Issues when implementing CRM in a multinational context

RIJKSUNIVERSITEIT GRONINGEN

Issues when implementing

CRM in a multinational context

A case study at a group of a multinational in the process industries

Author: Matthijs te Biesebeek (s1583689) 9/27/2010

1st Supervisor Rijksuniversiteit Groningen: Dr. H. Snijders

CRM in a multinational context

Preface

My interests in international businesses grew during my bachelor International Economics & Business. After a semester study in Bristol, England, and following a course of strategic management, I decided to apply for the master graduate course Business Administration, with a specialization in Strategy and Innovation. Because I wanted to gain experience in an international environment, the search began for an opportunity of conducting my master thesis at a multinational firm. So when a dear friend introduced me to a division of Emerson, and mentioned there was an opportunity for conducting a research, I was intrigued. Although strategic management of innovation draws considerable attention to the management of especially service and product innovation, this thesis will illustrate that a business process can be seen as a subject for innovation just as much as the former mentioned dimensions.

The challenge provided by the organization was, how to improve business by selling solutions to customer needs, taking into consideration a newly acquired addition to their product portfolio. With the help of my supervisors, both at Emerson and the university, I was able to shape the research question in such a way that it would both add value to Emerson as to the literature. This thesis is in the light of innovating a business process towards a customer centric organization with the help of Customer Relationship Management(CRM). The focus will be on the issues that arise, especially when implementing CRM at a divisional level in a multinational context.

During the internship at Emerson, I was able to review business in practice which has given me my first piece of practical experience. However, this thesis has been a real challenge to my perseverance, and has challenged me many times. Many people have contributed to this research and I could not have done it without the support of them.

First, I would like to thank my supervisor, Hendrik Snijders from the Rijksuniversiteit Groningen, who has given me interesting insights and helped in guiding direction of this thesis. I would also like to thank Frank van der Weiden from Emerson for providing me the opportunity to conduct this thesis. Furthermore, his insights and experience in business development have really inspired me and have been a valuable source of information for this research.

Second, the support of my girlfriend, friends and family during this thesis, and previous years of study have been great. In particular, I would like to mention my friend Erik Snieders, who started his master thesis at the same time. His support and our discussions about our theses where an interesting and helpful means in improving my work. Furthermore, my dad has earned his credits in reviewing my last concepts and making it complete.

Last, I would like to thank everyone at Emerson for their hospitality, interests and input for making this last part of my study to a success.

CRM in a multinational context

Abstract

CRM in a multinational context

Abbreviations

ADC Authorized Distribution Channel

B2B Business-to-Business

CRM Customer Relationship Management

EPC Engineering Procurement & Construction

EPM Emerson Process Management

HRM Human Resource Management

IT Information Technology

MT Management Team

R&P Rack & Pinion

RBV Resource Based View

ROI Return on Investment

SDS Sales Development & Support

SME Small and Medium sized Enterprise

VA Valve Automation

VP Vice President

CRM in a multinational context

Executive summary

Calling your company customer centric and actually being customer centric differs; conducting a truly customer oriented business approach is difficult to achieve. Customer Relationship Management (CRM), when implemented correctly, is a means to achieve this objective. Sequentially, many organizations have appeared to struggle with realizing the expected benefits from CRM. In addition, scholars have primarily focused research among SME’s. Therefore, it is important and interesting to know what needs to be done for implementing CRM, especially in a multinational context.

The definition of CRM affects the way an organization accepts and practices CRM. Many CRM failures are the result of not having a consistent definition of CRM throughout the entire organization, not having a definition at all, or focus only on the CRM technology. Recently, both firms, and academics on business process innovation and in the CRM literature, are converging to the common understanding that CRM should be viewed as a strategic business approach. By collecting relevant data from customers at all possible customer touch points, CRM is an approach to achieve better customer segmenting and profiling, understanding needs and wants, adjust offerings accordingly, create better (customer) communication company-wide, identify opportunities quicker, facilitate more accurate response to customers and more.

The integration of processes across the many areas of the firm and across the network of the firm, should all collaborate to generate customer value. Not only the definition but also the type of organization can have varying affects on the considerations to make when implementing CRM, especially in an international environment. Heterogeneity in a multidivisional and multinational context from both a customer as organizational perspective is expected to significantly alter the dimensions of implementing CRM.

This thesis investigates what the difficulties and stimulating internal organizational factors are that can enable or hinder divisions of large multinational organizations to conduct a CRM approach. Therefore the following research question is proposed:

What are the main issues that can enable or hinder the process of adopting CRM by a division in a multinational context?

A case study at a group of a large multinational and multidivisional organization was done in order to answer the above mentioned research question. This group conducts business in the European process industries and primarily in the power and oil & gas industry. Historically the multinational and especially the focal group of this research have been very product oriented.

CRM in a multinational context

Content

2.2 Customer centricity versus Product centricity ... 7

2.3 Business process innovation and CRM ... 9

2.4 Competitive advantage and benefits with CRM ... 10

2.5 CRM in a multinational context ... 11

3 THEORETICAL FRAMEWORK CRM ... 13

3.1 Introduction ... 13

3.2 Construction of the proposed implementation framework ... 14

CRM in a multinational context

4.1 Motivation case study ... 22

4.2 Data collection ... 22

4.3 Case description ... 24

4.4 Impetus for CRM at focal organization (VA Europe) ... 28

5 RESULTS ... 31 5.1 Strategy ... 31 5.2 Technology ... 33 5.3 Organizational structure ... 34 5.4 Human capabilities ... 36 5.5 Metrics ... 37

6 ANALYSIS AND DISCUSSION ... 38

6.1 Issues in strategy for CRM ... 38

6.2 Issues in IT for CRM... 41

6.3 Issues in organizational infrastructure for CRM ... 43

6.4 Issues in Human capabilities for CRM ... 45

6.5 Issues in Metrics for CRM ... 46

7 CONCLUSIONS AND RECOMMENDATIONS ... 48

7.1 Final conclusions ... 48

7.2 Recommendations case study ... 49

7.3 Limitations and further research ... 50

CRM in a multinational context

1 Introduction

First, I will explain the background of this thesis and the relevance of this research. Thereafter, the problem definition of the thesis will be given which will be followed by the objectives. Subsequently, the research problem and research question will be presented. Next, the research approach of this thesis will be elaborated and an outline of this thesis will be given.

