The Case for an E-Commerce IT Org Change

As multi-channel retailers move more and more towards implementing cross-channel strategies, organizational structures need to change to support those new strategies. I am a huge proponent of breaking up most e-commerce silo  organizations and integrating online and in-store marketing and merchandising teams to ensure a common vision and voice across channels. For IT, though, I actually recommend the opposite approach. I believe technology  professionals who work full time (or near full-time) on the e-commerce site should report directly to the head of e-commerce.

While at a high level is seems like technology should have the same kind of continuity as marketing and merchandising, I believe a close look tells a different story.

Here’s why e-commerce IT is significantly different from traditional IT:

In e-commerce, the business is technology

Traditionally, IT creates tools that help employees be more productive and efficient. However, in e-commerce, IT is actually creating software designed to generate revenue. E-commerce “stores” are really self-service software  applications designed to help customers perform a service — in this case it’s to buy the products and services we sell.  Intuit has Quicken; Microsoft has Word and Excel; retailers have our e-commerce sites. We really need to think about  our sites more as software products and organize our teams in a product management type of structure.

Also, a particular pet peeve of mine is when IT folks refer to those in other functions of the company as “the business.”  Just that reference alone insinuates that IT is not a crucial part of the overall business and creates a separation that  frequently leaves IT coming across as second class citizens, which they are not. While I’ve never liked “the business”  reference in any circumstance, it’s doubly bad in e-commerce where success absolutely depends on technology team  members actively working as part of the business.

Self-service applications require a different mindset

Working on an e-commerce application that is designed to be used directly by customers requires a very different  mindset than what is typically required when working on applications that support employees. Even when the  underlying technology is similar, the mindset required is substantially different. New employee applications usually  come with training programs and manuals. Moreover, employees are ultimately forced to use the app; they get used to it and get incrementally better at using it over time through daily usage. Customers, however, don’t get the benefit of manuals and training programs. They’re on their own. And if the experience doesn’t satisfy them, they give up and the sale is lost.

Site functionality and customer experience are major components of the e-commerce business strategy

The website application is a key differentiator for the business, and customer experience is hugely driven by site functionality. While functions other than technology certainly contribute to an e-commerce site’s success or failure, there can be little doubt that the quality of the technology is a massive contributing factor.

E-commerce is 100% dependent on technology to be open for business.

While technology is critical in all areas of the business, most retailers have offline contingencies for stores so they can  continue to make sales even if the system is down. Websites obviously don’t have an offline mode.

Web businesses are still immature and need considerable agility and flexibility to mature as quickly as possible

For many absolutely legitimate reasons, most IT organizations at multi-channel retailers have significant (and some might say onerous) processes in place to manage technology requests and roadmap prioritization. Because requests for technology improvements come from all corners of the company, it’s important for CIOs to ensure they are spending their resources on work that is thoroughly vetted and likely to generate the highest return on investment for the company. But given the absolute dependence of the e-commerce business on technology, typical IT prioritization and allocation processes are too slow for e-commerce businesses that need to be able to adjust quickly to issues that arise with customer experience.

The e-commerce competitive marketplace innovates far quicker than the brick & mortar marketplace

The CEO of a pure-play e-commerce company is in basically the same role as the head of e-commerce at a multi-channel retailer. If for no other reason than there is no alternative, the CIO of a pure-play reports to the CEO. This reporting structure gives the pure-play leader a leg up in agility and the ability to react to customer needs. In a multi-channel retailer, the CIO must split time between many functions of the business, and I find e-commerce often gets time allocated in a ratio roughly equal to its financial contribution to the business. While such an allocation is understandable given everything on a busy CIO’s plate, I believe this lessened focus can lead to stunted growth and lost ground to competitors such as Amazon who are more devoted to improving their software application and increasing their customers’ satisfaction with their site customer experience.

I believe if a head of e-commerce is to be truly held accountable for the success of the site, he or she should have  appropriate authority over such a major contributor to the success of the site.

So why should the head of e-commerce have authority over e-commerce IT and not e-commerce marketing and merchandising?

To me, it’s all about what faces the customer and what doesn’t. A brand should be clear to its customers about who it is and what it stands for, so continuity in marketing and merchandising trumps silo control over those aspects of the business. Site functionality has no parallels in other parts of the organization. Since it is both unique and customer facing, I believe the head of the online channel should maintain the authority to develop and execute the technical strategy for his or her business unit when it directly affects the customer relationship.

I’ll add this final point: I’ve lived through many different org structures surrounding e-commerce IT, and the only times I’ve found the pros to outweigh the cons of an org structure have been when e-commerce IT was part of the e-commerce operation and reporting to the head of e-commerce.

