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The Eight Building Blocks of CRM: Overview

Published: 16 August 2016

Analyst(s): Ed Thompson

CRM initiatives require a proven framework to ensure that projects are

approached on a balanced, integrated and strategic basis. Applying such a
framework will help CRM project leaders to maximize the benefits.

Key Challenges
■ Many organizations still view CRM as a technology deployment project. CRM project leaders
must understand the importance of viewing CRM as a business strategy, rather than as a
technology strategy.
■ Too many CRM project leaders neglect one or more aspects of CRM. As observed in
conversations with over 200 organizations, we found that CRM leaders who can address all
eight blocks — vision, strategy, customer experience, organizational collaboration, processes,
information and insight, technology, and metrics — are more successful than those who put too
much weight on a few of the blocks or miss some altogether.
■ The building blocks that pose the greatest challenge are the ones that require effort to convince
employees to alter their behaviors, the metrics for success and the clear definition of key
processes.

Recommendations
■ Use Gartner's Eight Building Blocks of CRM to improve the likelihood of producing successful
business results for your enterprise's CRM projects by adopting the entire model or by
modifying it to fit your organization.
■ Look at each of the eight building blocks in turn and use them as a checklist of best practices
to avoid the most common pitfalls.
■ Apply the eight building blocks to projects that are departmental- and geographic-specific, and
use them enterprisewide.

Table of Contents

Strategic Planning Assumption............................................................................................................... 2

 Introduction............................................................................................................................................ 2
Analysis.................................................................................................................................................. 4
Use the Eight Building Blocks to Ensure Best Practice and Avoid the Most Common Pitfalls in Your
CRM Vision...................................................................................................................................... 4
CRM Strategy.............................................................................................................................5
Customer Experience................................................................................................................. 6
Organizational Collaboration....................................................................................................... 6
CRM Processes..........................................................................................................................6
CRM Data and Information......................................................................................................... 7
CRM Technology........................................................................................................................ 8
CRM Metrics.............................................................................................................................. 8
Where to Start.................................................................................................................................. 9
Gartner Recommended Reading............................................................................................................ 9

List of Figures

Figure 1. The Eight Building Blocks of CRM............................................................................................4

Strategic Planning Assumption

Through 2020, fewer than 25% of CRM projects will have a scope that is enterprisewide.

Introduction
Gartner defines CRM as a business strategy with outcomes that optimize profitability, revenue and
customer satisfaction, organized around customer segments, fostering customer-satisfying
behaviors and implementing customer-centric processes.

The term "CRM" originated in academia. The initial research was done in 1982 by Professor
Leonard Berry at Texas A&M University and Professor Jagdish Sheth at Emory University. Both used
the term "relationship marketing." In 1983, marketing theorist Theodore Levitt at Harvard Business
School broadened the scope of marketing from individual transactions to "personalizing the
consumer-producer relationship." The meaning changed further to encompass marketing, sales and
customer service interactions. To achieve the maximum long-term value from CRM, the academics
recognized that organizations need to involve the entire business and approach CRM at an
enterprise level from the start.

In practice, however, CRM has been associated with department-specific sales, marketing and
customer service technology implementation projects since the early 1990s. Even after more than

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 25 years of investments, fewer than 25% of organizations have taken on the challenge of an
enterprisewide approach to CRM. CRM is an enterprisewide initiative in which enterprises know
how they want to manage customer value and loyalty. Knowledge about how to put all the relevant
capabilities in place to achieve those goals remains rare. It requires a solid vision and strategy, with
a supportive framework in the areas of organizational collaboration, customer experience,
processes, information, technology and metrics.

Enterprise CRM isn't easy to implement. It requires board-level vision and leadership to drive a
relentless focus on the customer, otherwise it remains fragmented. CRM involves potentially difficult
changes to processes, enterprise culture and the organization that can make the technology
support seem easy, even though it isn't. Technology personnel must grapple with the big challenges
of multichannel alignment and creating a single view of the customers for the whole organization.
Even if the board of directors accepts the need for enterprise-level CRM, the quarterly demands of
revenue and profit targets, especially in tough economic conditions, make CRM one of the most
important, but often not the most urgent, challenges an enterprise will face. This typically results in a
short-sighted focus on tactical quick wins until conditions improve. The main reason enterprises
aren't implementing enterprisewide CRM is because of their inability to overcome the organizational
politics in working together.

