

Understanding the enterprise’s current change capacity is the first step

Change Absorption Paradigm: change can be characterized by three variables such as volume, velocity and complexity. Where,

Volume in the above framework indicates the number of change initiatives underway within an organizational unit at given point of time. Velocity is the speed at which the change management initiatives are introduced into the organization. Complexity is the measure of the reach, range and duration of the change initiatives

The Absorption threshold of the change for a given organization can be increased by

Increasing the flexibility in the organization,

Lowering the levels of hierarchy,

Increasing accountability and responsibility

Methodologies to Improve Strategy Execution: Change is a process and as a process it can be managed using:

1. Frameworks,
2. Best-in-class,
3. CSF,
4. Best practices and methodologies

Dimensions of Change Stemming from Re-Engineering: Structural, Management and People’s Dimensions:

Dimension of Change Stemming from Reengineering:

Industrial Age Organization: Network Age Organization

Structural Dimension

Hierarchical org. based on Networked Org. based

Function / product. Cross-functional teams

Rigid Bureaucracy Flexible Adhocracy

Org. Integration through- Org. integrate through-

-Structure - information systems

Management Dimension

Management by- Management by internal-

-Internal objective -and external objectives

Functional Organizational

Structural empowerment Informational empowerment

People Dimension

Fragmented Tasks performed Holistic Process

By individuals accomplished by teams

Functional specialists Case management and process generalists

Expertise as functional- Knowledge as- -Specialist - organizational resource

Resistance: What is Resistance, Levels of Resistance: Examples

What is Resistance?

Resistance is any force that slows or stops movement. It is not a negative force nor are their “resistors” out there just waiting to ruin our otherwise perfect intervention. People resist in response to something. Something that we (or our clients) are doing evokes a reaction that we call resistance. The people resisting probably don’t see it as resistance; they see it as survival.

Resistance is a natural part of change. It protects people from harm. As a beginning downhill skier, it is resistance that keeps me from taking the chair lift to the top of Bodycast Mountain.

Three levels of resistance are identified. The better we are at identifying each of these Levels, the easier it will be to assist clients in creating strategies appropriate for the resistance they face.

Level 1 – Based on Information

This resistance is based on information. Facts, figures, ideas. It is the world of thinking and rational action. Level 1 is the world of presentations, diagrams, and logical arguments. Many make the mistake of treating all resistance as if it were Level 1. In other words, they give people more information–better arguments, detailed facts – when something completely different is called for.

Level 1 may come from . . .

* Lack of information

* Disagreement with the idea itself

* Lack of exposure

* Confusion

Level 2 – Physiological and Emotional Reaction: This Change Level 2 is an emotional and physiological reaction to the change. Blood pressure rises, adrenaline flows, pulse increases. It is based on fear: people fear they will lose face, friends, even their jobs. It is physiological and uncontrollable. Level 2 can be triggered without conscious awareness. They are what warns us of danger and allows us to take action instantly, before our conscious mind even knows what’s going on.

Imagine that you hear a loud crash as you read this sentence. You probably would cover your head and crouch instantly, and only then would you look up to see where the sound came from. You would have taken those actions without your conscious mind considering what to do. If the ceiling had been caving in, there would not have been time for a thoughtful reaction. Your rapid instinctive reaction could have saved your life.

Another practical example during the recession we saw during the yrs 2000-2002 will be, imagine a client talking to her staff about a proposed restructuring.

People ask Level 1 questions: How much will it cost? When will it begin? What’s the timeline? Then the executive happens to mention that there is slight possibility that this could result in downsizing. Suddenly, two-thirds of the room drops to Level 2. She may as well-quit going over slides that speak to the rational mind, these people are responding from a different part of the brain. The portion of the brain called the amygdala, has warned them that this is dangerous and they are literally preparing for fight or flight–even if they aren’t aware of it.

So, a meeting can continue as if everything was still Level 1. Polite questions are asked. Debates rage over budgets. But this all conceals the unspoken emotional reactions.

Level 2 may come from fear over a perceived . . .

