Why CRM and BI Aren't Created Equal

Why CRM and BI Aren't Created Equal

By Jill Dyche

Editor’s Note: Even the experts are confused about the differences between business intelligence and customer relationship management (CRM). Read this excerpt from Jill Dyche’s new book to find outwhat the distinct differences are. This article is an excerpted from The CRM Handbook: A Business Guide to Customer Relationship Management (Addison Wesley, 2001).

News flash! Data warehousing is not CRM, and neither is business intelligence.

While this announcement might seem obvious, even heretical to some, read a magazine article or attend a conference presentation on CRM these days and you’ll likely hear at least one of the following claims:

• Our new CRM system allows us to analyze customer behaviors and to give our salespeople global customer information, rather than the select bits and pieces they had before.
• Once we started doing CRM, we could access all of our customers from one system.
• Customer relationship management allows the company to analyze trouble ticket data to better understand which types of claims are most prevalent for a given customer segment.
• We’re using data mining to execute our corporate-wide CRM initiative. It allows us to predict what customers might buy next!
• Hallelujah! We finally know which customers are buying which products.

Valuable as they are, none of these capabilities requires a CRM product. In fact, companies from brokerage houses to pharmaceutical firms were performing these duties long before the CRM acronym came along. The combination of data warehouses and analytical toolsets has given companies the ability to drill down into integrated data to reveal interesting even competitively differentiating findings. Rather than extrapolating what types of promotions to launch and guessing who would respond, companies have begun relying on business intelligence analysis to provide them with hard facts that help them make better, more informed decisions and reap unforeseen rewards.

But even the experts are confused about the differences between business intelligence and CRM, and the media often exacerbate the misunderstanding. Publications and conference presentations routinely confuse the two terms. Data warehouse vendors whose markets are waning – most large companies already have at least one data warehouse – are hanging the CRM shingle without refashioning the message. Likewise, CRM vendors who realized too late that data analysis capabilities were vital are now pitching CRM data marts along with their core products.

One popular CRM book concentrates the majority of its text and all of its case studies on decision support analysis. In August 2000, a high- profile IT management magazine dedicated an entire issue to CRM, featuring a dozen best practices, most of which involved analyzing customer data rather than focusing on deployed CRM applications. And there was the well-attended CRM conference presentation offering the “Nine Types of CRM,” four of which – database, decision support, analysis and data mining, and rules repository – smacked more of data warehouse implementation goals than the overarching business strategy of CRM.

Although often misrepresented, the differences between business intelligence and CRM are distinct. Yes, they both involve critical business decisions, and both rely on information technology in order to deliver real value. The examples in Figure 1 illustrate the distinction:

Your first impression might be that CRM is more complex than business intelligence. In fact at most companies the number of true CRM users is a mere subset of the population using business intelligence. However, business intelligence, when not exploited to its full potential, can result in analysis for analysis’ sake.

The major difference between BI and CRM is that CRM integrates information with business action. Each of the examples in Figure 1 differentiates an individual customer or group of customers. Beyond this, the CRM business action will be tested and further refined. CRM combines data analysis with the deployment of specific business actions. The ability to access data is, by itself, immensely powerful. But many data warehouses simply provide information to maximize efficiencies of established processes or to confirm already held hypotheses. It’s the ability to act on that information and to change fundamental business processes to become more customer centric that’s the true mandate of CRM.

Jill Dyche is vice president of the management consulting practice for Baseline Consulting Group. This article was excerpted from her new book, The CRM Handbook: A Business Guide to Customer Relationship Management (Addison Wesley, 2001). Her previous book, e-Data, has been translated into four languages. Dyche can be reached at jilldyche@baseline-consulting.com.