Later adopters of CRM often question whether the investments are warranted. Organizations
struggle to measure the benefits because, for example, it is difficult to prove the correlation between
sales force automation and increased sales revenue. In general, most organizations underestimate
the benefits as they accrue. Nonetheless, a few enterprises have successfully measured and have
clearly shown the extent to which businesses benefit and customer experiences are enriched from
CRM.

Use Gartner's Eight Building Blocks of CRM to improve the likelihood of producing successful
business results for your enterprisewide CRM projects by adopting the model whole or by modifying
it to fit your organization. Following an analysis of several hundred organizations that had successful
CRM initiatives in 2002, Gartner created a CRM framework, or map, called "The Eight Building
Blocks of CRM" (see Figure 1). The eight building blocks came from categorizing the main topics
about which Gartner clients have asked questions. Gartner analysts noticed that the most
successful organizations had a clear view of what they were doing in each of the eight areas,
whereas the less successful had only a partial overview of what they were doing.

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 Figure 1. The Eight Building Blocks of CRM

Source: Gartner (August 2016)

This framework was designed to help enterprises see the big picture, make their business cases
and plan their implementations. It also can be used as a checklist for departmental CRM projects,
even though it was designed to help improve enterprisewide CRM initiatives.

The framework can be used for internal education and to foster debate about the development of a
CRM vision and strategy. It can then be used as the basis for an assessment of an enterprise's
current and required CRM capabilities to help analyze its position and future strategies. Using this
framework, Gartner has published numerous case studies, including some written about Gartner
CRM Excellence Award finalists and winners that exemplify how CRM should be done.

The eight building blocks in the model are the fundamental components of an effective CRM
initiative. Beneath each component are a variety of interlinked capabilities. A key feature of this
framework is its emphasis on the need to create and maintain a balance between the requirements
of the company and the customer. Far too many CRM initiatives suffer from an inward focus on the
organization. The point of CRM is to achieve a balance between value to shareholders or
stakeholders and value to customers for mutually beneficial relationships.

Analysis
Use the Eight Building Blocks to Ensure Best Practice and Avoid the Most Common
Pitfalls in Your CRM Vision
Your CRM vision is a picture of what the customer-centric enterprise should look like. Executives,
management and front-line employees will have agreed about:

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 ■ The definition and scope of CRM for the organization
■ The customers with whom they want to have a relationship
■ The value proposition the company is offering
■ Why the organization is compelled to invest in CRM
■ The importance and benefits of CRM to the overall corporate strategy
■ The nature of the customer experience to be delivered

The vision starts with getting agreement on what is meant by CRM — the definition, scope, what a
customer is and the value to the organization. A senior executive should be able to present this
overview of CRM in less than two minutes so that all employees understand what it is and why it's
important. At the heart of the vision is the overall customer value proposition. The customer value
proposition is the unique mix of a supplier's capabilities that will attract customers. This value
proposition needs to be supported with appropriate corporate values, which must be attractive to
target customers and should be created from their standpoint to ensure that the enterprise stands
out from its competitors.

The ultimate responsibility for articulating the CRM vision clearly lies with someone in the
boardroom. In the most productive environment, the board understands what CRM means for your
organization and is receptive to new ideas and ways of working. The CRM vision must be publicized
and accepted throughout the enterprise and the customer base. Therefore, it's useful to have a
meaningful, company-specific definition of CRM, rather than a generic one supplied by consultants.
For successful implementation of the vision, a board member must own it and provide inspirational
leadership in supporting it, even if they aren't involved in its day-to-day implementation (see "The
Eight Building Blocks of CRM: Vision").

CRM Strategy
The CRM strategy has to fit in with the overall corporate business strategy, which outlines how
stakeholder value is to be delivered. It should also inform, and be informed by, departmental
marketing, sales and customer service strategies. The task of the CRM strategy is to lay out how
the vision will be achieved. Its ultimate aim is to create and maintain a customer base that is an
asset to the company.

The CRM strategy is created by:

■ Identifying who the key employees (internal and external) are on the initiative, and who will
execute the strategy
■ Auditing the business's current position regarding customers' value, loyalty and satisfaction
■ Segmenting customers
■ Setting customer objectives, including acquisition, retention and development

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 ■ Defining metrics for monitoring the execution of the strategy — for example, satisfaction, loyalty
and cost to serve
■ Outlining the strategy for customization by product segment, pricing, communication and
contact, channel, customer service, and segment management
■ Specifying the resources required (including skills, organization, IT, analysis and data) to give
direction to the other operational strategies

(For more details, see "The Eight Building Blocks of CRM: Strategy.")

