A Common Sense Approach To E Commerce Governance2

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A high level article on challenges and approaches to solving decision governance within ecommerce businesses.

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A Common Sense Approach To E Commerce Governance2

  1. 1. A common sense approach to eCommerce Governance By Scott Wilkinson February 2005 There is a lot of noise in business circles about eCommerce execution and decision control – or governance. It is clear that companies that made choices in the early web days to create stand-alone web platforms are dealing with the effects some short-sighted choices. Almost 10 years after the popularization of the browser, eCommerce technologies are now core to business operations but the eCommerce organizations are not. Not surprisingly there is mounting frustration with eCommerce businesses and the teams in the businesses running them by business leaders and other internal stakeholders. Business leaders want to see the results and not just the costs and excuses. Stakeholders want to get more done in what increasingly seems to be a growing list of priority projects. There are two answers to address this mounting frustration: evaluate your eCommerce technology and infrastructure investments and ask yourself whether your platform is really designed to meet the strategies of your company; and, evaluate the role of eCommerce decisions and ask yourself whether the organization and decisions are making the best choices. They go hand in hand. Best-in-class companies are upgrading both the eCommerce infrastructure and organization models to take advantage of second generation web technologies. These companies are making strategic efforts to service their customers seamlessly across all their channels. To accomplish this they are de-siloing their companies, looking for synergies between channel shopping behaviors and uprooting traditional success criteria like unit-driven P&L reporting which hamper corporate strategic goals. These are not over night strategies. Best-in-class companies are rigorous in aligning business, technology and eCommerce decisions to the key objectives. This requires patience and diligence by business leaders. It also requires a framework to make sure the strategies are understood and acted on across all levels of an organization. This framework is vital to allow all stakeholders to understand their place in decision making processes and their responsibilities.
  2. 2. Governance Business Performance Strategy Arrangements Goals What are the customer How do we ensure that the right How do we measure our success at strategies and competitive decision makers make the right achieving business goals? differentiation plays that we need decisions? to do to succeed on the web? How do we ensure that the whole company understands and can align to strategic goals? eCommerce Unit eCommerce eCommerce Success Behavior Organization Metrics What are the desired outcomes What is required by the eCommerce What metrics, analytics and and behaviors desired by the team in order to execute desired subjective measures of eCommerce team to support behaviors (roles, reporting structures, eCommerce offer support business strategies? competencies, etc)? eCommerce and corporate objectives? Harmonize How? Harmonize What? Figure 1 - Governance Alignment Model While every company is different there are five areas where companies fail in eCommerce governance: • Decision Making Structures: Companies struggling with eCommerce governance do not actively think about who needs to be involved in eCommerce decisions within the company in order to create alignment to corporate, business unit and market strategies. These companies tend to keep decision making informal, narrow and involve only a small group of decision makers. They tend to not look to decision making as a process of alignment, communication and of natural tensions to support important checks-and-balances but of a result. • Alignment Processes: Some companies fail by eschewing important alignment processes like annual planning, formal or stage-gated change management processes, business cases, service level agreements and budgeting chargebacks. These companies avoid process because it appears to complex, bureaucratic, expensive or unnecessary. • Communications: Other companies fail in understanding the vital and ongoing role of communication mechanisms in executing eCommerce objectives. These companies execute communications in silos or in one-way exchanges. As a result, there is lack of understanding across the organization on core strategies, objectives and success criteria associated with the websites. • Requisite Resources: A number of struggling companies try and execute eCommerce strategies without giving clear thought to the required skills, competencies and staffing levels. These decisions are often driven by cost measures or desire for efficiencies. As a result key roles are not being filled or at the very list are filled by other internal stakeholders who do not have the skills or