* Loss of power or control

* Loss of status

* Loss of face or respect

* Feeling of incompetence

* Feeling of isolation or abandonment

* Sense that they can’t take on anything else (too much change)

Level 3 – Bigger Than the Current Change

This is deeply entrenched stuff and is bigger than the ideas at hand. People are not resisting the idea – in fact, they may love the idea itself – they are resisting the client or you. They may resist because of their relationship with you or the client. History tells them to be wary. Level 3 is also the domain of cultural, religious, and racial differences. In other words, people may resist whom you represent.

An African-American minister was being investigated for possible misuse of campaign funds. The cabinet voted to expel him, a strong and unprecedented action. A less surprising response would have been to censure him. The votes in favor of expulsion came mostly from whites; his support came mostly from blacks. In situations like this, each group wonders why the other side can’t see the situation for what it truly is. Each side

believes that the other is wrong. Even when confronted with the fact that our opinion is exactly what one would expect from someone of our race, we still can’t see it. We think it is based on a sound dispassionate assessment of the facts.

When we are locked in a Level 3 difference, it is difficult to see how our race, culture, sexual orientation, or religion limits our ability to see other points of view. When we are operating in a Level 3 situation it is unlikely that we can put much value on the ideas and opinions of the other side. In these instances, believing is seeing.

Level 3 may come from . . .

* Personal history of mistrust

* Cultural, ethnic, racial, gender differences

* Significant disagreement over values

* Transference. The person being resisted represents someone else such as a mother or father.

Challenges of Resistance, Working with Resistance

The Challenge of Resistance

Even when managers want to take resistance seriously and deal with it responsibly, most strategies are Level

1. There are beliefs that if they give people just a little more information then they will certainly come around.

Newsletters, videos, and PowerPoint are all Level 1 approaches. There is nothing wrong with presentations if people are confused or need more facts, but Level 1 tactics seldom work at Level 2 and 3.

Working with Resistance
Level 1 lends itself to presentations and question and answer sessions. Level 2, however, requires conversation in addition to presentation. Listening and meaningful dialogue are essential. Level 3 demands that you begin to rebuild relationships before you try to present new ideas. Or, at the very least, your change management strategies must include strategies that build bridges while you plan and implement.

Creating Cultural Change
Success in planned organizational change means creating a vision of the future organization and its culture. The values, beliefs, and attitudes of the To-Be organization must be clearly defined. The To-Be culture must be clearly differentiated from the As-Is culture to effectively identify the cultural gap. The organizational change method chosen to bridge the gap must match the values of the desired culture, not the present one. For example, if a Legitimacy-based organization wants to become databased, it should choose either a Functional/Structural Redesign, Business Process Reengineering, the Action Research Model, or a Strategic Redesign. On the other hand, a Fault-Driven organization that wants to become more strategic would need to choose either a Functional/Structural Redesign, Managerial Development, an Organization/Cultural Transformation, or Strategic Redesign.

Which of the possible methodologies is chosen should depend upon the managerial effectiveness culture wanted in the To-Be organization. In this way, it can guarantee that the values, beliefs, and attitudes of the change approach match those of the future culture. The Legitimacy-based organization that wants to become databased could choose a Rational Goal, Internal Process, Open System, or High Performing System type of culture. If the management feels that the key to organizational improvement is in smooth internal processes and process rationalization, the Internal Process approach to organizational effectiveness must be the final outcome. Therefore, the appropriate change method would be Business Process Reengineering. If the organization wants to become goal-driven, with goals of productivity and efficiency being paramount, the Functional/Structural approach would be most appropriate. Structures would need to be redesigned or reconfigured to allow such processes as departmental goal setting, super ordinate goals, and Management By Objectives. These changes would likely require corresponding functional restructuring, as new departments are created and new responsibilities allocated.

A Fault-Driven organization that wants to be more strategic may also find that key stakeholders in their environment will only accept well-known approaches to management–which experimentation is frowned upon. If these stakeholders control the purse strings, the organization must adopt a Legitimacy approach to managerial effectiveness. To achieve this, a strong, dynamic, charismatic leader using the Organizational/Transformation approach to change would be required.

