Business managers worldwide believe that their company's number one business issue is customer relationships. They value innovations that support improvements in customer experience, and they paint a picture of corporate cultures that prioritize customers.

So why is it their actions don't always support this belief? Despite the good intentions, companies often fail to back their beliefs in enhancing customer relationships with investments in IT and human capital initiatives. Many focus instead on operational improvements that provide a clearer impact on the bottom line.

Microsoft believes there is a gap between what business managers say about enhancing customer relationships and what they actually do to support programs for improvement. This is one of the major findings of a recent Web survey and a separate phone survey commissioned by Microsoft and conducted by Forrester Consulting. Business managers in the U.S., Europe, and Asia and senior IT decision-makers in the U.S. and Canada ranked customer relationships as the top area of strategic importance for their organizations (see "Respondents' Top Concern Is Customer Relationships"). This trend holds true for business decision-makers across the United States, Europe, and Asia, but is particularly prevalent in the United States, according to a Microsoft analysis of the Forrester information.

Improving customer relationships also came in first among the values and initiatives held by business managers. Three-quarters of those surveyed (75 percent) said they agree or strongly agree that their organizations highly value innovations that positively affect customer experience. Nearly three-quarters (73 percent) said that all their employees take great pride in the service they provide to customers. And more than two-thirds (70 percent) said they measure themselves against specific customer service metrics on an ongoing basis.

Only 15 percent said their organization outsources customer-facing business processes like service and support. According to a Microsoft interpretation of the Forrester results, this indicates that most organizations consider customer relationships to be strategic.

The biggest area of weakness with regard to customer initiatives, based on the Microsoft analysis of the Forrester data, is in not having a single organization responsible for all aspects of a customer relationship. The next biggest area of weakness is a lack of formal programs to build customer loyalty.

The survey shows a big regional variation in values and initiatives in this area. In terms of having one department to champion both customer relationship and customer loyalty programs, an analysis of the data by Microsoft concludes that Asia is ahead of the U.S. and Europe on both counts.

One would think that IT spending and human capital investments would map to the strategic focus on customer relationships in companies worldwide. But Microsoft believes that the survey shows this is not the case, revealing instead that IT and human capital investments in 2006 did not match up squarely with business priorities.

While 55 percent of respondents said that the top business issue for their organization was customer relationships, only 32 percent selected customer relationships as the top priority for IT spending. Similarly, only 35 percent selected it as the top priority for human capital investments.

At first glance this seems surprising, but the findings correlate with those of a separate Forrester survey of 74 customer experience executives that indicates many companies are not disciplined in their approach to customer experience management. Few corporation-wide programs exist, and sparse leadership and limited measurements are common (February 6, 2007, Forrester report "Obstacles to Customer Experience Success").

From the Microsoft-commissioned study of business managers, the mean ranking of customer relationships in 2006, with regard to both IT spending and human capital investments, is highest in the U.S. and lowest in Asia. For Microsoft this finding was unexpected, given that the percentage of respondents who say their organizations invest in advanced technologies to support customer relationships is higher in Asia than in the U.S. and Europe.

The outlook is similar for 2007. Based on Forrester's phone interviews, almost a third of senior IT leaders (29 percent) ranked customer relationships the number one business focus according to their organization's IT spending for 2006. Another 35 percent ranked customer relationships second. A slightly larger percentage (31 percent) selected customer service as the number one business focus according to their organization's planned IT spending for 2007, and a slightly smaller percentage (33 percent) ranked it number two.

Digging deeper into the IT investment data backs up the Microsoft assertion that a disconnect exists between what business managers believe is most important and how organizations are investing in IT and human capital. Of those respondents selecting customer relationships as the number one priority for the organization:

• Only 51 percent say their organization has implemented CRM software.
• Only 41 percent have implemented a basic customer tracking system.
• Only 38 percent have implemented a knowledge base.

Even fewer have implemented more advanced technologies. For example, only 21 percent have implemented automated, skills-based routing (a request coming in and going to an area specialist in their field), and only 21 percent have implemented agent collaboration (more than one person being able to work on a customer issue using chat or another mechanism).

In the Microsoft view, the main reasons for lack of IT investment in support of customer relationships are:

1. Lack of discipline. Many organizations don't have corporation-wide programs, leadership, metrics in place, or even a clear customer experience strategy. Instead, they have siloed customer experiences, industry tunnel vision, and inward-focused product development.
   
   
2. Path of least resistance. Most project teams find it easier to build a business case for technology and human capital investments that result in operational efficiency than to justify improvements in customer relationships. It is easier to calculate the ROI of shortened cycle times or reallocated headcount, for example, than it is to quantify an increase in customer satisfaction or customer retention.
   
   
3. Shades of CRM. Many business and IT executives do not feel that the business benefits achieved with CRM investments meet their expectations, or that they are able to quickly realize value from the applications.

From the survey and analysis, Microsoft concludes that:

• Respondents' top strategic concern is customer relationships, followed by operational excellence.
• Technology spending and human capital investments in 2006 were not aligned with the most business-critical issue: customer relationships.
• Customer relationships ranks higher on the priority list in the U.S. than it does in Europe or Asia.
• Risk-averse, tactical innovation initiatives that focus on explicit customer needs and cost efficiencies often do so at the expense of long-term programs to improve customer relationships.
• Customer interactions are valued as crown jewels (and therefore outsourced less commonly than one might think).
• Organizations that rank customer relationships as the number one priority have made limited technology investment in this area.

See additional survey data and a detailed Forrester analysis (PDF file, 294 KB).