What do you think? Am I completely misguided? What structures have you seen work and not work? What structure do you think is ideal?

Predicting the Future of Retail

The world is changing incredibly fast — maybe faster than ever — primarily due to rapid technology innovations. If our business models don’t keep pace, we’ll quickly be left behind. Since I believe that defending the status quo is what kills companies, thriving and surviving requires somewhat accurately predicting the future. So I thought I’d take a few moments to predict the three advances I think will most affect retail in the next 15 years.

I’ll start with an easy one:

1. Just about everyone will be connected at high speeds at all times

Heck, we’re almost there now. Technologies like WiMax and its successors will be incredibly prevalent in 2024. Furthermore, screen size will no longer be an issue. Innovative technologies like OLED will allow for large foldable and rollable screens that can be neatly tucked into devices the size of ballpoint pens. But it won’t just be mobile devices that are connected. Our cars, our clothes, our sunglasses, our appliances and just about everything else will be connected. Everyone will have exactly the information they need at any given time immediately accessible at any point in time.

2. Video communications advances will make today’s office spaces almost extinct

This one is where I’ve met with the most dissent when I’ve discussed it with people. I think we’ll all have wall-sized screens in our homes that allow us to have life-sized video conversations with people, and that technology will allow us to telecommute in massive numbers. So many people will telecommute that offices as we know them today will no longer make sense. Our co-workers will be spread throughout the globe, yet our communications with them will come close to the same quality we have today with someone in the same office.

The normal argument I hear against this prediction is that nothing can take the place of the types of in-person conversations we have today. That may be true, but maybe we don’t need that level of quality for the vast majority of our office conversations. We’ve proven over and over throughout the years that we’ll trade quality for convenience. In communications alone, we’ve traded phone conversations for what used to be in-person conversations. We’ve also more recently traded the higher sound quality and reliability of land line phones for the lesser sound quality and lesser reliability of mobile phones. Texting has replaced email for many, and even instant messaging has frequently substituted for in-person conversations. I’ve seen people IM each other even though they’re sitting in directly adjacent cubicles where they could have easily just spoken in normal voice.

I’ve used current versions of video conferencing that are pretty impressive. I once attended a meeting at Google’s Ann Arbor office where we met with people in Google’s Mountain View office via video conference. After a couple of minutes adjustment, I felt like we were in the same room. We were even drawing on the white boards for each other.

This particular technological advance will also be driven by environmental concerns and continuously rising prices of fuel. The “world is flat” phenomenon may also be a significant contributing factor as companies will be able to leverage their use of these technologies to hire the best talent available regardless of physical location.

3. Supply chain advances will make same-day delivery commonplace

One of the most often cited advantages of physical retail over e-commerce is the immediate gratification available at a local store. This advantage will not hold for long. I can just about guarantee someone at Amazon is currently trying to find a way to deliver most of their goods to almost anyone in the same day. They’re actually already doing it for some items in some cities today. And they’re not alone. The auto parts retailers have long been able to deliver parts to commercial garages within an hour. In fact, I can imagine the types of distribution networks built by auto parts stores becoming a model for many retailers. Supply chain professionals are some of the most amazing people I’ve ever met.
They are constantly finding new efficiencies in their processes, and I have no doubt they will be able to solve the issues associated with same day delivery.

Do these predictions sound crazy?

If so, think back 15 years to 1994. Hardly anyone had mobile phones or emails. Amazon didn’t exist, nor for all practical purposes did e-commerce. Those of us who connected to the internet did so on dial-up modems at 56k speeds. We’ve come a long way in the last 15 years, and I don’t see any sign of us slowing down for the future.

So, what does this mean for retail?

Many of today’s current physical store advantages are going to be neutralized, so multi-channel retailers are going to have to significantly change their business models. Furthermore, the commonplace usage of video conferencing will likely cause population shifts and cause the need to shift real estate strategies. I can see some people migrating towards urban environments to satisfy their needs for more personal interaction in their social lives, and I can see others going the opposite direction and moving to rural environments to satisfy their needs for more solitude and outdoor living. Suburbs as we know them today will have less appeal and may see significant population decreases.

As I think is already the case today, the retailers who create the best customer experiences across all channels are best positioned to thrive in the future. As retail becomes increasingly self-service via customers’ constant connections to retailers and to each other and to general information everywhere, it’s going to be the retailers who get customers the right information in the right way at the right time and with the best overall customer experience who will garner the most loyalty among customers.

Retailers with physical stores may consider leveraging those physical stores as distribution warehouses while maintaining selling spaces that are in many ways showrooms. Retailers will need to consider whether or not distribution and delivery should be outsourced or become core capabilities. Will sales associates and delivery drivers become one in the same? Will sales assistance occur both via video conferencing and via direct discussion on a customer’s doorstep? Is that crazy from a customer’s perspective or incredibly convenient?

