CRM Initiatives at 3M PDF

ITSY/010
IBS Center for Management Research
CRM/KM Initiatives at 3M
This case was written by A. Mukund, IBS Center for Management Research. It was compiled from published sources, and is
intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a
management situation.
 2002, IBS Center for Management Research. All rights reserved.
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License to use for IBS Campuses only. Sem IV, Class of 2015-17. Only for print, not for online circulation.
ITSY/010
“We’ll probably never complete the system, since new and improved technologies will always become
available. As long as customers have problems, we’ll be looking for better ways of solving them.”
- Paul Guanzini, New business development manager, corporate customer contact center,
3M, in 2000.
THE NEED FOR CHANGE

The story of US-based 3M (Minnesota Mining and Manufacturing Co.) goes back to 1902, when a
group of five businessmen set up a company for mining operations in Minnesota. Within a short
span of time, the founders started making abrasives, which became very popular among local
industrial consumers. As a result of its strong focus on research and development (R&D) and the
success of products such as Three-M-ite Abrasives Cloth, the Wetordry Waterproof Sandpaper and
the Scotch Tape, 3M’s sales crossed $ 1 million in 1917.
During the 1920s, the company expanded its facilities and sales network, while continuing to
launch innovative products. By the end of the 1930s, 3M had established a central research
laboratory to pursue research in technologies with long-term potential. This led to many
breakthroughs, such as the invention of reflective materials (used for improving highway signs and
markings). During the Second World War, 3M focused on finding more uses of its products for
industry. In 1946, 3M stock was listed on the New York Stock Exchange.
In the early 1950s, 3M started its International Division to expand its global operations. The
decade also saw the company getting involved in the health care business. The company gained
significant mileage from U.S. astronaut Neil Armstrong’s 1969 expedition to the moon, as his
space boots had soles made of synthetic material from 3M. By 1979, 3M’s sales crossed $ 5
billion. The company’s tryst with innovations continued with the launch of the worldwide best
selling product, Post-it Notes, in 1981.
Over the next two decades, 3M’s business grew manifold, and by the end of 2000, 3M had emerged as
a $ 17 billion company involved in a wide range of businesses (Refer Exhibit I for 3M’s financials). Its
business segments included electronics, telecommunications, industrial, consumer and office,
healthcare, transportation, graphics and safety (Refer Exhibit II for 3M products). The company
became well known for developing innovative products. To stimulate experimentation and innovation,
3M encouraged its personnel to spend up to 15% of their time (known as the ‘15% rule’) on projects
that interested them. Because 3M fostered a culture of innovation, it derived 30% of its sales each year
from products introduced during the previous four years. With operations in 63 countries, 3M offered
over 10,000 products in 200 countries around the world.
The company had always focused on offering its customers increasingly better services. In the
1990s, it began realigning itself into market-centered groups to focus on building customer loyalty
by providing superior quality, value and service. The company’s six independent call centers
manned by a dedicated team of agents for handling customer queries, were an integral part of this
initiative1 . Customers called in to ask questions about the products and services offered as well as
various other miscellaneous issues.
1
A call center refers to a facility handling large volumes of inbound and outbound telephone calls, manned
by ‘agents.’
As 3M launched increasingly sophisticated and complex products during the 1990s, the nature and
scope of customer queries also became diverse and more complex. As a result, call-center agents, who
typically handled around 1400 questions a day, found it difficult to answer these queries effectively.
The agents eventually began keeping technical bulletins, product brochures and notes containing
product information at the workstations. Paul Guanzili, new business development manager of 3M’s
corporate customer contact center, said, “It was very difficult for our people to be trained across all
those product lines and to be able to talk intelligently with knowledgeable users.”
The problems did not end at the agent’s desk. All the unsolved queries had to be transferred to
R&D experts within 3M. The company was shocked to note that as many as 18% of the calls were
being transferred in this manner. As a result, customers were forced to repeat their stories to each
agent and expert with whom they spoke. Complaints of incomplete information or unsatisfactory
answers started flowing in as certain queries were taking days to resolve. Once a query was
transferred to the R&D experts, the agents had no mechanism to know whether it had been solved
or not. As a result, they were referring queries of a similar nature repeatedly to the experts.
