Challenges for Businesses in the Information Age
Ever-increasing demands of customers concerning quality and innovativeness of products and services put companies under pressure. In combination with global competition, they change the rules of the market and force companies to adapt swiftly (Österle and Winter 2000). This challenge, together with rising pressure to reduce costs, requires enterprises to redesign their business model. One possible solution is to focus the value chain on the processes of the cus- tomers. For example, a company could support the customer process “car ownership,” which extends from the purchase, financing, and usage of the vehicle all the way to maintenance, sale, or scrapping. A single provider could cover this process entirely with an innovative combina- tion of products and services. Efficiently collaborating within dynamic networks based on modern information technologies, companies can provide these process-oriented offerings (Fleisch 2001). The growing importance of customer-oriented business models is emphasized by numerous publications within the area of customer relationship management (CRM)—for example,
Greenberg (2001), Shaw and Reed (1999), Schulze (2000). A comprehensive overview over the literature in the field of CRM with a focus on e-commerce can be found in Romano and Fjermestad (2002). CRM aims at leveraging investments in customer relations to strengthen the competitive position and maximize returns.
Focusing on customer processes requires considerable knowledge. Customer-focused compa- nies have to provide knowledge that customers demand, process the knowledge that customers pass to the company, and possess knowledge about customers. As a consequence, knowledge is considered a critical resource in the competition of the twenty-first century (Drucke 1999; Dav- enport and Prusak 1998)). The cultivation of knowledge to support business processes is the task of knowledge management (KM). Thus the application of KM concepts and technologies in the context of CRM is a relevant field of research (Romano and Fjermestad 2003).
Research Goals and Structure
Our research focuses on how concepts of KM can be applied within the area of CRM. This ap- proach enables companies to improve knowledge support of their customer-oriented business processes, which in turn aims at improving the overall performance of the enterprise.
The resulting customer knowledge management (CKM) process model, as introduced by Gebert et al. (2003), aims at integrating the two concepts of CRM and KM. We consider KM to be a toolset which cannot be applied independently of business processes. Thus we focus on the appli- cation within the area of CRM. The contribution of this chapter is to describe cases in which the performance of CRM was improved by applying the CKM process model.
Therefore, we will proceed as follows: Section two will provide an overview of related re- search within the areas of CRM and KM which form the foundation of the CKM process model. Subsequently, we will introduce the CKM process model based on a framework of six CRM subprocesses. In section three, four action-research cases with companies in the financial services sector will illustrate the application of the CKM process model. Our cross-case analysis in section four will specifically focus on how the illustrated cases managed to improve company perfor- mance through the application of KM instruments within CRM. In section five we will conclude this chapter with an outlook on further research opportunities.
To achieve our research goals and derive the CKM process model, we employed the research approach “action research” as defined by Gummesson: “On the basis of their paradigms and pre- understanding and given access to empirical, real-world data through their role as change agent,
. . . action scientists . . . generate a specific (local) theory, which is then tested and modified through action. The interaction between the role of academic researcher and the role of manage- ment consultant, within a single project as well as between projects, can also help the scientist to generate a more general theory, which in turn becomes an instrument for increased theoretical sensitivity . . .” (Gummesson 2000). Apart from this foundation, we also used in-depth case study analysis to complement our experiences and validate the conclusions derived from the CKM process model. The CKM process model is based on nearly six years of research in a special corporate–academic partnership. Research partners were major European players in sectors such as financial services and insurance, telecommunications, and chemicals.
To structure our analysis of existing challenges in these cases, we employ the concept of business engineering (BE) as our analytical framework. Business engineering is the transforma-
tion of enterprises from the industrial age into the information age by means of procedure models, methods, and tools (Österle 1995). To control the transformation complexity, a division into several levels is often suggested ((Ferstl and Sinz 1998; Scheer 1995)). Österle and Blessing (2003) propose three levels of business engineering: strategy, process, and system, each dealing with different business questions:
- On the strategy level, decisions are made regarding the long-term development of an enter- prise. This comprises decisions on strategic alliances, company structure, market services offered, customer segments addressed, and distribution
- Within processes, strategic decisions are implemented. A process produces a company’s services through the execution of a number of tasks with defined inputs and Process development includes the planned process outputs, the optimal sequence and distribution of tasks, and process management.
- The execution of processes is supported by information systems (IS) in the form of applica- tion software. The foundation for information systems is information technology (IT), con- sisting of hardware, networks, and operating systems software.
The research described in this chapter concentrates on the process and information systems level of CRM and CKM.
A MODEL FOR CUSTOMER KNOWLEDGE MANAGEMENT
Customer Relationship Management
The origins of CRM can be traced back to the management concept of relationship marketing (RM) (Levitt 1983). Relationship marketing is an integrated effort to identify, build up, and main- tain a network with individual customers for the mutual benefit of both sides (Shani and Chalasani 1992). RM is largely of strategic character and lacks a holistic view of business processes, al- though they are regarded as important (Parvatiyar and Sheth 2000).
Advances in information technology (IT) had a significant influence on CRM, focusing mainly on the information systems layer in the past. The goal was to support the existing isolated ap- proach of dealing with customer relationships. With the CRM philosophy aiming at creating an integrated view of the customer across the enterprise, these systems were connected, and today they form the building blocks of comprehensive integrated CRM systems.
We consider CRM to view the customer relationship as an investment, which is to contrib- ute to the bottom line of the enterprise. The design and management of customer relationships is to strengthen the competitive position of an enterprise by increasing the loyalty of customers. While this extends beyond the use of information technology, IT is an important enabler of modern CRM.
Apart from the strategy-oriented concept of RM and systems-oriented concepts, there are sev- eral CRM approaches with special focus on business processes (Schulze et al. 2000). However, these approaches are based on the separation of the functional areas of marketing, sales, and service, which by itself does not provide a cross-functional process view.