Customer Experience
Organizations have to justify the benefits they will receive from CRM. Therefore, they must measure
the benefits they will receive, rather than the benefits customers will receive. Employees tend to
focus on the things that they can understand and influence — for example, technology, customer
data, processes or the organization. Thus, CRM initiatives are often inwardly focused and ironically
provide little value to customers. They fail to take into account that value must be created for both
sides for successful CRM. The challenge is to balance the benefits for the organization with the
customer benefits, and to avoid being too inwardly focused.

It's foolish to pretend that you understand customers without talking to them. Leading organizations
are creating positions that formalize the need for the customer viewpoint and are ensuring that
they're heard at the highest levels in the enterprise through voice of the customer (VoC) programs
(see Note 1). This is often accomplished through the appointment of a chief customer officer,
customer advocate or a VP of customer experience. To ultimately succeed in becoming more
customer-centric, enterprises need to tell customers about developments, routinely monitor their
satisfaction levels and ensure that the customer experience is consistent with brand values and is
well-known across the enterprise (see "The Eight Building Blocks of CRM: Customer Experience").

Organizational Collaboration
Enterprisewide CRM normally involves changing internal processes, organizational structures,
compensation incentives, and employees' skills and behaviors. None of these goals is easy to
achieve. Top management must drive the necessary changes through a formal change management
program. This involves not just education, communication and training, but also employee
participation and, sometimes, modification to incentives and compensation, or even coercion to
force through change if there is a hard-core resistant minority.

To a degree, an organization's value proposition depends on its suppliers and business partners. In
addition to optimizing CRM within the enterprise, work must be done to include them (see "The
Eight Building Blocks of CRM: Organizational Collaboration").

CRM Processes
Organizations often have poorly documented customer-facing processes, and often change them
frequently in response to customer demand. While this means the processes need to be agile, they
may also be inefficient or fragmented. Consequently, organizations frequently fail to recognize that

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 their customers are having poor experiences because their functionally fragmented processes fail to
deliver a seamless macro process.

CRM often demands that the organization takes a fresh approach to business processes, rethinking
how they appear to the customer, and re-engineering them to be more customer-centric and to
deliver greater value to customers and the organization. This entails mapping existing processes to
the business objectives of the CRM strategy and making changes to processes inside-out
(enterprise to customer) to drive efficiencies, and outside-in (customer to enterprise) to listen to the
customers' views. Customer journey mapping and analytics are now commonplace activities for this
purpose. Not all processes matter equally to the customer, so discovering which are important is a
critical starting point (see "The Eight Building Blocks of CRM: Processes").

CRM Data and Information

Customer data, as well as the information derived from it, is key to delivering a CRM strategy. Data
must be acquired, stored, analyzed, distributed and applied throughout the enterprise — and,
potentially, to its business partners — in a timely fashion. It is the basis of customer knowledge and
effective cross-channel interaction. Achieving quality information requires hard work "behind the
scenes." Most enterprises' CRM information capabilities are poor because they have numerous
fragmented databases and systems, and they lack an ongoing master data management strategy.

A strategic approach to customer information is required at the start of an enterprisewide CRM

initiative. Organizations need to determine:

■ Where they will source different kinds of customer information, both from internal systems and
external sources
■ How they will ensure that there is strong data governance and an effective data quality
framework
■ Where and how they will generate the right customer insight
■ How they will create a customer information and insight "blood supply" for the organization

A common debate is whether to focus first on customer data quality and create a single view, or
define the processes first and then map the information required to support the process. The recent
additional challenge is the need to incorporate large volumes of rapidly changing and externally
sourced unstructured data from social media and mobile devices, for example, as part of a big data
approach.

Beyond the collection and processing of customer data to turn it into information is the need to
perform different forms of analysis. Customer analytics is now a key battleground for differentiation
through superior CRM as algorithms become a prized organizational asset (see "The Eight Building
Blocks of CRM: Data and Information").

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 CRM Technology
According to this eight building block framework, CRM clearly involves much more than just
technology. Indeed, for the smallest organizations, the CRM initiative can be delivered without
technology, particularly if the processes and knowledge of customers are stored in one individual's
head. But, for large organizations, this approach will not scale. Technology enables large
organizations to behave like the smallest organizations. More than 80% of CRM applications are
bought, rather than built. Packaged, then configured, applications have been steadily replacing
custom-built applications for 25 years, but there is now a resurgence in efforts to build customer-
facing applications as a means of differentiating a small number of key processes.

