The ERP, CRM difference

I wonder how many ERP (enterprise resource planning) customers actually use their ERP software to plan enterprise resources?

I wonder how many ERP (enterprise resource planning) customers actually use their ERP software to plan enterprise resources?

The point of ERP software is to run your whole business from a single integrated suite, making integration problems a thing of the past. So where'd that name come from?

Answer: First there was MRP (materials requirements planning); then there was MRP2 (manufacturing resource planning -- a more comprehensive and integrated planning process). What do you plan for once you've finished with manufacturing resources? Enterprise resources, of course! And that doesn't mean that anyone truly mastered the discipline, only the acronym.

Regardless, a recent column critiqued Oracle CEO Larry Ellison's message to his company's ERP customers, which stated that, regardless of whether the theory is reality, they should act as if it is; to wit, if Oracle doesn't ship it, you don't need it -- no customisation, no custom applications, and no third-party applications either.

But you do have to wonder. If Ellison thinks internally developed applications are such a bad idea, why does Oracle sell application development tools? And if Ellison and Oracle think third-party applications are such a bad idea, why does the company work so hard to get all those other application vendors to use its DBMS?

Just asking.

Oracle, as does every other major ERP vendor, also sells a CRM (customer relationship management) solution. Oracle says, in fact, that it can deliver global CRM in 90 days.

I know almost nothing about Oracle's CRM solution, and yet I know that it can't perform as promised. That's because software is merely a CRM enabler. In that respect CRM implementations are fundamentally different from ERP implementations. When you implement an ERP suite, you have three choices: Adopt the business processes designed into the software, adapt the software to your existing processes, or re-engineer your processes and then customise the software to the new process designs.

CRM isn't like that. Whereas enterprise resource planning isn't really the point of ERP software, managing customer relationships is the point of CRM.

If your company is planning to implement CRM, there are four key concepts that you need to understand.

The first is what it means to be a customer. As has been mentioned previously in Survival Guide, customers are people (usually) who make buying decisions. That distinguishes them from consumers, who make use of your products and services, and from the wallets, who provide the money. CRM is about customers. It is, however, easier if your customers, consumers, and wallets are all the same individual.

The second is what the term CRM really means. A company that adopts CRM will treat customer relationships as assets. That means it maintains them, performs preventive maintenance on these relationships, invests in them, and measures the return it receives from them -- each customer's LTV (lifetime value). Understand this, and you'll understand the difference between customer service and CRM -- that is, customer service happens one interaction at a time; CRM integrates all interactions with each customer.

Years ago I heard a great explanation of this, ascribed to Sid Applebaum, founder of a supermarket chain in Minneapolis. He explained that every time he saw a customer leave one of his stores, he envisioned him or her walking out with $50,000 worth of groceries, which is what Applebaum expected the customer to buy during the life of the relationship. And, he explained, "Of course I take back the tomatoes."

A third concept is that not every company is ready for CRM. Just as there are capability-maturity models for software development and IT operations, so there are capability-maturity models for CRM as well. Different industries progress through different stages, but CRM isn't an early stage for any of them.

Then there's the fourth and perhaps most important concept: Customer relationships aren't to be left to chance; you have to design them. This means you don't start by analysing the customers you have. You start by targeting the customers you want and deciding how you want them to relate to you.

In the end, customer relationships happen one interaction at a time, mostly between individual customers and individual employees. CRM software is just a tool you provide to make your employees more effective in handling those interactions. Now, do you think you can design and implement CRM globally in 90 days?

Implementing CRM? Send an email to Bob Lewis. Lewis is an independent consultant specialising in IT strategy and effectiveness.

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