Long Time Coming

In any other area of life, such dismal success rates would be considered recklessly unsustainable. Conduct elective cosmetic surgery with the probability of 80 per cent fatality and you might find yourself sued for malpractice. Launch a space shuttle knowing it had just a 20 per cent chance of completing its mission and you would expect to be drummed out of NASA. Launch a war knowing you were three times as likely to be wiped out as to win and you might expect to face impeachment . . . And yet businesses keep plugging away at CRM projects despite warnings from analysts of failure rates in some areas up around the 75-80 per cent mark.

Obviously under today's new economic realities, organisations without a definitive customer relationship management blueprint for success are doomed to suffer harsh consequences. But CRM is not for the faint-hearted. Clearly, it requires much management and money.

As Gartner analyst Scott Nelson maintains, many multimillion dollar initiatives have quietly stalled or failed as executives search for business benefits, and salespeople shy away from technology they say will not help them. This makes scrutiny of arguably the most advanced and effective broad-scale customer relationship platform among the leading retail financial services providers in Australia worthwhile - because customer relationship management has become the keystone of the National Australia Bank's business strategy.

But as CIO Ian Crouch explains, it has been a long time coming.

The National Australia Bank (NAB) has been working on CRM for more than 10 years - longer by seven years or so than CRM as a marketing term has had currency. "Way back then, a group of far-sighted NAB executives could see that the future for organisations continuing to build their business around products was limited," Crouch says. "The management team wanted to move away from a product orientation to a customer orientation. Customer information files were seen as a major vehicle to the transformation."

The CRM system which evolved from that nascent strategy has taken those 10 years or more to put in place, and the bank now has more than 200 consultants and technical staff developing the platform across the group's business units. The lesson is that there is no instant path to CRM nirvana; but the patient, steady approach has paid enormous dividends for NAB.

While Crouch only joined the bank last year, he says in his "previous lives" working with most of the leading banks he had not seen any bank that was as far down the track as the National Australia Bank is. "It is a credit to the people who have really worked on this for the last decade - and it hasn't been just one person, it's been a team effort - and the vision of the management at the time," he says. "There is no doubt in my mind that it really is leading edge, and that is what some of the recent awards that were won are simply recognising." Those awards include: Best CRM Strategy in the Financial Innovation Awards (sponsored by the Institute of Financial Services UK and British Telecom), November 2001; and Best Use of Technology 2002 in The Banker Awards, (Financial Times, UK).

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The Cornerstone

The NAB is the largest financial services institution listed on the Australian Stock Exchange, as measured by market capitalisation. Its Australian banking operation has more than 3.5 million banking customers, approximately 18,000 employees and is represented in approximately 1000 physical locations across Australia, supported by telephone and Internet banking.

Customer relationship management has become the cornerstone to the NAB's business strategy, which Crouch says can be summarised in one mantra the bank's executives repeat constantly: grow through excellent relationships. "That's pretty much the vision of what we're trying to do," Crouch says. "We think the success of the bank is built on not only the success of the community, but also the success of our customers, and we think we have a role to play in helping them.

"[Through CRM] we will be dealing with customers when they want to deal with us. That's what we've got in mind. Obviously the diversity of channels is key to that: being able to provide customers with various options, so they can interact with us the way they want to."

The ultimate aim is to ensure the customer can deal with the bank at his or her convenience, and that no matter who the customer's point of contact is within the bank, they have an understanding of who the customer is. That single customer view would include the history of the relationship; the products and services they typically use, ought to use and should want to use; and also provide some insight into what the customer is doing from a transactional point of view.

"In fact the goal is that we would become proactive," Crouch says. "If you've changed jobs or you've made a big deposit, or whatever the transaction may be, then that should be enough for us to initiate a conversation with you to see how we can support you. If you've got money sitting there on deposit we might contact you to see how you can get better value for that money. If you've changed jobs it might have to do with superannuation pensions or other types of information. Let's say you've sold your house or are selling your house; then there may be opportunities for us to help with remortgaging. It goes on and on.