1.1 Background

‘Having technology is only half the solution’

Senior technical consultant EPM

This quote is an interesting and important starting-point for this thesis. Many firms develop and produce superior products. However, to successfully market these products and to make sure customers recognize the value of these products, firms have to make sure technology suits the needs and wants of customers perfectly in an increasingly demanding market place. For firms to serve their customers better and better, it is important to get acquainted with customer needs and adjusting the organization in such a way to facilitate these customers best and in the end earn the appropriate profits. Lay et al (2009) recognized a tendency in the marketing literature towards advanced services with a particular tendency of changing B2B concepts from selling products to providing solutions. Vargo & Lusch (2004) contribute to this by recognizing a new prevailing perspective focused on intangible resources, the co-creation of value and relationships. In which, service provision rather than goods is fundamental for economic exchange. Manufacturing companies which are redirecting their focus from solely product centric to more highly valued and differentiated products accompanied with services need to change their business process to more customer centricity (e.g. Galbraiht et al, 2002; Matthyssens & VandenBempt, 2008; Tan et al, 2010). Especially manufacturing firms which are innovating their business process for more customer centricity face a big challenge since historically all the company’s units have been product centric (Windahl & Lakemond, 2006; Galbraiht, 2002; Shah et al, 2006; Matthyssens & VandenBempt, 2008).

CRM in a multinational context has been subject of discussion, however in this research it is viewed as a strategic holistic approach to innovate a company’s business process. In line with the view of leading academics (e.g. Payne & Frow, 2005, 2006; Boulding et al, 2005) in the CRM literature this thesis will view CRM as:

“a strategic approach, managing the (co-) creation of value, the intelligent use of data and technology for acquisition of customer knowledge and the diffusion of this knowledge to the appropriate stakeholders, to develop appropriate (long-term) relationships with specific customers and/or customer groups. Thereby integrating processes across the many areas of the firm and across the network of firms and collaborate to generate customer value”

A Customer Relationship Management (CRM) framework can be a vehicle for companies innovating their business process from product-centric to customer centric (Ryals & Knox, 2001). However, success factors for implementing CRM have been disappointing because of primarily focusing on technology (e.g. Zablah et al, 2004), not adopting the same definition throughout the organization or not having a definition at all (Payne & Frow, 2005).

Keramati et al (2010) have investigated that firms focusing on infrastructural CRM resources have more satisfying results as those that do not. However, as with most research on CRM, this is focused on SME’s. The topic of CRM in a global and multinational context is a relatively undiscovered topic that needs significant attention (Keramati et al, 2010; Kumar et al, 2006; Ramasheshan et al, 2006). In addition, Keramati et al (2010) also requested further research in large international enterprises and investigate on what organizational elements firms should concentrate. To address this, this thesis will take a step into this direction by using the model from Keramati et al, (2010) as a starting point and investigate issues in implementing CRM in the context of a division of a multinational.

CRM in a multinational context

1.2 Problem Definition

As mentioned before, achieving successful CRM and hence becoming a customer centric organization has proven to be difficult to achieve. Organizations struggle with both the definition of CRM and using it as such throughout the entire organization, often ignoring the underlying interdependencies that are needed to implement CRM as an enterprise wide approach. In addition, especially product centric organizations face difficulties in redirecting organization wide processes for CRM (Ryals & Knox, 2001).

From the CRM literature it is apparent that many researchers have found elements on which firms should concentrate when implementing CRM. Yet, most research is focused on CRM in SME´s, and little is known about CRM in a global and multinational context (Kumar et al,2006; Ramasheshan et al, 2006; Keramati et al, 2010). Infrastructural CRM resources are of substantial importance (e.g. Peelen et al, 2009; Keramati et al, 2010), but it is unclear for large organizations or divisions or groups within large organizations as to what elements to take into consideration concerning successful CRM implementation.

1.3 Objectives

This research has multiple objectives. CRM will be viewed as business process innovation and the first objective is to investigate the CRM literature and the (process) innovation literature to determine what the most critical factors are for implementing a CRM approach. The second objective is to investigate the literature in whether there are additional elements which should be considered for implementing CRM in (divisions of) large multinational or global organizations. And hence making a more complete framework for implementing CRM in (divisions of) large (multinational) organizations. As a third objective, this study wants to contribute to the CRM literature by conducting an in-depth single case study at a historically product-centric division of a multinational organization. Thereby, exploring the critical factors and issues which can stimulate or hinder implementing a CRM business process. The objective of this research for the case company is to provide recommendations for improving the business process toward a more customer centric orientation.

1.4 Research Questions

CRM in a multinational context implementing CRM. There are even more unknowns for large companies spanning their business practices across national borders. (Ramasheshan et al, 2006; Keramati et al, 2010). In addition, Keramati et al (2010) recommend further empirical research in different industries and among large organizations thereby concentrating on what elements infrastructural CRM resources, organizations should concentrate to successfully implement CRM. Therefore, further research in the implementation issues in large organizations spanning multiple divisions, or spanning business across national or geographical borders is required. This is one of the gaps in the literature for CRM that this thesis can contribute to.

The case study for this research, is a group of a company that historically has been product-centric and wants to redirect their business process to a customer centric process and will be the departure for investigation regarding the issues that enable or hinder the implementation for adopting a CRM approach.

Therefore, I propose the following research question:

What are the main issues that can enable or hinder the process of adopting CRM by a division in a multinational context?

Since CRM is a developing concept, it is important to conceptualize CRM properly to be consistent with the dominant literature direction. Moreover, it is necessary to find out what the organizational framework and relevant elements are that affect business process innovation with a CRM approach. In addition, the literature will be investigated to find internal organizational elements that should be considered when implementing CRM in a multinational context.

1.5 Research Approach

The research problem, the objectives and research question have been formulated, and here the approach to tackle these will be elaborated. First, a preliminary search in the literature is conducted to identify the vehicle for a customer centric business organization. This search identified CRM as the most dominant vehicle for such an organization.

Second, a significant amount of the relevant literature is investigated to identify the factors that might have an influence on the successful business process innovation of such a CRM approach. From the reviewed theory a model is found and adapted with relevant factors further identified for CRM in a multinational context.

CRM in a multinational context infrastructural and technological resources important for CRM and they have found a positive relationship between performance and the infrastructural CRM resources.

