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?