The essence of a business relationship is collaboration, which might be thought of as the ability of more than one person or organization to continuously create new value for all participants in the relationship. Below, I discuss the antithesis of collaboration—conflict and competition. I then move on to suggest how to build a collaborative environment that will allow managers and organizations to achieve the full potential of Customer Relationship Management (CRM).
CONFLICT AND COMPETITION
How can an understanding of conflict and competition shed light on what we need to know about collaboration? Why is it that people and organizations pursue or accept a path that leads to a collision? What state of mind drives this thinking? Is it best to align, limit or focus conflict to gain advantage, or is collaboration better?
Intense conflict can arise when more than one entity wants a disproportionate share of scarce resources, such as the most profit from the value chain, the best customers, smartest minds, more raw materials and extra capital. This pursuit of limited resources is certainly one way to view a company and how it competes to build its profit.
You are probably familiar with the five forces of industry profitability, described in 1979 by Harvard Business School Professor Michael Port e r. He noted that competition concerned itself with the management of competitive rivalry, the threat of substitutes and new entrants, and the bargaining power of customers and suppliers. His perspective paid attention to these issues and industry capacity.
Today, industry capacity is very difficult, or impossible, to manage, especially in technology businesses.
Additionally, companies serving individual customers find that they often compete for additional scarce resources, such as access to their customers, and for customer attention. In the era of CRM and customer-centric business models, Porter’s approaches do not serve the company adequately, because they do not talk to the issue of competitive advantage that comes from one-to-one relationships.
The pursuit of profit and competitive advantage starts with internal considerations that affect the company’s CRM strategy, such as:
- A company’s identity and perceptions of itself. These perceptions form the core of its identity and have much to do with a company’s ability to form enduring customer bonds
- The company’s evolution and its ability to recreate the company as it adapts to new challenges, in essence triumphing over past behaviours. Companies that know how to compete do not always know how to collaborate and relate; the reverse can also be true
- What companies think competitors, customers and stakeholders are. That is, how do companies view the core identities of other firms, and their drivers and direction? Some companies base and rationalize their approaches to winning on the nature of the competition
- What companies want to become and why they need to change. Vision is an often-used, but nevertheless important, word for companies wanting to capture CRM’s potential and describe the role of collaboration in achieving the desired goal.
To clarify their company’s identity, strategic leaders have often asked “What business are we in?” and “What are our core capabilities?” These are good questions, but defining or developing an identity runs deeper. In fact, identity is how the company thinks of itself, how it communicates what it thinks, and how it allows its competitors to position or reposition it. Identity is “mental labelling,” or a self-perception of a company’s position. When the label is stable, the company may not be able to change much if it cannot shift its self-image first. For example, CRM strategically implies that companies compete on scope, rather than scale. This means that companies provide what each customer wants rather than what the company makes. If the firm’s identity is fixed, such as, “We are a developer of horizontal application software,” it might be difficult for it to become a “provider of integrated solutions.”
The ability of a company to change depends on many things, but none more than its ability to triumph over its past. As the president of a Japanese technology firm said to me: “We must overcome our success.” Companies, like people, retain memories of managing or coping with conflict as they achieved their success. Companies tend to repeat these learned behaviours, making it difficult for some to adopt a collaborative business model. One company, rescued from bankruptcy some years ago, cannot overcome its past. It remembers too well how to get out of bankruptcy, such as how to fight its creditors—how to make others “take a haircut,” as one board member is fond of saying. As a result, its organizational memory and past have become its future. It acquires failed companies and then looks for unrealized financial value by cutting what it can. People depart, as do customers and shareholders, and with them leaves any chance to build a progressive organization that does not depend on resurrecting acquired companies.
