As visiting Professor at Cranfield School of Management, my research discovered ample evidence of both the risks of doing CRM badly, and payback from doing it well. Published studies of CRM implementations indicate 70% have no identifiable benefits, and over 50% of CRM managers would like to change the system they chose. For the lucky few, success has high rewards - 50% profit increases have been reported from 5% customer retention gains.

Software firms such as Siebel, SAP and Oracle are riding high on the CRM bandwagon. With software costing over £5,000 per user, plus implementation consultancy costing even more, software moguls are getting rich quickly. Yet for the unlucky majority of users that do not reap the benefits of CRM, this cost of failure is unacceptable.

A Swiss private banker confided to me that his firm has just lost 250 million Swiss franks on a CRM system that has failed to yield the promised benefits. Their CRM Strategy and the Benefits Assessment were the work of consultants from a Big Four firm. Today the bank is seeking compensation from its consultants through the Courts.

Consulting firms have profited even more than software firms from the CRM bandwagon. For example, Accenture boasts over 3,000 consultants helping implement Siebel, SAP and Oracle CRM. Consultants who implement CRM software also offer advice on Return on Investment, if you can trust their objectivity.

My recommendation is hire different consultants from the system implementers to advise on Return On Investment. I have been obliged to review several reports by consulting titans about CRM Return on Investment. My conclusion is that implementation-consulting firms generally lack the objectivity, or necessary expertise, to provide sound ROI analysis.

So what is the general solution? The short answer is that Profit Improvement and Risk Control techniques should be applied to CRM investments. They should be applied by objective third parties, as an independent control. Management must not be blinded by the claims of the implementation team, for costly CRM failure could be just around the corner.

As an advisor to Boards of organisations like IBM, Direct Line and Manchester United, I have developed a tried and tested approach to delivering the rewards and managing the risks of CRM. This can be used as management framework for new CRM projects, and turning round problematic CRM implementations.

I recommend that senior management establish a Profit Improvement and Risk Control framework for its CRM implementation. It will ensure that profit improvements are evaluated and delivered, while risks are tracked and controlled.

What this provides is a Profit Improvement and Risk Assessment report, evaluating how much profit improvement will be driven by CRM, and recommending actions for risk control and mitigation. This provides a framework for new CRM implementations to guide profit delivery, and for existing CRM management to improve their effectiveness and profitability.

Setting the right expectations among senior management is imperative. Many senior managers treat CRM as if it means Cost Reduction Mechanism. They starve CRM of resources and cut costs to the bone. For example, call centres generally give miserable service because they are short of resources, running as cost centres rather than profit centres.

Putting this into practice involves facilitating workshops with the CRM team, plus research and modelling. Senior levels of management participation are vitally important, in view of the large commercial risks and rewards.

Getting started involves identifying fail points in existing customer-related business processes. Three techniques help. Facilitated workshops help managers to share their knowledge and experience of customer-related issues. Interviews with a sample of customers provide another perspective. Analysis of customer-related costs (for example the cost of the customer interface, comparing cost and usage of different channels) provides the third perspective.

Revenue volatility is studied. Sources of revenue volatility are evaluated, such as reduction in consumption, competitive losses, cannibalisation and substitution. Changes in customer attitudes are the usual drivers of revenue volatility, and these must be carefully examined. Customer research may be needed to develop a clear explanation of revenue volatility.

The business's growth plans are reviewed, particularly for changes in product range and market coverage. Growth requires customer interaction, and will be hindered by any fail points identified in the first step. An assessment of growth-value at risk is made.

Profit Improvement opportunities are identified and evaluated. Workshops help managers develop a Profit Improvement plan. Typically Profit Improvements come from two areas - growth-value at risk and revenue volatility - and both areas of improvement need to be covered. After the workshops, spreadsheet models are prepared to provide quantitative estimates of the Profit Improvements.

Risk assessment comes next. This focuses on the Profit Improvement plan and examines areas where it is most likely to fail. Use techniques such as brainstorming, fishbone diagrams, and why-why analysis. Write down everything and create lists of risks that are becoming apparent.

Risks broadly fall into two groups - commercial risks and contract risks. Commercial risks concern potential shortcomings in your Profit Improvement plans. Examples include underestimating resources and costs, overestimating cross-selling and customer retention. Take a close look at them to see whether you can reduce the probability or impact or both. If that proves impossible, make sure that plans are in place to monitor and control the commercial risks.

Contract risks involve agreements with CRM suppliers. Risks can be mitigated by strengthening contracts in areas such as performance guarantees, subcontracting, exclusivity, transition plans, operational plans, resource guarantees, and exit strategies. Outsourcing the CRM process, and employing CRM interim managers are two other ways of mitigating risk.

All of us manage risk every day of our lives. We also experience customer relationships ourselves, and have strong opinions on what customers value. We like to see ourselves as "naturals" where CRM and risk control are concerned. So why do many CRM project fail? Is it largely because our intuitive approach is not as good as a well-structured, properly researched framework.

If in doubt, seek objective expert guidance. Don't expect this to come from the technologists, or even some large implementation-consulting firms. Our Cranfield research has yielded a wealth of knowledge about CRM, delivering the rewards and controlling the risks.

This is too large and complex subject to be covered in this short article. Readers wanting to know more can contact me. I am happy to share knowledge and provide expert guidance, and can be contacted by email at shaw@mbpi.biz or telephone +44 (0)208 995 0008.