Because so many calls were transferred to R&D, experts spent a lot of time handling queries
instead of focusing on research and development. Since 3M could not afford to compromise on the
time spent on R&D, it decided to employ customer relationship management (CRM) and
knowledge management (KM) solutions (Refer Exhibit III) to deal with the situation.
THE IMPLEMENTATION & BENEFITS
The company identified the two main issues the new system had to address: reducing training time
and abandon rates2 and improving solution accuracy and problem resolution speed. The first step
towards the CRM/KM implementation at 3M was the creation of a 14-member task force for
exploring available technology options. The task force comprised 3M’s customer service
managers, call center agents, IT analysts and documentation developers. After evaluating various
software available, the task force decided to implement the ‘Remedy Action Request System
(RARS)’ developed by Remedy Corp.3 RARS was selected for two reasons: it could be easily
integrated with many leading knowledge management solution products, and it did not require
additional programming before implementation.
For knowledge management, 3M selected the Primus eCRM solution offered by Primus
Knowledge Solutions. 4 Primus eCRM was chosen because it was compatible with 3M’s existing
hardware and software infrastructure. Besides, it provided a flexible workflow that supported
individual approaches to problem solving. It also allowed immediate sharing of newly developed
solutions, thereby eliminating the need for a separate, offline knowledge engineering process.
Guanzini said, “We needed software that could be totally integrated into our workflow without a
tremendous amount of back-room management by knowledge engineers. It also had to be an
intelligent enough product to answer a question from a customer who didn’t know the exact words
to ask.” The solution consisted of a desktop client software5 Primus eServer and Primus eSupport.
2
Abandon rate refers to the number of calls unanswered as a percentage of total calls received.
3
Remedy Corp. is a US-based company offering eCRM and eBusiness infrastructure solutions. RARS
enables companies to replace their manual systems with workflow automation that speeds the handling of
unique processes and optimizes user productivity. The aim is to achieve higher employee effectiveness,
improve employee morale and reduce costs.
4
Primus is a US-based leading provider of knowledge solutions for corporates.
5
Clients are PCs or workstations on which users run applications under the client/server network
architecture. Each computer or process on the network is either a client or a server. Servers are powerful
computers dedicated to managing disk drives (file servers), printers (print servers) or network traffic
(network servers). Clients rely on servers for resources, such as files, devices and even processing power.
The Primus software used the Primus Associative Search Engine, which had powerful search,
retrieval, and authoring capabilities6.
In late 1997, 3M decided to test the efficacy of the system by implementing it in its internal IT
customer service center. The company wanted to establish the solution’s credibility before going in
for organization-wide deployment. The agents manning the center, which handled technical
queries from 3M employees, were able to resolve a higher percentage of calls at the first point of
contact itself, and call-transfers to experts were reduced significantly. Not only was there an
improvement in accuracy and consistency, the training time for new agents also declined.
The call center agents found the new system extremely efficient and simple to adapt. As soon as a
customer called, the agents checked the system to view information about the customer along with
basic data about the 3M products referred to by the caller. Once this information was displayed on
the monitor, details of the customer’s problem were fed into the system. The software gave a list of
probable solutions, which the agent could easily read to the customer. If the agent was unable to
answer the question, he had the option of pressing an onscreen button, which transferred all the
data entered so far into a database into the eCRM software, which used it as search criteria for
generating solutions.
The software gave customer service representatives access to critical information. The agents fed
into the system a series of statements describing the problem in the customer’s own words. The
search engine compared these statements with the existing problem descriptions and solutions in
each data source. Instead of keywords, agents could now use natural language statements to
describe a problem. This enabled them to take into account multiple factors while searching the
knowledge base for solutions.7 The system then gave the agents a weighted list of possible
solutions. One of the agents remarked, “It’s not a tree-based, hierarchical system. This is a
relational system that’s designed to bubble-up the most appropriate answers for the particular
description that’s fed into the system.”
In case customer queries could not be answered even at this stage and the agent had to refer it to an
expert, all the data entered during the initial call could be saved in the system. As a result, the