It becomes obvious that the cultural goal must be determined before any steps are taken in a planned organizational change. The values, beliefs, and attitudes wanted in the To-Be organization should be the criteria for deciding which organizational method is used. For planned organizational change to be effective, it must be viewed as a cultural revolution carried out through behavioral modeling. The change approach that matches the desired organizational effectiveness culture prepares the membership to accept the new culture. In implementation, organizational members begin to behave in the desired To-Be way. Decisions are made in the change process using a value and belief system similar to the desired culture. Success criteria are the same in both the change process and the desired culture.

Human resources personnel responsible for implementing planned organizational change must keep track of the organizational culture and where that culture is headed. The Field and House typology of Organizational Effectiveness can be used to assess the As-Is and To-Be cultural gap. Once the To-Be culture is identified, the appropriate change method can be identified. If the appropriate organizational change method is used, the organization will be prepared to accept the new culture, making change easier to institutionalize. This procedure may not guarantee successful implementation and institutionalization of the changes but it will certainly improve the chances of success. If the cultural gap and change method are not matched, implementation will surely fail. An apple pie cannot be created using oranges.

Seven Phases of Initiating Process Change and Various Strategies

The Seven Phases of initiating process change and various strategies involved are:

1. Strategy

a. Starting a Project

b. Commitment from Management

c. Discovering process based opportunities

d. Identify IT opportunities where they can be deployed for efficient usage

e. BPR

2. Planning for change

a. Inform stakeholders and organize re-generation team

b. Prepare project schedule and set performance goals

3. Process

a) Document existing process

b) Uncover process pathologies

4. Social Re-Design

5. Technical Re-Design

a. Explore alternative designs (Will re-iterate till it meets the requirement/satisfied as laid in the

Project objectives)

b. Design new process (creating a process change)

c. Design HR architecture (multi-discipline)

d. Selecting IT platform

6. Process Re-Generation

a. Implement HR changes

b. Develop & deploy IT support

c. Re-organizing: teams, jobs, and training

d. Top management communication and persuasion critical here

7. Continuous Improvement

a. Measure performance

Generic strategy paradigms

1. Engineering:

a. Reduced cycle time,

b. Order fulfillment (OF),

c. Operational problem with BPR as one part,

d. Cross-functional process aimed at operational optimization

2. Systems

a. Costs/cycle reduction,

b. Underwriting/claims,

c. BPR aim communication ties,

d. Cross-functional processes aimed at improving information flows

3. Bureaucratic

a. New product development,

b. R&Dàdevelopmentàlaunch,

c. Process capability/strategy/value chain,

d. Strategic Business Unit.

4. Ecological

a. Change mindset/mission,

b. Cultural orientation,

c. Establish new managerial mindset/strategic focus,

d. Entire organization.

I was recently reading couple of articles about this CRM technology and found that many IT people and/or management people dont understand the importance of it. Most companies doesnt have correct expectations as to what are the benefits of CRM and measurement metrics to calculate ROI. So, I thought ,why not writeup something about it and publish.

Customer Relationship Management which is often abbreviated and referred commonly as CRM can be used to define the way business houses deal with their customers, strengthen their market position, customize their products to serve the customers better and increases their sales And last but not the least is tells us how to increase our return of investment.

Tangible or Hard Benefits of CRM Initiative:

Any business which improves their customer relationship will automatically see the direct advantage of it in terms of profitability. So far companies have been using CRM systems only to understand customer to improve sales.

Below are few ways through which the CRM benefits the businesses with the above goal in mind :

1. Repeat Business/Loyalty: Many surveys in the past have proved that it is easy to retain the old customers/business than to get the new business. By improving the customer relationship, many customers will tend to become loyal to the company and thus will help in increased sales. Few of the benefits are outlined here below:

a) Customers who shop frequently get to know more about the brand and various choices offered by them. As times passes by, these loyal customers have very strong knowledge and so they ask the service representatives very specific questions and so will result in lesser transaction and consume less store resources. This will result in savings to the company.

b) There is another subtle benefits associated with having a loyal customer. These customers feel like a stakeholder and part of the brand. So when they have a bad experience, they tend to complain rather than moving to a different brand/company.