"It's effectively saying if we understand our customers, then it gives us the opportunity to be proactive and help them."

To varying degrees, all of those things are happening now. The work has been a journey of continuous improvement. The big pieces in Australia are in place within the NAB; the bank is now in the process of refining and improving the system, and doing a lot of learning along the way. "You try some things and sometimes it works and sometimes it doesn't work. You then just keep on refining what you're trying to do," Crouch says.

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Tentative Steps

With no CRM products available when it started its efforts, the NAB's first step towards relationship management was to move from a customer information file for each product to a single customer information file, linked through to the various product systems. That work alone was effective in starting to break down the silos within the NAB, Crouch says.

From there, the efforts moved towards building a data warehouse around customer events to help the NAB understand its interactions with customers. "The data warehouse work really started in earnest in the early to mid-1990s and has continued," Crouch says. "A lot of focus has gone into it since then, so the customer information file has probably been over a 10-year journey, and the data warehouse a little bit less than that, probably more like a five- to 10-year journey."

Most recently, the NAB contracted with Siebel to implement a global platform for relationship management to be installed in call centres and provide Internet access to all NAB customers, initially concentrating on sales force automation. Crouch says Siebel provides the integration piece of the CRM puzzle, and brought the system to people's desktops.

The NAB has also been using software to provide customer profitability information to the marketing process since the late 1980s from within the bank's corporate data warehouse. And it has been actively experimenting with sales management methodologies, schemes for segmenting the customer base and targeted messages since before all the technology pieces were fully implemented.

The NAB defined a matrix of five universal customer financial needs for a relationship with the bank. Some customers might have a handful of the needs simultaneously, but every customer would demonstrate one of the following:

1. Funding (all loans)

2. Risk Management/Insurance (P&C, life)

3. Payments/Transactions (deposits, withdrawals, transfers)

4. Investments (depository services, custodian services, securities, bonds, etc.)

5. Information (single statement, portal)

The bank uses the five universal needs to underpin its communications strategy with customers when it develops new services or marketing efforts.

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The retail bank also divides customers into six major customer segment types, with customers assigned to a segment according to a financial needs analysis and profitability assessment. These are:

1. Custom business

2. Packaged business

3. Agribusiness

4. Private

5. Premium

6. Retail

The bank has refined those segments further to help it define its customers more accurately, to the point where it now has a few hundred sub-segments for highly targeted marketing purposes. It then uses NCR's Relationship Optimiser - developed in conjunction with the bank - to manage the entire customer interface, from the timing and number of communications with customers to the appropriate channel and the nature of the offer.

During the first six months after implementing Relationship Optimiser in March 1999, the NAB initiated close to 100 distinct campaigns. Interestingly, the vast majority of campaigns (more than 70 per cent) are intended to expand the NAB's "share of wallet" among existing bank customers. Although it recognises the importance of attracting new customers, the bank has consciously chosen to focus its main effort on mining opportunities with current customers, according to a TowerGroup Research Note.

That Vision Thing

Crouch says the magnitude of the required investment was one of the biggest challenges to be overcome along the journey to CRM. Without management approval, buy-in to the vision it would have been impossible to realise, he says.

Fortunately, the NAB had manned its executive with numbers of visionaries who had a clear idea of what they wanted and how they wanted to operate. "And we haven't, to be honest, deviated that much from it except in technology, where different solutions have evolved along the way, but the vision hasn't changed," Crouch says.

Of course the NAB could have joined other banks and high-end organisations in waiting for an off-the-shelf CRM solution before trying to fulfil its relationship management vision. Crouch would argue that giving itself a head start has proved a real positive, precisely because the biggest issue is not the technology, but the organisational culture. He says although technology may have been the enabler for the CRM strategy, and comprises the biggest component of the investment involved, it is by no means the most complex piece of the NAB CRM effort.

"You know, everyone is calling for CRM and [where it has failed] I think the finger points to the technology problem," he says. "And I think in many cases it's not a technology problem. It is culture, and the discipline around when you deal with the customer . . . the disciplines around certain events and making sure you act on those events in a time frame. There are a whole lot of disciplines for people that are important to make this work."

