March 29, 2024

Succeeding with CRM:
The Importance of Retail and Change Management Strategies

by Bob Brnilovich, Senior Vice President, Global Professional Services, SPL WorldGroup
In the mid-1990s, North American electric utilities enthusiastically embraced the concept of Customer Relationship Management (CRM). At the time, software vendors presented CRM as a package of IT functions that went well beyond the legacy Customer Information Systems of the time. With advanced tools for identifying customer niches and their evolving needs, along with developing, selling, and marketing new products and services, CRM offered utilities a way to deal effectively with the move toward retail competition that was then sweeping the industry.

Utilities that went forward with CRM implementations were well prepared to handle the new, competitive retail market. But for many, retail competition never arrived. And in the meantime, vendors of customer management solutions, originally seen as limited CIS replacements, have expanded their applications to encompass many of the most important customer service improvements previously available only in extensive CRM solutions.

Under those circumstances, it’s hardly surprising that CRM has not delivered an expected return on investment (ROI).

That doesn’t mean, however, that utility CRM needs to join the CalPX on the industry’s pile of historical artifacts. Delivering full and complete customer satisfaction remains a cornerstone of the electric utility industry. CRM functionality—obtained through dedicated application packages, advanced customer management tools, or expansions of legacy-system functions—has a definite role to play in today’s utility.

To realize the full benefits of existing and proposed new CRM applications, however, utility managers and executives must take a multi-step approach to incorporating the new functionality into the entire fabric of the organization. There are four steps necessary for success:

Step 1: Establish a retail strategy.
Both unregulated and regulated segments of the utility market have retail functions. From distribution companies to competitive energy retailers, every utility company that sells products and services to customers is in retail. Today, however, many utilities have not adopted that perspective.

To shift to a retail mentality, utilities must view customers as partners with rapidly growing expectations about product variety and service quality.

A retail strategy has many components, including target markets, product lines, branding, and measurements for each product line’s profitability in different market segments. The foundation for the plan is indepth knowledge of customer preferences, typically gleaned from customer focus groups and distributed to those in the organization who are empowered to act on it. A certain customer segment may want to purchase green power, for example. Another segment may want budget billing or a guaranteed annual price. Yet another may wish to have a reliable backup power source in the event of an outage. By definition, a retail strategy revolves around letting customers design the products or services they desire at a price they consider fair.

Step 2: Use CRM to build out and implement retail strategy.
CRM is far more than just software. It is a combination of strategies, people, processes, and technologies that enables companies to boost customer retention and meet demand for tailored products and services in new and profitable ways.

CRM is a way to approach the process of discovering what customers want. It is a commitment to streamline everything from customer initiation through to product and service delivery. It is a way to develop knowledge of each customer’s preferences and purchasing patterns and to use that knowledge to cross-sell and up-sell new products and services that complement what customers have purchased in the past.

Step 3: Design and implement a retailoriented organizational structure.
Once a retail strategy is in place, utility companies need to begin structuring their organizations around the concept of satisfying customer demand. The necessary organizational changes will be far more sweeping than those that occurred when traditionally integrated utilities restructured their operations by unbundling regulated and unregulated businesses into separate business units.

Many of the most highly regarded and successful retail companies are organized by product line. Managers are responsible product line profitability or loss, and they have the authority to leverage the cross-functional resources of the enterprise to make their product lines succeed in the market.

Step 4: Put change management strategies into place.
Organization by product line is foreign to most utility companies, where hierarchical structures are the norm and rewards are allocated based on the performance of the entire organization. Thus, shifting from a rate-based business model to one organized around product lines with individual responsibility for product success or failure will be a major change for most utilities.

Change is not an easy process. Among the many by-products of significant organizational restructuring are discontinuity, disorder, and distraction. There are differences between what was once appropriate and what will now be appropriate. There is uncertainty about what should be done and the standards to apply.

Most executives know that organizational change of this magnitude is impossible without full staff cooperation and participation. They know that they must lead the charge, and that employees must implement the changes. However, top management typically overestimates the degree of cooperation it will get and underestimates the cost and complexity of change. And, just when visible executive leadership is urgently required to enable the necessary transformations, top managers are swamped by decisions about what to do and feel they have less time for managing process changes.

Some executives believe that staff will welcome change—or at least make an effort, if only to preserve their jobs. Others view change management as a “back burner” priority that can be addressed when resources free up.

If mismanaged, restructuring can all too easily make people feel helpless, anxious, startled, embarrassed, overworked, cynical, hostile, and worse. Restructuring thus produces a window of vulnerability, a time when exposure to disease is increased at precisely the same time as the corporate body is temporarily weakened. As a result, change management must be on the front burner, and it must occur before new directions are defined and new technologies arrive.


When managers realize—too late—that change management should not have been postponed, they often attempt to salvage the innovation initiative by bringing in an outside team of change management experts. That impulse has some merit. There are a number of proven methodologies that can help overcome organizational inertia and prepare employees to respond positively to innovation. However, the process takes months at a minimum. By the time executives and employees are on the same wavelength, the window of opportunity stimulating change has probably long since closed. Change fails simply because the company implemented process and technology changes before implementing change management for the people pivotal to success. Other changes are possible in the future, of course. But they must be played out against the backdrop of initial failure and the skepticism it engenders.

CRM implementations—founded solidly on both retail and CRM strategies—can be successful only when organizations are prepared for change. Change management must therefore be on the front burner and must be implemented before new business directions or technologies are proposed.

Change management initiatives are among the most difficult an organization faces because so many elements must be completed successfully. The chart below details each of the vital elements and explains what the company risks if the element is omitted or mismanaged.

Successful change requires that projects successfully achieve all the elements in the left-hand column in this chart. Ensuring that all these elements are managed well helps companies navigate change while retaining company value and morale. And if managed gracefully, organizational and cultural changes can reinvigorate a company, inspiring a new sense of team spirit and camaraderie among staff and renewing commitments to corporate success.

Conclusion
North American retail energy markets have not evolved as predicted in the mid-1990s. Investments were made in CRM and other IT applications that have not proved as central to success as planned. But there is no reason to lament these investments or to view them as failures. It is time to acknowledge that “a funny thing happened on the way to the future” and move on.

CRM functions can and should be an important part of any utility’s plan to serve customers thoroughly and well. In the presence of a clearly articulated retail strategy, and viewed as one of the means of strategic implementation, CRM can provide a firm foundation for building customer loyalty and support long into the future.