2. Targetted/Focussed Marketing: Instead of scatter-gun marketing approach which is in-efficient, if the company has all the information and metrics to process the information i.e. CRM, company can now focus to specific audience. This will result in increased sales and cheaper costs.

3) Reduction in costs due to: Order Processing; Short-term acquisition costs and Customer referrals.

4) Develop better communication channels: 2 way communication channels should be established between company and client.

5) Collect vital data, like customer details and order histories

6) Create detailed profiles such as customer preferences

7) Deliver instant, company-wide access to customer histories

Identify new selling opportunities

Intangible and Soft Benefits of CRM Initiative:

Apart from the above benefits, there are lots of hidden benefits that a CRM system provides to any business. The perspective of the company towards the CRM system needs to be changed. Outlined below are those hidden benefits which many companies don’t realize and as such undermine the benefits of the customer relationship management :

1. Proactive Management: With the abundant wealth of information available about the customers, companies can use that information to track the buying patterns of the customers, foresee the problems in the potential customer relationship and accordingly can take measures so that they don’t loose any customer. Companies instead of being reactive which might be too late in many cases, companies can be proactive and generate new business.

Pro-active management has to be done at every level of the service to the customer. Especially, pre-sales and post-sales (customer service representatives) people need to be involved in this idea heavily. At the Pre-sales level, this often involves the following steps:

1. Contacting the customer either prospect or existing and trying to do some cross-selling or up-selling which are important factors for business success.

2. From previous buying history and patterns, the sales folks can approach the customer and explain them various product packages customized for them and the value they offer.

3. It is important for the sales management to constantly ping the prospects or referrals and explain them about various services and products they offer and customizable level of solutions and of course various incentives for becoming the customer. The sales people need to be pro-active in turning every referral to a customer. Instead of referral walking to the company, the company needs to approach them first.

The above described steps are generalized, but depending on the sector, it might involve even more steps.

As a post-sales or customer service representative, every care has to be taken to retain the customer. Customer satisfaction plays an important role in customer retention. Various studies have revealed that 5% of customer retention translates to nearly 25% of profits.

For example let’s consider the case of an IT company which offers various products to its client depending on the sector the client is in. The customer support personnel need to be trained in the CRM tool and they should be able to analyze when they need to contact the client. For example, the customer might have just purchased software. The support personnel needs to immediately conduct multiple trainings on the customer site and should not wait till the customer faces a problem and requested for one. This often results in lost of interest towards the product and the company. The support personnel need to ensure that the product utilization should not decrease. The number of calls related to products or bugs or new product enquiries are all logged in the CRM database and looking at the results of the CRM tool, support personnel should decide what kind of service should be provided to make the customer happy.

Another good example for pro-active management would be credit management. Many utility companies will be in huge debt due to failure of debt recovery from the customers. So the utility companies need to adopt a different model

To come out of debt. This model can be independent of any billing or credit management system. The customers previous debt history such as amount owed to the company , number of days the amount is overdue and customers demographic information, other critical information such as customers salary is fed into the a model which automatically computes and tells the company whether and when can the customer pay . Companies can also use this information to determine appropriate payment terms upfront and initiate debt recoveries.

Companies can develop a credit rating system to rate the customers based on their payment performance and amount overdue. Based on the credit score, companies can also determine the payment terms upfront. Thus the utility companies can be pro-active and save huge money from being in debt.

2. Customer focused database: An organization making the CRM information visible to entire organization wide can see improved: performance, financial control, forecasting;

3. Reputation: Improving the customer relationship, will lead to many referrals through word of mouth etc and thus larger growth.

4. Time Sensitivity: Having all the information and efficient system in place to process and generate the reports helps the company in being informed and organized about the individual or a group and also it helps the company to act at the right time. This will increase the ROI.

5. Business Intelligence: Business Intelligence is just one aspect of it. Business Intelligence Process should be viewed as a part of CRM strategy and it should be seen as process that drives a behavioral change. This process involves on how we evaluate the customers, what we do and when we do, describe the environment, trends predictability and the companies can use this process to constantly define their decision process and strategies.