This model will guide this research in the quest to what the differences are from the proposed framework with all the most important CRM factors and the current situation in the focal case company.

Since, Blumberg et al (2005) state that single case studies provide more in-depth understanding and a full contextual analysis of fewer events, this will be a single case study. Moreover, due to time restraints and the possibility for the author to gain practical experience inside an organization, the choice for a single case study was easy. The contextual analysis will add value in this research, since the case study has historically been product-centric and the group under investigation is part of a large global operating multinational. The multinational nature of this group, multinational customer base and operating across national boundaries could further provide insights as these can alter the dimensions for implementing CRM. Therefore, a single-case study is justified and will provide in-depth information into what will become challenges, what is already in place and what are barriers which cannot be overcome. As a result, this information will lead to an answer of the main research question.

1.6 Structure

This chapter has introduced the topic of consideration and has further elaborated on the reasons for this research. In addition it has provided the objectives and the research approach in line with the introduced research question.

Section two will deal with the theory on the subject of CRM. It will discuss and state the definition of CRM, compare customer centric and product centric organizations. Motivations for a customer centric organization and CRM in a multinational context will be explained in the last chapters.

In section three, the framework from Keramati et al (2010) is introduced, together with the adapted CRM implementation framework. All important building blocks will be discussed hereafter.

Section four will discuss the methodology of this research, along with the motivation for a single case study, the means of data collection, a comprehensive case description and the justification of the research for the focal case.

CRM in a multinational context

2 Theory

To outline the theoretical base for CRM, this section will first discuss and state the definition of CRM. Then a comparison of customer centric and product centric business processes will be made. Subsequently, the benefits and competitive advantage of a customer centric organization, and CRM accordingly, will be explained. The literature relevant for CRM in a multinational context will be discussed last.

2.1 Defining CRM

CRM has shown an explosion in both the literature as in the market for CRM technology. A Gartner report (2009) showed that in 2008 the global market for CRM technology consisted of $9.15 billion, which was an increase of over 12.5% from 2007 and the fifth consecutive year which showed a double-digit growth rate.

Historically, CRM has its roots in relationship marketing and is seen as a follow up of database marketing. As an emerging and growing phenomenon, it appeared in the late 1990’s/early 2000 (Rosenfield, 2002; Ramaseshan et al, 2006). Relationship marketing shifted focus from a transaction-based marketing approach to winning new customers, by customer retention through effective management of customer relationships (Chen & Popovich, 2003). The terms ‘relationship marketing’ and CRM were used interchangeably. However, the scope of CRM differs both in the literature as in use within organizations (e.g.: Payne & Frow, 2005, Sin et al, 2005).

Payne and Frow (2005) recognized that the concept of CRM in the literature has been defined along a continuum, which stretches from a narrowly and tactical definition to a more broadly and strategically defined definition. Where at the former end it is suggested as the implementation of a specific technology solution project and at the latter a strategic holistic approach of managing customer relationships to create shareholder value. Additionally, Reinartz et al (2004) mentioned that CRM is an evolving concept and will change in its characteristics, processes and benefits in the future.

As mentioned by many academics (e.g. Chen & Popovich, 2003, Lambert, 2010) it is essential not to view CRM as merely a technology initiative, but instead when fully integrated, a cross-functional, customer driven, technology integrated business process and management strategy that maximizes relationships and encompasses the entire organization (Chen & Popovich, 2003). This is essential as most companies that failed to reap the benefits of CRM viewed it as a technology initiative and have not adapted their organization with all its elements to achieve success with CRM.

CRM in a multinational context profitable customer value. Essential to build customer loyalty is that customers should be involved in the value creation process and should be offered a valuable experience (Peelen et al, 2009).

The definition affects the way an organization accepts and practices CRM. Implementation failure is often ascribed to not adopting a consistent CRM definition throughout their entire organization, or not even having a definition for CRM at all (Payne & Frow, 2006). A consistent and clearly defined definition of CRM should be used organization-wide, where not solely the adoption of CRM technology should be considered (e.g. Zablah et al, 2004; Lundstrom & Wright, 2005; Chang et al, 2009). Therefore, for the purpose of this research and to ensure the consistency of this research with the current CRM literature, the definition by Boulding et al (2005), similar to that of Payne & Frow (2005, 2006) and Keramati et al(2010) will be used:

“a strategic approach, managing the (co-) creation of value, the intelligent use of data and technology for acquisition of customer knowledge and the diffusion of this knowledge to the appropriate stakeholders, to develop appropriate (long-term) relationships with specific customers and/or customer groups. Thereby integrating processes across the many areas of the firm and across the network of firms and collaborate to generate customer value”

Although companies already have used a form of CRM for some time in the past, the present day sets CRM apart from past activities due to the increased potential to utilize technology and manage one-to-one relationships with potentially huge numbers of customers (Payne & Frow, 2006). Customers have lost their uniqueness and were seen more as account numbers. Firms lost track of customer needs. In order to overcome this misalignment between organizations and customers, companies are re-establishing their connections with existing and new customers to boost long-term loyalty (Chen & Popovich, 2003). Therefore, CRM is one of the fastest growing business practices in today’s marketing environment and has been acknowledged to bring substantial improvements in the effectiveness of sales forces (Raman et al, 2006), higher rates of customer loyalty, customer retention, customer satisfaction and long run profitability (e.g. Chen & Popovich, 2003; Zablah et al, 2004).

2.2 Customer centricity versus Product centricity

CRM in a multinational context literature. Stating that over the past several decades there has been a shift from a focus on tangible resources, embedded value, and transactions to a marketing focus on intangible resources, the co-creation of value, and relationships. Whereas, skills and knowledge are seen as the most fundamental unit of exchange.

Shah et al (2006) mention five trends in their research which justify a transition from a product-centric approach to a customer centric business approach for achieving a sustainable competitive advantage: intensifying pressures to improve marketing productivity, increasing market diversity and competition, more demanding customers and accelerating advances in technologies. In contrast, Slater & Narver (1998) state that this perspective tends to be reactive and short term in its orientation, and the most successful implementation will be in relatively predictable environments where a company takes care of a stable served market. This is confirmed by the research of Rapp et al (2009), whereas they argue that the rapidity of changes in the external environment moderates the performance and development of customer relationships.