customer did not have to repeat his queries again to the expert, who went through the saved details
and synthesized the relevant information in the knowledge base into a new solution. The new
solution so generated was then made a part of the knowledge base. More importantly, every bit of
information generated by the system was stored for anytime access for the entire support staff of
the company.
Besides speeding up problem solving, this real-time knowledge sharing was very valuable for
support representatives in the field. Guanzini said, “Now we’re hiring a whole new type of call
center agent. We hire people who not only have a wonderful phone personality, but who can also
think on their feet, defend the company, negotiate, be fair, and think and type at the same time.
Many people can’t do that! Using Primus software has provided a new training opportunity, as
well as revised CSR job descriptions and reward systems.”
6
A search engine is a software program that searches documents for specified keywords and returns a list
of the documents where the keywords were found. Typically, a search engine works by sending out
commands to fetch as many documents as possible. Another program, called an indexer, then reads these
documents and creates an index based on the words contained in each document. Each search engine uses
a proprietary algorithm to create its indices such that, ideally, only meaningful results are returned for
each query.
7
An integral part of knowledge management systems, a knowledge base is a centralized repository of
information about a particular subject. It is a machine-readable resource for the dissemination of
information, generally online. It is used to optimize information collection, organization, and retrieval for
an organization, or for the general public.
In 1998, implementation of the system was begun at Expert Technical Support, 3M’s post-sales
customer support division. The division first tried out the technology in a project involving the
company’s commercial graphics unit. The project proceeded smoothly and the system was a
success. By April 1999, the system was implemented throughout the division. Within the next
year, implementation was completed at 25 of 3M’s 30 business units.
The new system brought many benefits to 3M. There was a 13% increase in the productivity of the
agents with improved solution accuracy and first call resolution increased from 84% to 95%.
Referrals to experts came down by 55%. The company was also able to reduce support training
time and costs by 35%. Employee satisfaction levels also went up significantly. An agent
remarked, “The information is literally at my fingertips. It makes me feel great to be able to give
people, on the spot, the information they need to know.” More importantly, 3M’s customers were
able to get precise and quick responses to their queries. As many as 95% of the customers said that
they were satisfied with the performance of 3M’s call centers.
The detailed reporting features offered by the system enabled 3M to monitor the quality of its
customer service efforts. Based on the monthly reports, 3M could find out how many and what
type of people called in, what products they had problems with, what the problems were and what
solutions were provided. These inputs were used by the R&D team to develop new products and
refine existing offerings.
EXTENDING THE BENEFITS
Enthused by the success of the CRM/KM solution, 3M decided to implement it throughout the
organization. The company’s human resources, purchasing and procurement departments were the
first ones to adopt the technology to help answer questions posed by employees and business
partners. The company made the knowledge base available for internal self-service through a
corporate intranet.8 Employees could log in to a site to search the 3M knowledge base for solutions
to their own technical problems. Over the next few years, 3M added many new capabilities to the
support system, e.g., allowing customers to question agents via e-mail.
To save time for consumers and agents, the company implemented a self-service extranet with an
online troubleshooting option that allowed customers to access the eCRM software through the
Internet9. This software allowed 3M to personalize the website for individual customers. In other
words, the website could be designed to focus on the products the customer used/mentioned. To
encourage self-servicing of information on the part of consumers, agents were being asked to help
them access information themselves online.
The company also wanted to increase the usage of the system by making it accessible to the
company’s distributor and reseller network. This was to be followed by providing access to field
sales representatives and repair technicians through handheld devices. According to analysts, what
was noteworthy about 3M’s CRM/KM initiatives was the continuous updation of the knowledge
base. Since the system was being accessed by customers directly, updation to keep the knowledge
base current was essential.
8
An intranet is a private network that is contained within an enterprise. It may consist of many interlinked
local area networks and also use leased lines in the Wide Area Network. Typically, an intranet includes