6. Process Management: When viewed from an evolutionary point, all the processes that are used to re-align the business processes or increase the business functionality result in decreased personal interactivity with the clients/customers. Companies should use the results of CRM tools to analyze and improve the business performance. As many companies are now realizing that to recreate the business, it needs deep experience and analytical skills. As Paul Ciandrini says that to improve Business knowledge and experience, it’s not an application software innovation, but the personal customer relationship now drives the process improvements.”

A Process Management Professional has to interact with all individuals who participate in the Process Modification and/or (re)development activity. Previous studies have shown that one needs to develop a satisfying relationship with whomsoever we interact with.A common scenario often seen and a concern to IT companies are described below:

The developers start coding sometimes with the partial or incomplete specification which often results in an erroneous product. This happens due to the minimum interaction or none in most cases with the user community. The user base on the other hand will be in the assumption mode that the product will contain all the requested features and whereas the delivered product will not. This will result in dis-appointment to the customer and decrease in the profits/image to the company. So, the company needs to ensure that process management professional is involved in this process where he will define the complete specification and review the product features and quality assurance of the product. The critical piece here for the IT manager Is to identify the lack of process in place. Also the IT company management with the help of CRM tools should (re)define the process and Improve their business performance and hence ROI.

7. Quality Assurance: This is one of the important intangible benefits of the CRM initiative. As the companies process the information obtained from customer about a particular product, they can utilize it to improve the quality of the product. This is more of a qualitative rather than a quantitative benefit.

8. Personalized Relationship building: As the companies get to know more about their customers using various CRM initiatives implemented, they can engage their sales and customer service representatives in developing an personalized service with all their customer. As companies get to know the purchasing patterns and other statistics like their demographic information, income range etc, they can predict what services/products are required for that particular customer and accordingly provide the service to the customer. As all customers are not same, one needs to implement the Nordstrom way.

Another example that can be mentioned is many energy companies are now moving away from being service oriented

Company to Product Oriented Company. Energy companies are now developing personalized relationship with their customers by offering them a customized products based on various parameters like

1. Bill Frequency
2. Bill Media
3. Read Frequency
4. Payment Method
5. Payment Frequency

By selecting the above settings, customer enables to tailor the products according to their economical class they fall in. At the same time, it is advantageous for the company also as it will be a cost-effective solution for them. Companies aligning the above parameters will help in reducing the credit risk, maximize profitability and customer retention.

9. Supply Chain Management : OEM and its supply chain partners can also experience the benefits if implementing a CRM system. Based on the user satisfaction surveys, the manufacturing requirements of an OEM changes frequently and the OEM has to accommodate this across the manufacturing plant wide. Due to these frequent changes, OEM are forced to maintain an huge stock of components which results in increasing costs due to stock pile and holding overhead and other capital requirements. To avoid all of the above, the business process that is in place has to be re-aligned .At times, business re-engineering efforts are required.

In most cases when the specification changes, it takes couple of months to reflect the same changes in the entire supply chain. Because of this “time-lapse”, every one in the supply chain will have a different view of what they were at any given time.

Once a CRM system is in place which is focused on delivering customized solutions with minimum cycle time, the OEM can re-align the business process and supporting systems. Each participant in the supply chain will have access to the information and is forced to prioritize the different function areas based on the costs and operation feasibility.

As a part of implementing the CRM solution, every participant defined only parts of the specification and so the entire process became relatively painless and all the participants belonging to the same group will have the business problems to begin with.

The CRM solution will cause/make a fundamental shift in the way each channel partner interacts with its supply chain. The process re-alignment that has been implemented lays the foundation for this supply-chain community. The solution will optimize processes, and increases ROI.

10. Predictive Modeling: The benefit of Predictive CRM is help companies to have profitability and yet deliver the incentives to the customers as promised .Using the abundant wealth of information available with the companies and the other relevant data like purchased data, companies can customize its services and also predict what new products and services can be designed to serve the customer better.