Since historically manufacturing firms have been product-centric, economies of scale and scope were of considerable importance. This resulted in firms being internally oriented, and instead of fulfilling customer needs best, manufacturers tried to increase market share by focusing on creating superior products. (Shah et al, 2006) A comparison of the differences and characteristics of a product-centric and customer centric approach can be best illustrated by the following table;

Product-Centric Approach Customer Centric Approach

Basic philosophy Sell products: We’ll sell to whoever will buy

Serve Customers: All decisions start with the customer and opportunities for advantage

Business Orientation Transaction Oriented Relationship Oriented

Product Positioning Highlight product features and advantaged Highlight product’s benefits in terms of meeting individual customer needs

Organizational Structure Product profit centers, product managers, product sales team

Customer segment centers, customer relationship managers, customer segment sales team Organizational focus Internally focused, new product

development, new account development, market share growth; customer relations are issues for the marketing department

Externally focused, customer relationship development, profitability through customer loyalty; employees are customer advocates

Performance Metrics Number of new products, profitability per product, market share by product/sub-brands

Share of wallet of customers, customer satisfaction, customer lifetime value, customer equity

Management Criteria Portfolio of products Portfolio of customers Selling Approach How many customers can we sell this

product to?

How many products can we sell this customer? Customer knowledge Customer data are a control mechanism Customer knowledge is valuable asset Table 1: Shah et al, 2006

CRM in a multinational context solutions and lack the elaborate testing that CRM has been subject to. Moreover, CRM is a more strategic and holistic approach of innovating a business process towards a customer centric organization compared to the latter mentioned models.

2.3 Business process innovation and CRM

Business process innovation is not a commonly discussed subject in the innovation literature. Different definitions of process innovations and business processes can be found. As mentioned before, CRM is an approach to innovate a business process for a customer centric organization. Therefore, the definitions will be discussed and CRM will be linked in terms of the determinants necessary for successful business process innovation.

From the innovation literature Garcia and Calantone (2002) classify a (production) process as ‘the system of process equipment, work force, task specification, material inputs, work and information flows, and so forth that are employed to produce a product or service’, and process innovations will evolve to improve the output productivity. In their work they mostly refer to efficiency gains in production processes for products. However, process innovation do not merely seek for efficiency or effectiveness gains, it strives for order of magnitude improvements in the way business objectives are accomplished.

Papinniemi (1999) and Davenport & Short (1990) refer to business processes as a structured set of activities designed to produce specific outputs for internal or external customers or markets. In addition, Papinniemi (1999) notes that processes can be across organizational boundaries and are generally independent of organizational structure. Innovating these business processes means performing work activities in a radically new way.

Christensen and Bower (1996) take a broad perspective on business process innovation as they use the term technology for the processes by which an organization transforms labor, capital, materials and information into products or services. Innovation of technology herein refers beyond engineering and manufacturing functions of the firm, encompassing a range of business processes.

CRM in a multinational context Business process innovation needs several determinants, where the most important ones recognized by Davenport (1993) are; information technology, organizational structure and human resource enablers. Furthermore, he states that such innovation initiatives are most effective when reinforced by a company’s strategic focus and vision. However, the overemphasis on technology in process innovation can lead to missed opportunities, in particular when new process technologies and the current organizational processes are not aligned (Jacobs, 2006). In sum, one should view business process innovation as a change of radical nature, where the innovation should be undertaken explicitly and be treated as a large-scale organizational change with a vision within a strategic context. (Craig & Yetton, 1992; Davenport, 1993; Jacobs, 2006)

When a company wants to become more customer centric by means of CRM this can be seen as business process innovation. It requires performing work activities in a radical new way, and most often requires change in culture, structure, processes and strategy. In line with this view, Boulding et al (2005) state that vendors of CRM technology argue that for CRM to be implemented successful, an entire paradigm shift is required. Furthermore, the before mentioned generic business processes as recognized by Davenport also apply to business process innovation for customer centricity (Kumar et al, 2006; Galbraiht, 2002; Shah et al, 2006).

Moreover, Ko et al (2008) also acknowledge that CRM can be considered as an innovative management strategy or business process (Lambert, 2010), since innovation can be defined as ‘ideas, action programs or objects appealing as new things to individuals or organizations’, according to Rogers (1995).

2.4 Competitive advantage and benefits with CRM

For an organization to become competitive over competitors, one needs a sustainable competitive advantage. As acknowledged by Keramati et al (2010) the Resource Based View (RBV) can be used to analyze the resource-competitive advantage that can be achieved with CRM. The resources which are used by organizations, can be seen as tangible and intangible. If resources are rare, valuable, difficult to imitate, and non-substitutable, they can become ‘unique’ corporate assets. With which a firm can attain sustainable competitive advantage (Barney, 1991).

CRM in a multinational context have a positive association with the development of durable customer relationship and the performance of the relationship.

Selden & MacMillan (2006) acknowledge that being customer centric can provide a sustained competitive advantage. The more customer-centric a company is, the longer it takes and the harder it is for competitors to figure out your game. When customer centricity is embedded in a corporation and becomes a core competence it can provide potential access to a wide variety of markets, and core competences can make significant contributions to the perceived customer benefits of the end product (Prahalad & Hamel, 1990).

In addition, Shah et al (2006) contribute to this by stating that marketers, who devote significant amounts of their time (at least 50%) to customer centric processes and capabilities, can achieve marketing ROI over 30% greater than competitors who lack such a focus.

Richards and Jones (2008) investigated the literature for where CRM can benefit and have found the following: Target profitable customer, integrate offerings across channels, improve sales force efficiency and effectiveness, improve pricing, customize products and services, improve customer service efficiency and effectiveness, and individualize marketing messages. Whereas the process of improving customer relationships can lead to greater customer loyalty, retention and ultimately profitability (Ko et al, 2008; Narayandus, 2005).

2.5 CRM in a multinational context

This research focuses on implementation within a division of a multinational and therefore is a modest contribution to the literature for CRM in an international context. Several others have researched the subject of cross cultural differences of CRM in different nations (Ali & Alshawi, 2003, 2004; Mishra & Mishra, 2009; Ramaseshan et al, 2006), such as language, dealing with different kind of cultural values from customer interaction and governmental regulation on datastorage. However the relatedness to internally oriented organization implementation issues in the current literature and the elaboration in the well established journals about multinational implementation or implementation in divisions of larger organizations is limited.