connections through one or more gateway computers to the outside Internet. The main purpose of an
intranet is to share company information and computing resources among employees. An intranet can
also be used to facilitate group work and teleconferencing.
9
An extranet is a private network that uses the Internet protocol and the public telecommunication system
to securely share part of a business’s information or operations with suppliers, vendors, partners,
customers, or other businesses. An extranet can be regarded as a part of a company’s intranet that is
extended to users outside the company.
QUESTIONS FOR DISCUSSION:
1. Why did 3M decide to implement the CRM/KM solution in its call-centers? How did the new
system help agents answer customer queries more effectively?
2. Analyze how 3M benefited from these CRM/KM initiatives. Also critically comment on its
decision to establish an extranet to allow customers to access information themselves.
Exhibit I
3M – Key Financials
Source: www.3m.com
Exhibit II
3M – Business Segments and Major Products
Source: www.3m.com
Exhibit III
About CRM & KM
CRM
Customer Relationship Management (CRM) deals with learning about the needs and behaviors of
customers in order to develop stronger relationships with them. It involves the use of technology
to enable organizations to continue attracting new and profitable customers while forming ever
tighter bonds with existing ones – and optimizing on these relationships over time. With CRM, it
becomes possible to launch mass-marketing activities on a one-to-one basis and treat each
customer as an individual. It involves the use of various tools, technologies and business
procedures to attract and retain customers, prospects and business partners. This includes Contact
Management, Sales Force Automation (SFA), Opportunity Management, Relationship
Management, Marketing Automation, Company Websites, Telesales and Telemarketing Systems.
Technologies such as eCRM, iCRM, and Enterprise Relationship Management (ERM) are also
tools of CRM. Essentially, any and all technologies, processes and procedures that facilitate or
support the sales and marketing functions can be associated with CRM.
CRM software is designed to help companies keep track of their customers and boost revenues
by increasing customer loyalty. Applications range from sales and field-service automation to
call center and customer-database management. More than its technological components, CRM
is a process that helps bring together various pieces of information about customers, sales,
marketing effectiveness and market trends. It helps companies provide better customer service,
make call centers more efficient, cross sell products more effectively, close deals faster,
simplify marketing and sales processes, find new customers and increase customer revenues.
Typically, CRM software collects the following information:
* Responses to campaigns * Shipping and fulfillment dates * Sales and purchase data * Account
information * Web registration data * Service and support records * Demographic data * Web
sales data
CRM not only aids in reducing overall business costs, it provides better customer services and
long-term customer loyalty. Some of its benefits include
 Gain a better understanding of customer needs and build individual customer solutions
 Establish a dialog with customers by using the Internet.
 Improve marketing efforts by using readily accessible customer information
 Link departments, giving them access to the same information (updated in real time).
KM
Knowledge is defined as the fact or condition of knowing something through experience or
association. It is a set of models describing various properties and behaviors within a domain. It can
be recorded in a person’s brain or stored in organizational processes, products, facilities, systems and
documents. In the global village, an entity’s knowledge base is quickly becoming its only
sustainable competitive advantage. This necessitates the protection, cultivation and limited sharing
of knowledge, broadly referred to as knowledge management (KM). KM is a process through which
organizations generate value from their intellectual and knowledge-based assets. It is often
facilitated by IT tools such as off-the-shelf e-mail packages and sophisticated collaboration tools.
These tools can be categorized into one or more of the following categories: knowledge repositories,
expertise access tools, e-learning applications, discussion and chat technologies, synchronous
interaction tools, and search and data mining tools.
Source: IBS Center for Management Research
Additional Readings & References:
1. What’s your problem? www.cio.com, September 1, 2000.

2. Millhouse Cassandra, Maintaining Momentum, www.cio.com, September 1, 2000.
3. www.primus.com
4. www.3m.com
5. www.webopedia.com

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ITSY/010

IBS Center for Management Research

 2002, IBS Center for Management Research. All rights reserved.

THE NEED FOR CHANGE

THE IMPLEMENTATION & BENEFITS

EXTENDING THE BENEFITS

QUESTIONS FOR DISCUSSION:

3M – Business Segments and Major Products

Additional Readings & References:

1. What’s your problem? www.cio.com, September 1, 2000.

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