I believe the retailers who best leverage their cross-channel capabilities today will be best positioned for this brave new world. And those who attempt to protect the status quo will face pressures from all fronts.

There are lots of other things that could happen in the next 15 years that are potentially even more radical than anything I’ve predicted here. But one thing’s for sure: there can be no doubt the retail landscape 15 years from now will be very different from what we see today.

What do you think of my predictions? Even more importantly, what are your predictions? How do you think retailers should react?

The Tree Stump Theory

Since I mentioned it in my eTail presentation last week, I’ve received a number of requests to expound on my Tree Stump Theory in this space. So, here goes:

As truly amazing as the human brain is, it’s not able to re-process everything we see anew every time we see it. So, our brains take some shortcuts by basically ignoring things we are very familiar with, and that can cause us trouble any time we have interactions with people who don’t have the same level of familiarity with something as we do. I usually talk about this in reference to website usability, but it actually applies to many areas of our lives. To illustrate the concept, I have my Tree Stump Theory…

Imagine if someone brought a big tree stump into one of your conference rooms. The first time you saw it, you would say something like “Hey, what’s with the tree stump?” Someone would give you a compelling reason why it was there, and you would go on with the meeting. The next time you entered the conference room, you would notice the tree stump but not ask about it. After while, someone might throw a tablecloth on it or dress it up in some manner, but it would still be there. You would no longer ask about it or think about it. Frankly, you wouldn’t even really see it. You’d just arrange yourselves at the table in a way that worked around the tree stump and go on with your meeting. Meanwhile, anyone new coming into the room can’t help but see the tree stump and find it to be an obstacle.

We all have these types of “tree stumps” on our sites and in our lives. I bet you could think of something like this in your house right now. They manifest themselves as obstacles to good web usability, but they’re also our biases, our stereotypes and any other set of assumptions we rely on, usually unconsciously, to drive our daily actions and decisions. Sometimes they’re relatively harmless, but more often than not tree stumps prevent people from buying on our sites, or they are the unspoken roots of disagreements and miscommunications in our daily interactions both at work and at home.

So how do we get rid of our tree stumps?

1. The first step is to recognize the fact that tree stumps are everywhere, even when we can’t see them.

If you’ve read this far, you’ve probably made it to step one.

2. Next, get some help finding them

The very nature of tree stumps makes them difficult to self-identify. If you’re dealing with web usability, try the steps prescribed in this post. If you’re concerned about tree stumps in strategies, policies or general decisions, seek some input from someone who is outside the general team and who has a different background from you and your key decision makers. Ask them to openly question everything.

3. Specifically call out assumptions, preferably in writing

Assumptions are the roots of tree stumps. We make assumptions so often that we don’t always realize we’re making them. Listen for statements or reasons that hint of tree stumps. The most obvious is “That’s the way we’ve always done it.” If you hear that one, sound the sirens. But there are other, less obvious comments like “People want…” or “Based on my experience…” or “In a previous life we…” Don’t get me wrong, some of these statements could be perfectly accurate and valid. But whenever someone is applying past experience to a currently situation, he or she is assuming the two situations are similar enough to warrant the comparison. That’s potentially an assumption fraught with problems because the number of potentially important variables in any situation is massive. Writing down those assumptions and then testing them on the current situation often brings bad assumptions to light.

Also, on the web usability side, remember that while your internal reason for a tree stump may seem extremely valid to everyone in the company, your customers don’t know those reasons and even if they did, they probably don’t care. Common explanations that won’t hold water with customers include:”I’m not in charge of that area;” “It doesn’t matter because people don’t use that anyway;” or the time-honored classic, “That’s due to the limitations of our platform.”

4. Schedule regular reviews of your own assumptions

This one in some ways is a repeat of #3, but the point here is to specifically and methodically question yourself. This is really hard to do, of course, but it has a tremendous amount of value. One technique I’ve used in various situations is to write down my first impressions of important situations so that I can regularly review them in the future after I’ve learned more. I recently talked with Shop.org about this technique in reference to starting a new job. Beyond that technique, it just takes practice and discipline to think about your own biases and assumptions to see if they still apply.

I also find it helpful to constantly look for new ideas. I read lots of business and science books. I don’t always agree with everything I read, but new ideas cause me to question my own ideas. I also enjoying reading thought-provoking blogs, some of which are listed to the right, and I follow interesting people on Twitter. More than anything, though, I love to spend time talking to people who think differently than I do and are willing to share their perspectives. (And I hope you’ll share your comments on this post and others.)