Most midsize businesses and large organizations' CRM technology bases are fragmented because
each department protects its autonomy and often buys without reference to the rest of the
organization. To achieve integration across channels and business units, an agreed-on architectural
approach is needed, with policies and standards for sourcing applications. Integration is key to
CRM applications, whether they're bought or built, and whether they're a suite, best-of-breed or
hybrid approach. It is also important to integrate with non-CRM applications — financial systems,
supply chain management solutions, legacy tools and, frequently, business partners' systems.

The shift to software as a service (SaaS) or public cloud-based applications started in 1999 and
now more than 50% of new CRM application projects are cloud-based. We expect that the
movement to cloud will continue for another decade. This has altered how applications are now
integrated (see "Comparing Four iPaaS-Based Architectures for Data and App Integration in Public
Cloud"). It has also altered how CRM architectures are being designed (see "2015 Strategic
Roadmap for the Future of CRM").

More than 75% of CRM applications are operational — that is, they focus on handling customer-
facing processes. Approximately 15% of CRM applications are analytical for tasks such as
customer segmentation and predicting customer needs for cross-selling. Fewer than 10% are social
CRM applications that enable customers to communicate with each other or with a supplier in a
collaborative manner. Spending for analytical CRM is increasing faster than for operational and
collaborative CRM (see "The Eight Building Blocks of CRM: Technology").

CRM Metrics
Organizations must set measurable, specific CRM objectives and monitor indicators if they are to
deliver financial business benefits. CRM metrics are essential for linking CRM initiatives to
measurable business value, and for engaging business sponsors and stakeholders. They not only
gauge the level of success, but also provide the feedback mechanisms for the continuous
development of strategy and tactics. They can act as tools for change management and are vital for
the structuring of employee incentives.

CRM metrics must follow and measure the organization's CRM strategy (see "The Eight Building
Blocks of CRM: Metrics"). The metrics should not be viewed as an amorphous whole; a hierarchy of
metrics is required, depending on their purpose and who's using them, from executive management
to frontline employees. This means having a set of high-level metrics (the average Gartner sees is

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 six) that match the overall goals, linked to a more detailed set of related processes and, in turn,
linked to hundreds of day-to-day operational metrics.

Two primary challenges in developing CRM metrics are:

■ Understanding the linkage points between the levels

■ Avoiding overly complex or simplistic internal and external measures of CRM success and
failure

Where to Start
The eight building blocks are intended to be a holistic approach so that participants focus on all of
them at the same time. However, some building blocks tend to get more attention earlier than others
in successful CRM programs.

CRM project managers who establish their vision first and get an early start on improving the quality
of CRM data and information tend to have greater success with implementing CRM. This is because
the vision should help drive the strategy, which in turn sets the objectives that drive the rest of the
program. Customer data issues around ownership, governance and quality often take longer to
resolve than other issues and require a head start. The blocks will be emphasized at different times,
but the best organizations take an iterative approach and are willing to re-evaluate, as needed,
when conditions change. The reason is that individual CRM projects range in duration from 10 days
to five years, with an average of 17.7 months per project. Those that go beyond two years often
need to be reassessed to ensure that the original goals have not changed.

Gartner Recommended Reading

Some documents may not be available as part of your current Gartner subscription.

"The Eight Building Blocks of CRM: Vision"

"The Eight Building Blocks of CRM: Strategy"

"The Eight Building Blocks of CRM: Data and Information"

"The Eight Building Blocks of CRM: Customer Experience"

"The Eight Building Blocks of CRM: Organizational Collaboration"

"The Eight Building Blocks of CRM: Processes"

"The Eight Building Blocks of CRM: Technology"

"The Eight Building Blocks of CRM: Metrics"

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 Note 1 Gartner CRM Maturity Profile Levels
The five maturity levels are:

■ Leading: An enterprise that has differentiated itself based on customer-centric capabilities and
has simultaneously redefined those capabilities.
■ Optimizing: An enterprise that not only has developed customer-centric capabilities, but also
has actively integrated them into its daily operations.
■ Practicing: An enterprise that has implemented basic customer-centric capabilities.
■ Developing: An enterprise that has a rudimentary, loosely woven set of customer-centric
capabilities.
■ Aware: An enterprise that exhibits few customer-centric capabilities.

(For further details, see "Toolkit: The Gartner CRM Maturity Model.")

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