CRM in a multinational context the multinational company? Is the company a candidate for continued and increasing investment? What are global/country strategies that can affect the internal company for CRM? And how are the businesses staffed, especially at senior levels?

Bohling et al (2006) have found that when CRM is championed bottom up from divisions, it tends to be tactical in its nature. In contrast to top down initiatives that are seen more as a strategic enabler. Therefore, suggesting that with bottom up championed initiatives in particular, top management and involvement should be enhanced in order to be a strategic enabler instead of a limited divisional scope of CRM.

CRM in a multinational context

3 Theoretical framework CRM

In this chapter the theoretical framework with all building blocks necessary for CRM will be presented. This framework will be based on a recent process oriented CRM model from Keramati et al (2010). The adaptation is based on the reviewed literature for business process innovation and the literature for CRM in a multinational context.

3.1 Introduction

The conceptualization of CRM in the literature is seen from many perspectives, as can be seen in table 2 next:

Perspective Author(s), date

Technology initiative Chang et al, 2009; Richard et al, 2007

Strategy Payne & Frow, 2005; Zablah et al, 2004; Boulding et al, 2005; Peelen et al, 2009; Sin et al, 2005; Finnegan & Currie, 2010; Bohling et al, 2006; Keramati et al, 2010 Cross-functional Ryals & Knox, 2001; Payne & Frow, 2005, 2006; Chen & Popovich, 2003; Reinartz

et al, 2004

Resource-based Keramati et al, 2010; Rapp et al, 2009

Process oriented Lambert, 2010; Payne &Frow, 2005; Reinartz et al, 2004; Chen & Popovich, 2003 Table 2: Analysis of the perspectives in different CRM studies

The literature is slowly gaining consensus regarding the strategic imperative of CRM and the components considered important for achieving CRM success. However, there are differences in the elaboration on the different factors used for constructing the CRM frameworks. Consequently, it is stated that further research is required to clarify on which CRM components or building blocks an organization should focus, to be able to prioritize investment in the necessary building blocks for successful CRM (Keramati et al, 2010). As mentioned before, research into this subject is especially required for (divisions of) large organizations spanning operations across national or geographical borders (Keramati et al, 2010; Kumar et al, 2006; Ramasheshan et al (2006)).

CRM in a multinational context

Figure 1: Source: Keramati et al (2010), CRM value generation process

The model by Keramati et al (2010) takes a Resource Based View and process oriented approach and recognizes that achieving the proper capabilities is a path-dependant process. This perspective is shared by the researcher of this thesis, since building relationships and trust with customers and retrieving valuable information takes considerable amounts time, especially in highly complex b2b environments.

Keramati et al (2010) have found that infrastructural CRM resources significantly alter the success of CRM. When not providing significant attention to these factors when implementing CRM, success can be hard to achieve. The model in figure 1 is empirically tested at small firms up to 185 employees, which can limit the generalizability of the model and results to multinational multidivisional firms, which have customers and operations spanning across different countries. Therefore, in the next section the model will be adapted by the reviewed literature about process innovations and CRM in a multinational context when implementing CRM in large multinational and multidivisional organizations.

3.2 Construction of the proposed implementation framework

Creating value from CRM efforts is considered to be a path dependent process. The building blocks, or infrastructural resources as mentioned by Keramati et al (2010) for CRM, when implemented correctly, could provide a firm with the necessary CRM process capabilities that are inimitable and non substitutable by other firms. The business model created should be build around the customer, which requires redesigning core business processes starting from a customer perspective (Chen & Popovich, 2003).

The model presented in figure 2 on page 16 is viewed in the light of business process innovation. Therefore, it contains relevant factors mentioned in the process innovation literature, such as strategic vision, organizational infrastructure, human enablers/capabilities, technology and metrics to measure desired outcomes to avoid developing wrong core rigidities (Davenport, 1993; Jacobs, 2006).

CRM in a multinational context regarding the CRM process capabilities, as used by Keramati et al (2010), which result from the CRM process, is different when considering the investigation into the possibilities for implementation of CRM. The CRM process capabilities are according to Keramati et al (2010) a way to measure the firm’s ability to combine the necessary resources efficiently to attain the CRM objectives or results. As mentioned by Peelen et al (2009), the metrics used for a CRM strategy are different as under a product-centric strategy. Therefore, and given that they are viewed as essential in the process innovation literature, metrics are considered as an essential building. This in contrast to Keramati et al, who do not consider this as essential for CRM, but rather one of the capabilities resulting from the achieved CRM processes.

An important adjustment to the model in figure 1 on page 14 is the inclusion of strategy as an essential building block for successful CRM implementation. Because CRM should be viewed as a strategy or essential part of a company’s strategy (Payne & Frow, 2005; Zablah et al, 2004; Boulding et al, 2005; Peelen et al, 2009), especially within a larger organization (Ramasheshan et al, 2006; Bull, 2003; Bohling et al, 2006). Corporate, company and/or global strategy from large multinationals can play a role for divisions of these companies, both with the scope of CRM as with the possibilities that can be made cross-divisional and enterprise wide (Ramasheshan et al, 2006). Although Keramati et al (2010) acknowledge the importance of strategy, it is not incorporated as an essential element as part of infrastructural CRM resources.

CRM in a multinational context

CRM BUILDING BLOCKS CRM PROCESS CRM

RESULT

Figure 2: Adapted from Keramati et al (2010); Building blocks for the implementation of CRM

3.3 Building Blocks

In the following sections the elaboration of the five different building blocks of the proposed model in figure 2 (above) is made. Herewith, accounting for elements that are important for the implementation in a multinational or divisional context. The focus of these building blocks are organizational factors which are all internally oriented. These should eventually lead to an operational and management CRM process.