Tree stumps are everywhere. We’ve all got them. And as soon as we remove some, more will crop up. It takes a concerted effort and a solid process to regularly look for and remove the tree stumps in our lives and our businesses. But I’ll argue that those of us who are aware of our tree stumps are on a much faster path to improvement than those who go on ignoring them.

What do you think? What types of tree stumps have you run into? How do you go about removing them?


Twitter: A model for a people focused business strategy?

I am truly impressed with the way Twitter combines a very rigid constraint with an incredible amount of openness to create a hugely flexible service that gets better and better through the combined effort of many creative and devoted users and developers. (To be clear, I’m talking about Twitter the application/service as opposed to Twitter the company.) I wonder if such a nicely blended mix of rigidness and openness is just the right recipe for developing the type of business strategies that best leverage the power of people in an organization.

Twitter’s one rigid constraint, of course, is the 140 character limit for any one tweet. It’s an incredibly strict and inflexible constraint, but it’s well-defined, easily enforced and easy to remember. Beyond that single constraint, though, Twitter the company is extremely open about letting users and developers work within that constraint to improve the service. And improve it they have. Here’s a quote from co-founder Biz Stone’s recent blog post:

“Twitter began as a rudimentary social tool based on the concept of status messages but together with those who use it every day, the service has taught us what it wants to be. From features invented by users to applications built on the platform, we’re still discovering potential. Twitter has moved from simple social networking into a new kind of communication and a valuable source of timely information. Also, it’s fun.”

Developers have used Twitter’s APIs to create excellent applications like Tweetdeck or capabilities that have transformed the service like Summize, which created an ability to search through all tweets. (Twitter ultimately purchased Summize and created Twitter Search.)

Users also developed great innovations. The ability to search inspired someone to start including hashtags in messages to make it easier to find conversations of interest, and apps like Tweetdeck created columns devoted to search terms to make it just as easy to follow topics as it is to follow people.

And that 140 character limit? TinyURL, which to be fair was already in existence, exploded when people began to realize it could help them post URLs within the confines of the Twitter character limit.

So what does all this have to do with developing business strategies?

Over the years, I’ve seen and written all kinds of business strategies of varying levels of detail and sophistication. I’ve come to realize, though, that the most effective and executable strategies are those that have the following qualities:

1. They are easy-to-understand, support and communicate
Twitter nails this one with the simple idea that the service be used to communicate short bits of info to followers. Business strategies should do this with a clear and simple statement of purpose. This statement could be called a mission or vision statement or something else altogether, but the key is that it be clear, simple and easy to remember. Clear objectives for the strategy should also be stated, so that those who execute the strategy know what they’re working towards. For example, objectives could be increase conversion, increase market share and maximize profitability. I’ve found that three clear objectives are about as much as anyone can reasonably remember.

2. Have clear boundaries
Twitter’s 140 character limit is a very clear boundary. Business strategies can create these boundaries with clear constraints. I believe it’s OK, and sometimes even desirable, for objectives to contradict each other to some degree as a form of balance. Without the “maximize profitability” objective mentioned above serving as a constraint, we could easily spend our way to increased conversion and increased market share, but that spending could be very unhealthy for the business. Conversely, by stating that we want to maximize profitability, we are also opening the door to making all investments necessary to gain the most possible profit with our various tactics.

3.    Allow for flexibility and creativity by those executing the strategy

Twitter opened up their service via APIs and allowed anyone to improve upon the service. Businesses can do something similar by doing what I call “matching the A’s,” which are Accountability and Authority. By clearly defining accountabilities for each member of the team, and at the same time assigning matching authority, businesses can truly unleash the creativity and power of the organization to maximize the objectives. Giving members of the team closest to the actual work the authority and accountability to perform as they see best can produce excellent results. While this is easy to say, it’s difficult to do. A lot of forethought needs to be applied to ensure accountabilities are well-defined, and a conflict resolution system needs to be defined to deal with the inevitable clashes that will occur when teams with dependencies have different priorities. I’ve seen great strategies fail because effort wasn’t put into carefully defining and matching authority and accountability, so I strongly believe serious effort is required here.

So is it as easy as 1…2…3? Definitely not. Designing “simple” strategies requires an incredible amount of effort and thought, but the effort is worth it if the end result is a highly functioning, effectively executing organization. Twitter is proof-positive that a well-designed structure can enable the power of the people to elevate good ideas to incredible results.

What do you think? What types of strategies have you seen work? Do you agree that Twitter represents a good model for people-powered strategies, or do you think strategies can and should be more complex?



Retail: Shaken Not Stirred by Kevin Ertell


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