Another important benefit of this technique is that, other strategies adopted by the companies gets better with time. Another key benefit is the margin of error can be minimized as the results of the earlier strategies are fed back as an input into this predictive modeling technique and thus it works as a calibration factor.

Customer lifetime value metric is defined on the basis of the following factors: Initial Services bought by client, future products/services that can be sold, relationship marketing expenses, customer service expenses, Future profitability, customer retention, incentives used to keep the client.The CLTV metric helps the company to minimize the margin of error and keep the deviation of results to.The minimum. Statistical Modeling Algorithms like clustering and affinity modeling are used to define what to sell to whom and when to sell them. Once the above is determined, we have to determine the probability Of the customer buying that. This is done using the process called regression.

As one can see, that by the using predictive modeling, we train the relationship between customer and the sales force and thereby increasing the efficiency. Also the sales force can prioritize customers and schedule them according the value they carry. Also predictive intelligence aids the developed in focusing their efforts on new products and time-tested themes.

Measuring ROI of a CRM initiative:

Measuring ROI of a CRM Initiative is very challenging as it involves measuring the soft benefits offered by CRM. As many case studies say measuring an ROI should be done from the scratch and should include measuring both the soft and hard benefits. Measurement metrics should include all process changing metrics too. Customer satisfaction is a soft benefit; it should be measured in terms of service objective

Key Performance Indicators to measure Customer Satisfaction:

1. Improved response time to customers.

2. Delivering a product as per the expectations set by user community.

3. Reducing cost of buying and using the product.

4. Access to the product information and checking order status.

5. Creating customized solutions to cater varying needs of different customers.

6. Enhancing the technical support by being more Pro-active.

The difficulty in measuring the ROI generally comes from the three factors outlined below:

1. Develop a baseline measure for the existing system,

2. Measuring hard benefits in correlation with finance and also measuring soft benefits such as customer satisfaction

using key performance indicators

3. Measuring CRM strategy too early in the process.

A 7-step process of measuring CRM ROI is outlined below:

Step 1. Identifying all finance metrics such as revenue projections, cost savings, net present value (NPV) and internal rate of return (IRR), payback period we expect to achieve from CRM initiative.

Step 2. Estimating the costs incurred on for new software and equipment, services and change management.

Step 3. Have a realistic estimate of time when the ROI should be analyzed. A design and deployment plan should be created at the very beginning of the project. Having such a plan will help the CRM project manager to assess when he can expect the returns. Once the project is in the implementation phase, review should happen at each module implementation in specific time frame and the assessment should be done.

Step 4. Check if a no change scenario exists over the identified time period. That is to say, the company should analyze its current marketing, sales and support structure and costs associated with each of these. The costs should include services, equipment procurement, costs, finance and accounting staff function costs. Then the current ROI has to be determined and should be used as a baseline for comparing with the anticipated ROI. As the CRM system is implemented, evaluate the ROI with the ROI of the project over the expected time frame.

Step 5. Analyze all CRM benefits and calculate ROI.

Step 6. Determine incremental returns. Once the ROI before implementation is calculated and also anticipated ROI is calculated, company should analyze whether any incremental returns are possible. If possible, then the CRM initiative should be implemented.

Step 7. Systematic approach towards the CRM project for high yield/returns. The higher management should have a clear understanding of the CRM system and should have a clear vision about how they plan to implement like the strategy and what they are expecting in return from the initiative and the allowed time period to achieve the returns. Also the company should have the right team in terms of project managers and leader and they all should have clear understanding of the expected returns.

Critical Factors which help in maximizing the ROI are

1. Planning: The plan should include expected benefits, criteria to select a vendor, time frame allowed for having incremental returns, resource planning, change management and its associated costs, and of course CRM strategy . Should also have a document explaining how the marketing/sales/support services should be and also information on how they are planning to improve/introduce process development and training activities.

2. People: Ensure that the initiatives and benefits reaped are explained organized wide. This can be achieved by training the team. This is very important for the company as it can impact the CRM initiative.