3.3.1 Strategy

Peelen et al (2009) describe the CRM strategy as the way the organization wants to realize its vision. For translating CRM to operational results, a customer centric vision should be achieved. Accordingly, Payne and Frow (2006) view strategy as a dual focus process on both the overall organization’s business strategy and its customer strategy. Arguing that integration of business strategy and customer

Strategy

• Long-term view

• Customer centricity

• Alignment with overall strategy

• Key customer segmentation

•

Organizational Infrastructure

• Culture

• Structure

• Top management commitment

• Human resource management

Human capabilities

• Technical skills

• Customer oriented view

Metrics

• Lifetime value

• Share of wallet

• Customer satisfaction

• Customer loyalty

Operational Process (Keramati et al, 2010; Lambert, 2010)

CRM in a multinational context or CRM strategy should be prioritized, especially where separate strategies are developed within different functions of the business. The purpose of addressing a company’s business strategy, as part of the CRM building blocks, is to determine whether strategy is aligned for a CRM business process. Among multinational and multidivisional organizations the element of strategy can play a significant role. Such as what global strategy or corporate strategy is set out and how strategy is defined for specific countries or divisions. Both from corporate top management, as with management at a divisional level. (Ramasheshan et al, 2006: Bull, 2003)

Important is to acknowledge that not each customer is equally valuable and that segmentation should occur according to key customers and their potential. Followed by building strategies to address these customers or segments (Payne & Frow, 2006). The focus should not merely be on how relationships should be build and maintained, but more on building the right kind of relationships with the customers that can have a substantial positive impact on corporate profitability. Viewing the different segments as a portfolio of assets that have to be actively managed to maximize profitability is acknowledged by Zablah et al (2004) as important for CRM strategy.

Keramati et al (2010) state that a strategic long term view on where to spend resources can enhance performance. Slater and Narver (1998) emphasize this, whereas CRM as a vehicle for customer centricity should be careful in concentrating on long-term competitive advantage, but still provide stimulus for significant innovation that discontinuous change requires especially in more dynamic environments.

3.3.2 Technology

CRM in a multinational context suppliers and customers. For some companies there is also the impact of the internet on the way customer relationships can be managed.

Customer data can include all sales, promotions and customer interactions. Furthermore, information related to billing, account status, customer service interactions, back orders, product shipment, product returns, claims history, internal operating costs, after-service support, guarantee and additional customer related information can improve understanding of customers and their purchasing patterns. The technologies that are necessary for successful CRM can be linked into different categories as is also done by Keramati et al (2010). First, collaborative technologies which can make communications between a company and its customer. Second, operational technologies which are the customer-facing applications acting upon functions such as order management, billing and customer service. And third, analytical technologies that analyze customer data, and transforms customer data into useful forms for the user. It is however, essential to conduct the planning of IT from a perspective of providing seamless customer service, as opposed to planning for product-centered activities, as is the case with e.g. ERP systems (Mishra & Mishra, 2009).

3.3.3 Organizational infrastructure

Shah et al (2006) have acknowledged that there exists a large difference in the perspective of product centric and customer centric approaches (table 1 on page 8). CRM requires an entire business process change and therefore needs most aspects of the organization to change, especially in product centric organizations. The following elements, regarding organizational infrastructure, are recognized in the literature as most crucial for CRM; culture (Shah et al, 2006; Chen & Popovich, 2003; Peelen et al, 2009), structure (Shah et al, 2006; Sin et al, 2006), top management commitment (Sin et al, 2006; Keramati, 2010) and Human Resource Management (Sin et al, 2006; Keramati et al, 2010).

Customer centricity incorporated in culture is identified as a critical success factor for the development of CRM by Rahimi & Berman (2009). Cultures are however, very resistant to change (Shah et al, 2006), while consisting of many facets ranging from values, beliefs, taboos, symbols, rituals and myths. A culture which from origin is based on a product-centric company feels their product is the holy grail of their organization, as opposed to customer centered cultures which put their emphasis on the customer’s interests. (Shah et al, 2006; Chen & Popovich, 2003; Sin et al, 2005; Keramati et al, 2010; Ryals & Knox, 2001)

CRM in a multinational context Organization wide and especially top management commitment is crucial for CRM. Support of the board and or senior management is required (Ryals & Knox, 2001), in particular when the initiative is championed bottom up in divisions of large organizations to become more of a strategic enabler. Furthermore, organization wide commitment of resources for sales and marketing resources, technical expertise, as well as resources for promoting service excellence is key to the success of CRM. Commitment by top management is necessary to keep the momentum, drive major change efforts, cope with objections, disagreement and difficulties among various departments that arise in the process of business reengineering. (Sin et al, 2005; Keramati, 2010; Chen & Popovich, 2003)

The individual building blocks for customer relationships are the employees of an organization (Sin et al, 2005; Ryals & Knox, 2001). Most difficult to change are the people who have to become CRM-oriented. This can be achieved by internal marketing where human resources and marketing interfaces can provide people’s service-mindedness and customer orientation (Gronroos (1990) in Sin et al, 2005). Keramati et al (2010) have considered human resource management practices as an essential element of the resources of an organization for CRM. Training, job-evaluations, compensation programs and reward systems are essential HRM elements for CRM (Chen & Popovich, 2003). The actual human capabilities will be discussed in the separate following chapter.

3.3.4 Human Capabilities

Keramati et al (2010) have divided the human capabilities into two categories: technical skills, which encompasses the ability of employees to work and extract customer information from the CRM technology and the second is the attitude of employees towards customers when they have contact with them or perform tasks with or for them.

The technical skills of employees consist of the responsiveness to the knowledge generated by CRM applications. It should be shared throughout the organization and could eventually lead to a learning relationship which is crucial for the competitiveness of a firm. (Keramati et al, 2010; Sin et al, 2005) It is also important to commit to the new technology, by employees since IT acceptance has a positive outcome of the performance of sales representatives. For sales this can result in improved targeting abilities, enhanced presentation skills, and increased call productivity (Ahearne et al, 2007).

CRM in a multinational context

3.3.5 Metrics

According to Payne and Frow (2005), performance assessment is essential to guarantee that the strategic aims, set by an organization are being delivered to an appropriate standard for CRM and additionally provide aims for future improvement. Moreover, Raman et al (2006) also recognize the importance of metrics used by an organization for CRM. Rewarding performance from a customer centric perspective, will increase the success for CRM implementation. This is also acknowledged by Shah et al (2006) and Reinartz et al (2004), whereas change in the structure, processes and culture can be facilitated by customer centered metrics. Lambert, (2010) acknowledges the significance of metrics that are related to the customer’s impact on firm profitability as well as the firm’s impact on the customer profitability. Boulding et al (2005) and Davenport (1993) both mention that inappropriate and incomplete use of CRM metrics can put the firm at risk of developing core rigidities, which could lead to long-term failure. Although there are differences in the way metrics are used in the literature for CRM, the metrics considered by Peelen et al (2009) will be used in this research. This is a comprehensive list (figure 2 on page 16) and includes the important elements used by others (e.g. Payne and Frow, 2005; Chen & Popovich 2003; Ramaseshan et al, 2006).