  3. 3. bandwidth. Then of course there are those companies that outsource functions altogether. • Measurement: The last area for failure is lack of measurement. There are three areas where failure occurs. Many companies do not define success objectives for their eCommerce properties and initiatives. Others do not validate results with metrics. For those that do measure and validate, some do not evaluate whether the metrics are actually contributing to the behaviors and outcomes desired by team. These companies face the sum of many small decisions that have amounted to significant issues effecting the eCommerce team effectiveness and customer experience. It is not surprising that many companies are asking questions. Why are our customers still trapped in silos? Why is there internal confusion about our web strategies, objectives and priorities? Why do we seem to have not only spend more on web technology but increasingly get less apparent value from it? Where is the promised breakout growth from our eCommerce investments? Let’s face it. Web 1.0 has gotten us as far as we can go. The companies that will succeed in the next phase are the ones already making strategic investments in their eCommerce platform architecture. So how do companies become best of breed? We observe that best-of-breed companies have gotten out of their early web silos by doing 5 things: • Fix governance structures as you fix web technologies – the technology is a tool. How the tool is used and optimized is a people issue. Best-in- class companies are focusing as much on reengineering how they work as on new technologies. If you think a new web site alone will help you, think again. • View governance and behaviors in the same light – governance is a formal framework to encourage desired behaviors between key decision makers. Behavior is the doing of strategy – it’s the how to results. You want communication, checks and balances, collaboration and executive involvement. Build the processes, oversight committees and structured communication tools to facilitate and hold teams accountable for results. • Make cross-corporate bets – you can’t afford to make narrow technology decisions anymore. The complexity of mounting technology is the most important challenge facing companies over the next 5 years. Winning companies are recognizing that the customer does not care how a company is organized or what the restraints of the system are. And the excuses we use to tell them why are running thin. Technology investment is key to retaining and delighting a customer going forward. We cannot think it terms of channels, business units or segments any longer. The plays we make must be integrated. This also places demands on decision making and alignment. Governance must be cross corporate. • Accept complexity to manage complexity – It is counter intuitive but complexity is a requirement. Simple solutions may be easier to sell but are usually false. The quicker companies accept and embrace the complexity
  4. 4. of matrix organizations, alignment processes, consensus decision making and the systemic tensions of checks-and-balances the sooner they can move from process discussions to satisfying the customer. There aren’t any short cuts. • Emphasize results and measurement – while obvious, our research indicates that measurement is key to outstanding success. Every decision and deliverable should have a measure attached to it. Site data, customer satisfaction data, and financials all need to be considered. Active discussion between all stakeholders needs to be encouraged to ensure that the measures support not only the objectives defined for measurement but the underlying business needs of smart revenue growth, customer satisfaction and long-term strategic alignment. Getting a handle on eCommerce governance is vital if a company really wants to come to grips with their eCommerce strategy and results. A simple framework for thinking about eCommerce governance is illustrated below. Critical to the thinking is the linking of strategy, desired behaviors and measurement to the mechanisms of governance and organization planning. ### Scott Wilkinson is Managing Director of Idea Associates Ltd, a Toronto based management consultancy with a focus on financial services product and channel development strategies.
  5. 5. Is Governance a problem in your company? Here is a simple exercise. Answer it yourself then ask your peers in your company the same questions. Compare the answers. Do you hear this said about your eCommerce offer? Rarely Sometimes Often “We can’t identify a customer who comes in through the    door versus telephone versus online… our systems don’t talk to each other” “We want to do the strategic projects but once we    complete our maintenance we have no more IT resources” “I’ve given up on IT, why don’t we just outsource our    project?” “I don’t know who to talk to and I have given up trying    …” “Our business can’t get on the priority list … we’re just    not that important to the eCommerce group” “We’re moving from one problem to the next … we can’t    seem to get ahead to focus on the big questions” “Our executives don’t understand eCommerce, we always    seem to be going back and telling them about what we do and what we need from them” “We seem to spend most of our time dealing with internal    issues and strategies not customer strategies” “We told them that it wouldn’t work that way … but they    did it anyway and now we have a bigger mess” Because we have 3 web sites everything we do has to be    done three times

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