Since the NAB introduced the relationship banking concept years ago it has constantly reinforced the message to staff, more recently backed by the Growth Through Excellent Relationships mantra of CEO Frank Cicutto. The message is that maintaining good customer relationships involves a continuous process and the dedicated efforts of all staff.

"The pieces are coming together," Crouch says. "I wouldn't say that we are finished. In fact, if anything, we put more emphasis on the need to really understand and know our customers. This has been a big part of our investment program in the past, and I don't anticipate that changing. I think we just continue to understand our relationships, focus on how we're going to better support our customers, be aware, treat them as individuals - all those sorts of things are now part of the culture of the bank."

And making it a part of the culture has been at least as important as the technology to the success of the NAB CRM effort, he says.

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No Immediate Gratification

In pondering why the NAB's CRM efforts have succeeded so comprehensively where others have failed, Crouch believes some organisations have weakened their efforts by expecting instant success. "I think one of the lessons learned is that you don't look for quick results," he says. "I don't think you get quick payback, so if you do it because you think you're doing it for quick financial returns, you're probably better off saving your money."

He also thinks the strategy has worked because the early, prerequisite work on customer information files, data cleansing and building of data warehouses was kept comparatively low-key, with very limited visibility across the bank.

"We haven't gone in with the big announcements: 'We're going to put in CRM, and it's going to have all these wonderful results', and all those sorts of things," he says. "So I think we've gone into it [CRM] quite pragmatically, knowing that we were in for the journey and that we have to do this. Technology is going to underpin our relationship banking strategy, so success is really not optional for us. That makes it a bit easier."

And he says senior executive buy-in has been crucial to success, first under Don Argus as CEO and then under his successor, Cicutto. "If you don't have the CEO right behind it - and in our case the bank has - and the management team behind it, it's easy to start off down the trail and then lose heart," Crouch says. "I think you also get many competing things that are going on - competing for investments, and in many cases a lot of those investment decisions are made on short-term financial returns. So you've got to have a strategic view and stick to it."

These days, he says, any request for new investments is considered in the light of how it aligns with the strategy of the group, so to that extent most IT investments at the NAB are made in the context of the CRM strategy. "I think what's happened within the bank is that this focus on relationships and relationship banking as it was always referred to back in the 90s has always been a cornerstone of what the bank's about," he says. "It's become a cultural thing.

"Even when we go back and have our strategic discussion, the cornerstone is always our relationships with our customers. And I've never heard it challenged or people say: 'That's not the right thing to do', or whatever. It's always: 'That's a given. That's what we're doing; now what are the other things we need to do?' So it's certainly a strategic thrust and very much embedded in the culture of the bank."

The Whole World in Its CRM

The NAB is now starting to push CRM into New Zealand, and Crouch says it is starting down a track to deploy it in their geographies around the world. That means all that work will need to be replicated in other corners of the globe.

"You've got all the same challenges," he says. "You've got to go through and build the data warehouses, and build all the technology that underpins it. You have to go through building the national leads component of it, the data warehousing. We haven't deployed Siebel in some of those other places. Now that's part of the next three- to five-year program that we're working on.

"And I think that's part of us maturing as a group. We're making some of these investments in Australia, and building skills and learning, and then deploying those in the other countries. But the incremental cost of deploying now in other countries is comparatively small. You've made the big investment in Australia. So achieving scale out of our investment is a common theme within the group, and that's something probably reasonably unique to NAB."

The NAB is still working on delivering the real-time enterprise in response to changing customer expectations. Crouch acknowledges that continues to be a major technological and cultural challenge, and not just for his organisation. "I don't think we're unique in that one. Maybe we're a bit further down the track, and maybe we're a little better advantaged on that one.

"But [our CRM] is a real success story for the group, and for technology. I think for Australia it demonstrates that we can really have some of the leading thinking and we can then develop relationships where there are vendors that put us right at the leading edge," he says.