3.3.6 CRM process

CRM in a multinational context Management process: strategic activities related to the decision making on resource allocation for market intelligence, new product and service development and changes in market and customer perspectives.

CRM in a multinational context

4 Methodology

Here a justification and explanation for the single case study will be given. The process of data collection and analysis will be elaborated. Followed by a comprehensive introduction of the case study. Thereafter, a motivation for this research by the focal case company.

4.1 Motivation case study

This research is interpretive in its nature, since it takes a broad and complete overview of the issues regarding the implementation of CRM, and tries to offer a detailed, rich and thick description (Blumberg et al, 2005). The reason for case study research can be due to unusually revelatory, extreme exemplars or the opportunity for unusual research access (Yin, 2003). For this single-case study, the results will be derived due to unusual access of information relating to a complex phenomenon, explicitly; the possibilities of innovating a business process towards a more customer centric organization by using CRM. The unusual access of information is due to being present at the case company, and the granted access to many persons for interviews and relevant documents.

In addition, case studies place more emphasis on a full contextual analysis of e.g. conditions and interrelatedness between factors. Elaborating on details can provide valuable insights for problem-solving, evaluation and strategy, particularly when the considered number of variables are rather large, which emphasizes the use of a case study. As is also in the case at hand. (Blumberg et al, 2005) Case study research is not based on sampling logic, but instead on replication logic. This implicates that the results are not generalized to populations, but instead to theoretical propositions. Replication logic is based on the idea that one’s theory and the expectation that the same propositions hold in differing circumstances or that the phenomenon differs if the circumstances differ. (Blumberg et al, 2005) This research explores whether the adapted model from Keramati et al (2010), differs in the implementation difficulties when the setting changes from small and medium sized enterprises to a group of a multi-divisional multinational manufacturing organization.

The reason for a single case study is also due to the restricted time frame in which this thesis, with an in-depth contextual approach, should be written. Therefore, conducting multiple case studies will not be possible. Consequently, the generalizability of the conclusions from this research will be limited. In addition, this study is more open to bias than multiple case study research.

4.2 Data collection

CRM in a multinational context 3 (page 16). This fieldwork approach encourages participants to share as much information as possible in an unconstrained environment. The interviews will provide the necessary information considering the issues from the building blocks for conducting a CRM strategy within the case study company. The reason for interviews is because Payne and Frow (2006) have found that (semi)- (un) structured discussions and interviews with the appropriate company managers are extremely valuable to highlight the areas on which an organization should concentrate in order to improve the implementation and performance of a CRM strategy.

The questions for the interviews are segmented according to the different building blocks of the adapted CRM model. For the interviews a general template (appendix D ) was created to assure that all appropriate information will be retrieved for this research. Members of the Management Team (MT) which could answer (almost) all questions are interviewed according to the general template.

Before the interviews, a comprehensive introduction is provided to explain the purpose of the research and the interview, along with a description of CRM and what the purpose of CRM is. This is followed by an explanation of the different building blocks of CRM, and the segmentation of the questions according to these building blocks. This should provide the respondents with a consistent view of the concepts and additionally improve the accuracy and reliability of the results.

The interviews conducted lasted between 35 minutes and 90 minutes. A table with the relevant interview information can be found in table 3 on page 24. At the organization a total of four answered the general template. Further, to obtain more specific information on separate building blocks, more in-depth questions on HRM and (customer oriented) information technology were created and asked. These in-depth interviews related to Human Resource Management issues were conducted among to two responsible managers, and the in-depth questions related to IT were answered by one responsible manager. Additionally, to get more insights on CRM and the issues for implementing CRM an interview was conducted with an MT member from another division of the conglomerate, which already operates with a CRM system. For confirmation of information obtained from preceding interviews, an interview was conducted with an external and internal salesperson. This interview followed the general template. Due to time constraints of one interviewee, this interview could not be totally completed.

CRM in a multinational context presence at the division for five months has provided me with valuable and crucial informal conversations with employees.

Interviewee Position Focus interview

Respondent 1 Sales Development Support Director VA

General template

Respondent 2 Sales Director Fisher General template, adapted since the division uses a CRM application. Interview to gain further insights in difficulties for CRM within the organization

Respondent 3 Human Resource manager VA Human Resource Management

Respondent 4 IT Director Europe Information Technology and Human Resources regarding IT. Respondent 5 Operations Director and General

manager VA

General template

Respondent 6 Vice President VA Europe General template. Section regarding Strategy and Organizational structure

Respondent 7 Human Resource Director Europe Human Resource Management Respondent 8 Strategic Director Rack&Pinion

(R&P)

General Template

Respondent 9 Combined interview Internal Sales employee and External Sales Manager

General Template

* Due to time constraints interviewee, interview not completed Table 3: Summary interview, with the focus

4.3 Case description

This research is conducted at a group of Emerson Process Management which is a business platform from Emerson corporate. Emerson is a diversified conglomerate global corporation spanning their presence over 150 countries. Emerson is founded in America in 1890 as an electric manufacturing company. The corporate office is in St Louis in the USA. It started diversifying its business portfolio since the mid 50’s and nowadays Emerson’s products, solutions and services, both for the consumer- but primarily for industrial markets go to market via eight different business platforms; Process Management, Network Power, Climate technologies, Industrial Automation, Appliance Solutions, Storage Solutions, Professional Tools and Motor Technologies.