3. Phase: The strategy should be implemented in phases so that it will be easier for the upper management to analyze the results and cash flow.

4. Performance: Care should be taken such that the new software can be smoothly integrated into the existing technology. This is necessary to have significant cost savings.

5. Price: Evaluate the price of the new software/services/equipment. Also one should remember not to evaluate this in isolation as the price is part of the total life cycle cost and so is a small fraction of it.

6. Progress Tracking: Project mile stones should be reviewed on regular basis and care should be taken to tune the project collected throughout the lifecycle of the system.

7. Partners: Right partners should be selected based on the criteria decided during the planning phase and partner ship should continue to exist even after the integration and implementation of the software/systems.

Some measurement metrics to measure the Hard Benefits such as Cost Savings & reductions.

1. Number of calls required to close the deal successfully.

2. Automation of purchase orders and quotations.

3. Customer contact management

4. Improvement in management of product information and demos.

5. Reduce travel time and expense.

6. Reduce response time and number of call back requirements.

7. Lower storage and hardware costs due to consolidation of data and systems.

8. Improvement in co-ordination between customer support, filed applications and sales folks.’

9. Market segmentation and product pricing.

10. Decrease problem resolution time by using the data sharing concept.

11. Lower administrative and systems management costs due to streamlining the operational costs.

12. Cross-sales and up-selling

13. Customer retention

Suggestions for a company planning to implement CRM:

Any company planning to implement CRM in their process, should first ask these questions outlined here

1. What are the various products and services offered currently and what are being planned in future

2. To what customer groups these products/services are targeted to.

3. Which of the above said products/services are most valuable to the company? It should describe them in terms

Of cost, profitability, reliability and growth potential

4. Does the customer have any special needs that the company can meet in terms of additional products and services etc?

5. Different ways to serve the customer better.

There are four key aspects that should not be ignored when designing a CRM strategy. They are

1. Defining the existing customer relationship management process

2. Determining the way the relationships are handled between customer and company.

3. Designing the ideal customer relationship that suits the company’s objectives and goals.

4. Implementing the strategy based on the recommendations by the CRM managers.

By following the above 4 aspects, it helps the company to develop specific strategy which suits Its business goals and keep all its customer relationship management intact.

The next important question, a company has to answer is what value does the CRM initiative deliver?

To answer the above posed question, one needs to answer the following questions mentioned below

1. What products were bought a particular customer
2. When was the last communication from them and in what mode?

The solution to the above questions is having a knowledge focused business where the companies collect
Information about their customers and use analytical methods to understand purchasing patterns and analyze various

Demographic factors and other factors that influenced the decision.

Companies need to consolidate all the different databases they have which contain different aspects of the information about the same customer. For example, sales department will have database about the purchasing history; marketing department will have purchasing pattern of the same customer and administration/call center will carry about the call history of the same customer. With so much wealth of data lying internally, companies first need to focus on how to consolidate and integrate the data and make it available to all the different functional bodies in the company.

Companies with this internal information coupled with the external feedback such as customer surveys should use for more comprehensive analysis.

Executive sponsorship is very critical in getting the CRM initiative successful. Someone from the upper management has to send a clear signal about its vision and has to take in charge of the CRM strategy .The executive staff has to realize that the following are integral part of the CRM strategy.

1. Product Development
2. Change Management
3. Market Planning
4. Customer Retention
5. Bills of Materials
6. Customer Service
7. Inventory Management
8. Payment management
9. Credit Management

Conclusion: Organizations need to constantly monitor their strategies and change them according to the expectations of the customers and should become more customers centric in their approach.

Implementing CRM initiative doesn’t mark the end of journey, but it’s only the beginning and companies who want to remain in this competitive world should evaluate their strategies and objectives continuously. The benefits of implementing a CRM system will start from day one be it in terms of the reduced cost, increase in profits, increase in staff morale or attaining higher brand equity. CRM benefits come in the form tangible which can be measured and there are couple of intangible benefits which are difficult to measure. But care should be taken to measure these intangible benefits with some key performance indicators. Having correct set of metrics to evaluate the ROI will help the company in implementing future CRM strategies.