Today’s post is from Jason Jordan, partner in Vantage Point Performance. This is a chapter excerpt from the new best-selling book, Sales Insanity: 20 True Stories of Epic Sales Blunders (and how to avoid them yourself), by Cannon Thomas and Jason Jordan.
In the 1990’s I was managing a team of process consultants for a mid-sized consulting firm. The phone call came one day from a major technology company that needed some process design work done to accompany new CRM software it was implementing. This didn’t seem so odd, except the implementation was already underway. Why were they just now asking for process documentation if they had already begun to build the system? Here is what I learned:
A year or two before, the company had elected to implement the “best of breed” CRM tool to automate its sales force’s key activities. Basically, this was the biggest and most robust of all the CRM applications on the market at the time. Simultaneously, the company had engaged one of the biggest consulting firms in the world to handle the customization and deployment of the new CRM software. So far, so good.
Things first started to go wrong during the contract negotiations with the big consulting firm. The systems integrator had quoted a preliminary figure of $20 million to design and implement the new CRM tool. The company’s chief information officer, fancying himself a master negotiator, felt it was his sole job to reduce this nose-bleed figure, and he responded with a classic negotiating strategy. He simply countered that the price was outrageous.
This old-school, price-is-outrageous negotiating strategy can work okay when you’re purchasing a clearly defined product – like a car, for instance. You negotiate back and forth, and one party’s gain is the other party’s loss. However, consulting services are not clearly defined products, and there are at least two variables in play until the very end – the price for the work and the scope of the work. Savvy consultants respond to the price-is-too-high bargaining tactic by offering to lower the price along with the scope of work to be performed. Basically, the profit margin for the consultant stays the same while the amount of work decreases.
The CIO in this case battered the systems integrator down to $12 million by eliminating all the business consulting around the technology: that is, the process definition, the business logic, the work flow, etc. – all the stuff the CRM tool was meant to automate. Unfortunately, the CIO’s negotiating stance had been based on a highly erroneous assumption – that all this “business” stuff either already existed inside the company or it could be quickly developed by the company’s own employees.
Thus began the hiring of dozens of additional consultants as sales, marketing, and operations were now being asked by the systems integrator for all the business content to be automated – content which, of course, didn’t exist. Therefore, the consulting budget was effectively spread throughout the organization and quickly began to speed past the original $20 million estimate to fully develop the CRM capability.
To make matters worse, what had begun as a fairly contained scope of automating order entry and other basic sales tasks became an ever-expanding wish list of CRM features. They might as well automate the pricing process too. And add a product configuration tool. And integrate with ERP.
The growing scope of CRM functionality and the consequent demands on the business to define the underlying processes spiraled out of control. My team and I were only one of many consulting firms there, and we worked on this project for over two years. You can see where this is going.
In the end, I was told that the company spent – get ready – $90 million on this CRM tool. $15 million went to the CRM vendor for software licenses and another $75 million went to technology and business consultants. $90 million! Just a bit more than the outlandish $20 million that had so offended the CIO.
Yet the most amazing fact of this story is that no salesperson ever used the system – because it was never successfully deployed. Several years, three CIOs, and $90 million later, the company gave up on the system as the economy slowed and the company’s finances went south. In fact, you won’t be surprised to learn that this company no longer exists. Nor the CRM vendor, actually. Only the consultants.
Here are two lessons you can take away from this epic CRM failure.
1) Technology Is Just an Enabler of Business Processes
Technology is too often sold as the silver bullet cure-all for any business issue. In reality, though, technology is just an enabler. It won’t solve any problems on its own; it will just help you do the wrong things faster. Take the time to define how you want your business to work before you set about automating it.
2) When Implementing Technology, Think Small
“Big bang” system implementations are always tinged with insanity. It’s smarter to implement the smallest piece of technology you can possibly imagine and then add the bells and whistles. Otherwise, the sound you hear won’t be all the bells and whistles working in the background; it will be the sound of an oncoming train.