Enterprise relationship management
Enterprise relationship management or ERM is a business method in relationship management beyond customer relationship management.
Overview
is not an entirely new concept. In fact, it has taken on many forms that address specific organizational constituencies. The most obvious form is CRM, which focuses on improving top-line growth by maximizing an organization's ability to identify sales and business opportunities with its customers. CRM's little brother PRM, focuses on optimizing opportunity and downstream order management for an organization's channel partners On the back end, we have ERP to manage internal operations including manufacturing, finance, HR, sales and distribution, etc. Specialized HRM solutions exist to manage employee benefits, collective agreements, performance reviews and so forth. And lastly, SCM to manage the product flow, up and down a firm's value chain, with external partners/suppliers.However, according to Galbreath, "for the most part CRM, human resources management, enterprise resource planning, supply chain management, partner relationship management and similar programs have paid very little attention to the relationships that underpin those processes, or to the intangible – relationship – assets embedded in them."
Norman and Ramirez state, "One of the chief strategic challenges of the new economy is to integrate knowledge and relationships – devise a good fit between competencies and customers and keep that fit current." Galbraeth adds that "success in the relationship age requires a deliberate process of creating intangible, relationship assets, growing them and monetizing them".
Galbreath suggests that enterprise relationship management is a process that harmonizes and synergizes different organizational relationships to realize targeted business benefits and goal. Harbison et al. did some research on the performance of alliances and cited the following statistics in their study:
- "Strategic alliances have consistently produced a return on investment of nearly 17 percent among the top 2,000 companies in the world for nearly a decade. This return is 50 percent more than the average return on investment that the companies produced overall." Harbison et al.
- "The 25 companies most active in alliances achieved a 17.2 percent return on equity - 40 percent more than the average return on equity of the Fortune 500." - Harbison et al.
- "The 25 companies least active in alliances lagged the Fortune 500, with an average return on equity of only 10.1 percent." - Harbison et al.
- "Successful alliances recognize 20 percent profitability improvements as compared to only 11 percent for the less successful companies." - Harbison et al.
- "Revenue generation from highly successful alliances equates to 21 percent of overall firm sales as compared to 14 percent for less successful alliances." - Harbison et al.
- Inventory levels reduced by as much as 50 percent.
- Inventory turns doubled.
- Stock outs reduced ninefold.
- On-time deliveries increased by as much as 40 percent.
- Cycle times decreased by as much as 27 percent overall.
- Supply chain costs reduced by as much as 20 percent.
- Revenues increased by as much as 17 percent.
Tools and methodologies
ERM frameworks are needed because relationships are becoming prevalent and more integral to an organization's success. Although establishing inter-enterprise links is far from a new science, Klambach and Roussel affirm that nearly 60% of business alliances do not deliver anticipated benefits while Lovallo & Kahneman and Selden & Colvin estimate M&A failures range between 70% and 80%.With statistics like these, the need to improve relationship success rates seems quite obvious. Many authors have addressed these issues from varying perspectives, including technology enabling a firm, reviewing or re-designing operational & administrative processes, and transforming the culture to one that is more adapted to collaboration. As Galbreath and Norman & Ramirez state, collaboration or rather the effective leveraging of relationship resources to create new sources of value, is a process of learning and developing new mental models and competencies as well as obtaining resources through new means/sources.
ERM is still a relatively new field and few players stand-out with a complete ERM methodology and tools. Nevertheless, a host of best of breed tools and methodologies exist to carry out an ERM implementation, unfortunately they are not integrated and focus on very specialized problem areas. ERM tools can be viewed as enablers of an ERM methodology.
Fundamentally adopting ERM is a cultural and change management issue more than a technology or process one. Therefore, regardless of the methodology or tools that one may elect to use when integrating with outside firms, they must maintain a focus on the human side of the equations. The figure below illustrates the benefits of focusing on the human, cultural and change aspect of a project, notably deploying ERM in this case.
Practical methodologies and frameworks
RIIM and PowerScope
RIIM is a registered method of Perfluence. It is a systemic approach based on the assumption that each relationship can be seen as a linear combination of five different kind of common relationships. This method can be used "stand alone" or within the SaaS software PowerScope that carries each concept developed in the RiiM method. It enables an accurate and detailed vision of influence maps or relationship matrices, especially with graphic visualizations.Velox framework
Velox ERM is a product of Technology Partnerz. It integrates ONA - organizational network analysis, process re-design, IS/IT strategy, change management, supplier relationship management, customer relationship management, and risk and business continuity management into a comprehensive and simple framework that supports people and organizations in repeatably/consistently:- Mapping and understanding collaborative processes and networks within and across organizational boundaries
- Benchmarking collaborative capability
- Identifying and selecting the best partners and collaborators to minimize risk and improve agility of the business network
- Understanding and deploying collaborative best practices
- Aligning and leveraging new and existing business relationships to business objectives
- Accelerating/Facilitating the adoption of business change related to processes, policies, systems and culture changes.
- Accelerating decision making resulting in improved corporate responsiveness to changing market conditions
VNA - Value network analysis
Primary sources
- Inmon, W. H., et al.. Data Warehousing for E-business. John Wiley & Sons, New York, NY
- Kalmbach, Charles, Jr., and Charles Roussel. "Outlook by Issue: 1999, Special Edition: Dispelling the Myths of Alliances". Accenture.com
- Normann, Richard, and Rafael Ramirez. "From Value Chain, to Value Constellation: Designing Interactive Strategy". Harvard Business Review on Managing the Value Chain. Harvard Business School Press, 2000, 185–220.
- Torkia, Eric. "Velox ERM: Building an Enterprise Relationship Management Framework". Montreal: UQAM.
- Harbison, J.R., Pekar, P.jr., Viscio, A. and Moloney, D. The Allianced Enterprise: Breakout Strategy for the New Millennium, BoozAllen & Hamilton.
- Gretchen Teagarden, Solomon Smith Barney, 2000
Footnotes
ERM and "Relationship Age" white papers
- at Orgnet.com
- at boonea.com