Strong relationship marketing capabilities have been recognized as important differentiators by marketing strategy scholars. Yet assessments from industry and academia agree customer relationship management (CRM) initiatives still have high failure rates. Behavioral research using the resource-based theory (RBT) has examined marketing capabilities from many perspectives, but the role of specialized teams in executing CRM strategies remains unstudied. We explore the role disciplined execution in CRM teams by isolating the effect of different levels of discipline in the execution of new strategies by multi- CRM teams. We provide a detailed definition and construct for measuring disciplined execution as well as research propositions concerning its impact on firm performance. We then test these propositions using a unique dataset and a quasi-experimental approach in collaboration with two leading financial services firms. Our analysis quantifies the impact of disciplined execution on recurring revenue – a focused measure of CRM performance. This research was particularly useful to the practitioner partners that have experienced low success rates for collaborative sales and marketing initiatives like CRM and continue to struggle to understand why efforts falls short of expectations.
This study is the result of a collaborative effort between the authors and two large financial services firms searching for answers to an expensive and persistent problem in practice (Foss et al. 2008). The direct experiences of the firms involved in this research, industry studies and scholarly research
concerning customer relationship management (CRM) all agree that initial CRM implementation efforts often fall significantly short of expectations. Foss et al. (2008, p. 68) state, “Despite the enormous growth in the acquisition of CRM systems in the last ten years and widely accepted conceptual underpinnings of a CRM strategy, critics point to the high failure rate of CRM implementations as evidenced by
resulted in either losses or no bottom-line improvement in performance.” A compilation of published industry reports provides a similar view of the effectiveness of CRM efforts in practice (Foss et al. 2008).
Table 1: Industry research on CRM implementation failure rates
Year Industry Research Source Failure rate (%)
2001 Gartner Group 50.0%
2002 Selling Power – Chief Sales Officer Forum 69.3
2006 AMR Research 31.0
2007 Economist Intelligence Unit 56.0
2009 Forrester Research 47.0
Mean Median
50.7% 50.0%
We hypothesize and show that the ability to produce results in multi-disciplinary initiatives like CRM implementations is tied closely to the level of discipline applied to combining sales and marketing efforts to execute new strategies. We adopt a resourced-based view of marketing and sales capability
development to define disciplined execution and provide a framework for measuring it and applying it to subsequent CRM efforts (Kozlenkova et al. 2014).
The resource-based theory of the firm (RBT) has been an important foundation of marketing
scholarship for more than 30 years (Barney 1991; Barney et al. 2011; Slotegraaf et al. 2003; Vorhies and Morgan 2005; Wernerfelt 1984). Yet despite the extensive use of RBT in marketing, Kozlenkova et al. (2014) argue the process by which marketing resources are built, fine-tuned and sustained over time remains largely unexplored and empirical research tends to focus only on the “valuable” (V) dimension of the four criteria for sustainable advantage (i.e. valuable, rare, imperfectly imitable and organizationally exploitable or VRIO). This perspective reinforces the argument that RBT characterizes resources and capabilities as conferring advantage in a fixed manner (Barney and Clark 2007). They go on to point out
that even so-called dynamic capabilities are characterized as static in this sense. We endeavor to define the concept of disciplined execution of multi-disciplinary strategies and show the influence of disciplined execution in delivering a sustainable advantage through a more effective combining of marketing and sales talent and resources. The mechanisms by which organizations develop advantage through operating discipline are often social and tacit in nature and embedded in the cultural fabric of the firm (March and Simon 1958; Weick 1979). These mechanisms that create and reinforce discipline are also dependent upon the network of strong and weak ties within the firm, which are difficult for competitors to observe, characterize and imitate (Granovetter 1985; Granovetter 1973). Consequently, exploring the role of disciplined execution provides needed insight into the potential sources of sustainable advantage
conferred by the imperfect imitability (I) and organizational (O) dimensions of marketing resources in the VRIO framework. We use a quasi-experiment to quantify the magnitude of impact attributable to disciplined execution and thus separate the contribution made by deciding to enact a strategy from that of the level of discipline in its implementation. By demonstrating firm-level variability in discipline and the attendant impact on relationship marketing results, we shed light on an important source of competitive marketing dynamics within a mature industry – the financial advisory industry. The two-part experimental approach first compares financial advisory firms that have elected to adopt new relationship marketing and sales strategies to a control group that made no changes to strategy to discern the effect of new strategy enactment in the context. We then apply a measure of disciplined execution to the treatment group to discern the effects of different levels of execution discipline on results they experience from applying new relationship marketing strategies. We use the change in annual recurring revenue over the treatment period reported in the accounting records of the focal firms as the dependent variable since this is a direct measure of the effectiveness of the relationship marketing and sales process. Recurring revenue only includes regular fee income from long-term customer relationships and excludes transaction-based revenue, like sales commissions or other one-time payments to the firm. The two-part analysis first shows that when new sales and marketing strategies are introduced through a focused effort of training and coaching called “practice management,” financial advisory firms demonstrated an improvement in
recurring revenue compared firms in a control group. In the second part of the experiment, we show that a change from an average level of discipline in execution of new marketing and sales strategies to a high level of discipline produces a large incremental increase in recurring revenue. This suggests that much of the benefit of introducing such strategies depends on the level of discipline in these multi-disciplinary teams. The magnitude of the contribution from disciplined execution persuaded the corporate participants in the research to alter their practice management curriculum to emphasis the five drivers of disciplined execution identified in the study.
Our research contributes to practice in two ways. We identify and provide proof-points for the behaviors that lead to disciplined execution in multi-disciplinary sales and marketing teams. The five cognitive and behavioral dimensions of disciplined execution have been incorporated in the practice management training programs of two major financial services firms supporting more than 45,000 financial advisory practices in the U.S. Second, we demonstrate the magnitude of influence that
disciplined execution within multi-disciplinary teams has on relationship marketing implementation. This insight provides direction concerning how to reconfigure the deployment of training and other resources in the implementation of new CRM programs. Both corporate partners in the study noted that their future initiatives supporting relationship marketing will allocate far more time, effort and other resources to testing, training and communicating based on the needs of multi-disciplinary sales and marketing teams.
We contribute to scholarship in three ways. First, we provide a definition and measurement of disciplined execution of marketing and sales strategies by enumerating the behavioral foundations of multi-disciplinary sales and marketing execution. Second, we use a unique dataset and a quasi-
experimental design to model the impact of disciplined execution on a direct measure of the success of relationship sales and marketing efforts – recurring (or fee-based) revenue for financial advisory firms. By measuring the influence of disciplined execution, we disentangle the level of discipline in execution from the impact of simply electing to execute a strategy. This adds a critical element to our understanding of the mechanisms through which firms build and sustain marketing capabilities by quantifying the effects
of different aspects of efforts to improve marketing and sales capabilities. Finally, we use our initial insights into the role of disciplined execution to propose additional research to explore the micro- foundations and mechanisms responsible for the development of marketing and sales resources in the firm. The next sections develop a theoretical framework and research propositions, describe the context for the study, methodology and results, and finally discuss the contributions to practice and scholarship as well as suggestions for future studies.