Character helps overcome the past. Before becoming President in 1860, Abraham Lincoln experienced considerable failure. In 1832, he lost his job and was beaten in an election for the Illinois state legislature. His business failed a year later. He had a nervous breakdown in 1836. He was defeated for Speaker in the state legislature, beaten in his nomination for Congress, and, although elected to Congress in 1846, lost the renomination two years later. He was rejected for even low-level jobs, then again lost in his bids for the U.S. Senate and Vice-President. Each time, he was somehow able to shake off the past and focus on the future, determine what he needed to learn and change about himself, and ensure that his successes overcame his setbacks. Character, discipline and integrity can help organizations triumph over the past and create an environment in which collaboration is possible. Without traits such as these in its leaders and culture, a company cannot easily break its pattern of behaviour.
PERCEPTION OF OTHERS
A company’s view of other organizations can be as important as its image of itself. Competition between companies arises when leaders perceive that they are in a business game which, if not “zero-sum,” is not far removed from it. An example: Ray Kroc, McDonald’s prime mover, reportedly (and rather unfortunately, given the industry) said, in reference to competitors: “This is rat eat rat, dog eat dog. I’ll kill ‘em, and I’m going to kill ‘em before they kill me.” More generally, the first-generation thinking here goes, “Sales that go to another company will not come to us.” The same thinking applies to value-chain profits, scarce raw materials, bright new recruits, patents, regulatory support, investor interest and customer engagement.
A leader who believes that his or her company is one thing (and labels the firm in this way), and that another company is another thing, has set the stage for combat. If you think another organization—whether competitor or stakeholder—is different from yours, collaboration will not come easily. Peer into Coca-Cola and Pepsi-Cola, and you would likely find companies in which the perception of difference is well entrenched. Talk with some companies, and their channel “partners” and franchisers and franchisees, and you’ll often find that similar perceptions of difference precede conflict. Companies often talk of their channel partners in terms that might be described as “we” and “they,” with the implication that “we” are right and “they” are not. Collaboration cannot easily flourish when this mindset prevails.
A company must obviously have a view of the future and its position in it. More than this, though, the firm should view the future through the present. That is, in addition to having a vision for the industry and the company’s role in the future, there should be clear reasons for it to change. These reasons could include the rewards for vision attainment or threats if it is not achieved. Where companies have not achieved the potential of CRM, perhaps they did not set their organizations on the right path at the outset, namely by describing a CRM vision and strategy, and identifying the benefits of changing from the current state. CRM requires entirely new computing environments, production and other processes, success measures and cultures, among much else. As the amount of change is significant, CRM’s benefits, or the risks of not implementing it, should be considered large, too. Without this clear assessment, companies may commit themselves more timidly to the future state of CRM than their competitors, or they might invest more in CRM than prudence suggests.
COLLABORATION AND INNOVATION
In previous eras, competition was about market share and winning the battle to sell what you make. In the era of CRM, competition is about customer share, and winning the battle for the customer’s mind and wallet. In this context, creating new, customer-specific value is more important than anything else. CRM requires innovation. Innovation may change the nature of competition and stakeholder relationships entirely. Bill Lear, founder and inventor of the Learjet, autopilot and the 8-track, had different stakeholders, and eventually, different competitors for each invention. A changing stakeholder and competitive landscape is characteristic of other first-to-market, multiple-product companies, such as Sony, Microsoft and Motorola, an off-spin of Lear’s car-radio invention. In companies like these, the focus has often been first on products and technology. Today’s CRM firm innovates first by collaborating. This should also change how a company competes, such as:
- Unshackling the company from its past. To address future opportunities, the company may need to change its accounting practices, especially if the old ones hinder change. For example, some firms require that their investments provide planned earnings before reinvestments are made; others do not fully account for real rates of product or technology substitution and replacement
- Developing a CRM vision and strategy, one that balances attention to the creation of strategic capabilities with the development of marketing strategy
- Focusing on process innovation for customer life-cycle management, including collaboration throughout the value chain
- Paying attention to the strategies for competing on scope rather than scale
- Providing the leadership to develop integrity, consistency and trust-based relationships with internal and external stakeholders alike.
Collaboration, like trust, underpins CRM. It then follows that collaboration must exist if any business based on relationships hopes to succeed.