CRM in a multinational context of Emerson is to create solutions for the benefit of their customers and in the meantime achieve growth. The largest competitor of Emerson is Siemens, which in 2009 had sales amounting up to 6 times more than Emerson. Although, Siemens does not compete with Emerson on every business platform, they are recognized as the biggest competitor (CNNmoney, 2010). (emerson.com, 2010, company presentations)

A significant part of Emerson’s business comes from Emerson Process management (EPM). In fiscal year 2009 it accounted for 30% of total Emerson’s revenue, accounting up to $6.2 billion. Process Management can be split up into four different divisions; Systems and Solutions, Asset Optimization, Measurement and Valves & Regulators as can be found in Appendix B. Process management states that it is worldwide market leader in the area of process automation. EPM is designed and controlled as a matrix. The strategic focus is to deliver complete technological solutions (products and application advice and services) for optimizing production processes, with the help of intelligent field instrumentation and powerful software for diagnose and regulation. To respond to global competition and pressures to increase profitability, EPM Top management has the objective to evolve from a product centric to a customer centric organization. The objective of selling solutions is communicated by means of quarterly presentations to division personnel. To become more customer centric, EPM has initiated a ThinkCustomer program (figure 3 below) to drive the effort. This program comprehends many facets of becoming a customer centric organization, as can be found in the figure:

[File Name or Event] Emerson Confidential 27-Jun-01, Slide 23

Company Confidential 6-Jan-2010 / Slide 23

The Cornerstones of the Global

“ThinkCustomer” Initiative

is an initiative to

create a more external, customer focused

culture and drive us all to better manage the

Customer Experience:

•Organize ourselves around serving the customer •Understand his business needs

•Re-design our internal processes for speed and agility

•Manage our customer touch points •Meet all our commitments

•"Think Customer" first

CRM in a multinational context Further, EPM top management recognizes that service to the customer is key for business value and a strategic aim to achieve this is to globalize service presence. This should be done by localizing site and service coverage. Furthermore, attention should be given to understand customer strategies and needs, keeping track of customer migrations and improve service with customer asset life. Part of the customer centric strategy is more development in project management efforts, because within the divisions there is much technological know-how.

Emerson claims to be market leader in the process industries with their wide array of brands. When looking at competition, there are different kind of competitors. On the one hand, there are major competitors such as Honeywell and Siemens, who both operate in the process industries. On the other hand there are competitors like Tyco and Flowserve. The first two compete with EPM on turnkey projects (e.g. oil platforms, process infrastructures or process plants), for (operating) companies which are also end-users like Shell, Chevron and BP. In these projects the infrastructure is designed and determined for process control. Where it can be the case that a main contractor as a representative for the operator is responsible for the products which are used. Honeywell and Siemens often do not have the necessary products to put into the project-infrastructure, and are said to be more oriented towards services than products compared to EPM. For product delivery in these projects these firms often work with (sub)contractors, engineering companies, alliances and other kinds of cooperation. Tyco and Flowserve, in contrast, are seen as competitors who are more focused on product manufacturing for the respective industries. They are vendors who compete for a place of their products in the turnkey projects. EPM is in the middle of these competitors, as they compete for turnkey projects, but they also consolidate a wide array of product brands which compete with manufacturers such as Tyco and Flowserve. These firms, Flowserve in particular, have a localized service orientation to be close to customers.

The case part of Emerson for my research is Valve Automation (VA) Europe which is a group within the Valves & Regulators division of Emerson Process Management (Appendix B). VA consolidates the array of valve automation products and services for the process industries (e.g. Oil & Gas, Water, Electrical, Energy). The group brings together several brands in pneumatic, hydraulic, electric, and gas-hydraulic valve automation products, such as Bettis, El-O-Matic, FieldQ, Hytork, Shafer, Dantorque and since October 2009 also EIM (Appendix B). These brands mostly were separate companies which over the years have been acquired by EPM.

CRM in a multinational context Hengelo is responsible for sales, engineering, assembly and logistic processes for all actuators in Europe, the middle East and Africa.

EPM puts their products into operation in projects mentioned in the preceding paragraph, by discussing with end-users and contracting companies for end-users. In this way an installed base for VAs’ products is created, not only for VA products but also for other EPM products. These projects involve a great deal of customizing to the customer needs and involve many hours of project management. Large projects of hundreds of thousands or even millions of dollars of value for VA are dealt with at a UK office and smaller ones are dealt with in Hengelo. After an installed base is created and projects are ready, the business for these projects consists of replacement parts, maintenance, renewal of products and expansions of existing projects. These product orders are primarily handled and delivered by distribution channels (ADC). Products marketed through ADC’s also have the largest profit margin.

However, for these projects, many end users and contractors view the valve as more important compared to the automation part where VA is specialized in. Therefore, many projects are placed by Valve manufacturers, and then VA only delivers products to Valve manufacturers and products are sold primarily on price. Although, VA lacks essential communication with end-users, a considerable amount of end-user knowledge can be shared with other divisions within EPM. Fisher (appendix B), communicates much more with end-users. This is something that can be leveraged to VA, for instance with a uniform CRM database.

In sum, VA markets their product mainly to four different customer types (figure 4 found below). To end-users, engineering and contracting companies (Engineering, Procurement and Construction (EPC)), Valve manufacturers (Valve OEM) and distribution channels (ADC) where the last customer group is the most valuable marketing channel for VA Europe.

Figure 4: Way products go to market. Distance to user indicates the degree, determining and understanding the needs of customers.

EPM Valve Automation Europe End-user

ADC

EPC

Valve OEM _{‘Distance’}

to user

CRM in a multinational context The mission of VA is to provide valve automation solutions. Long range strategic objectives are profitable growth, undisputed product leadership, acknowledged innovation, full breadth portfolio and >90% customer loyalty. Strategies that should achieve are divided into four pillars; growth, operational excellence, customer loyalty and people. Under each pillar, there are several key initiatives which should achieve the strategic goal set. The most important initiatives that impact Customer loyalty: deliver to promise, project management development, meeting market lead times and developing customer care culture. Furthermore, responsiveness to customers at all stages of the business process, internal communication to support customers and special attention to initiatives and processes to the benefit of the customer are highlighted for a customer centric organization.

The latest addition to their product-portfolio (EIM) is considered to be of larger size and complexity, both in product options, customizability, service and support offering and the approximate profits both in current but also in future growing markets as opposed to the current product portfolio. VA’s current product portfolio is sold as merely components. The product of EIM can be sold as a technology solution with above mentioned attributes. There are two reasons which makes this a challenge for VA to realize this with EIM: First, historically the divisions are highly product oriented, since they are mechanical engineering companies focused on creating superior products, which do not require a large service and customer oriented organization. Second, when this product would be sold as a component and not as solution, with all attributes as mentioned before to retrieve additional value, it will compete against the settled competition.

The market leaders in Europe for large electric actuators, are ROTORK and AUMA. ROTORK is a very successful and growing company, with localized presence in most countries and industries in Europe. AUMA is a well respected large family business, and has a large market share in Germany, but also owns and contracts many localized service partners and agents in the rest of Europe.

4.4 Impetus for CRM at focal organization (VA Europe)