By Andrew Macey
Black Friday sales for 2010 were up only 0.3% over last year, yet online sales are up 16% against last year. Sixty percent to 70% of offline, store and catalog sales are now impacted in some way by digital commerce, either through comparative ratings and reviews, research, or targeted promotions and personalized campaigns. Almost all retailers are making significant investments, ranging in scale from about 1% to 3% of revenue, in cross-channel capabilities including online, mobile, and social media to build brand and drive new revenue streams.
Despite all this momentum and spend, however, few companies have managed to successfully bring together the thinking, skills, and experience required to create a unified, successful cross-channel organization. What’s required for a company to build a successful cross-channel organization? How does one ensure maximum return on all those investment dollars?
The first and most important step is to think of cross-channel as a combination of touch-points that together must create a seamless customer experience, and an organization has to accommodate that change in thinking. It doesn’t matter whether your customer is buying online to pick up in the store, returning online purchases to the store, doing comparative price checks on a phone while in the store, or using mobile coupons in the store – marketing and merchandising have to be able to work together to create that seamless customer experience. A helpful tool to use is a day-in-the-life map of what your customer actually does and wants to be able to do as s/he moves from online to store to catalog and back again. Design a set of experiences around those day-in-the-life scenarios.
Recognize that any organization has to evolve over time. It’s not reasonable to believe that all best practices and new ideas can be adopted from day one. A framework that can be helpful to gauge relative strength is the use of a maturity model with varying levels of maturity as they develop more cross-channel capabilities. Aspects of the organization should be evaluated, designed, and built with respect to different criteria i.e. incentives and rewards, people and culture, business processes, technology, and internal structure as companies develop a more sophisticated set of capabilities.
Figure out where the current organization lies within the maturity model by assessing its capabilities in each functional area, including marketing, merchandising, web commerce, fulfillment, customer service, international expansion, and IT. Consider the ability to design and execute things like targeted campaigns, seamless cross-channel support, dynamic and consistent pricing, or cross-channel analytics. Evaluate against several criteria including depth of skills relative to the future vision, readiness and ability to change, and expected impact and size of impending change.
There is no one best model for cross-channel organizations, despite the intuitive appeal such an idea offers, but there are a small and finite number of viable options that can be adapted, and the core element of best thinking revolves around developing a cross-channel or digital Center of Excellence (COE) that serves as the building block for future capabilities for domestic and international needs.
The first model is a COE or digital operations hub with strategy, website, mobile, and capital spending responsibility, but no direct P&L. IT, such as it relates to digital, online, and call center operations, is part of this organization, and the organization serves its business line P&L counterparts through named liaisons that help prioritize capital spending and investment across the company as a whole. In this model, there is a great ability to try new ideas, experiment, and learn without disruption to the traditional, P&L-based business lines.
The second model is a digital operation COE that has its own P&L for direct sales. Website, call center, and fulfillment for any digitally-enabled orders run through this organization. This simplifies investments, since there is no longer competition between channels, but the change is large and it’s a big strategic shift to execute in this model.
Finally, the most sophisticated version of the cross-channel organization is where digital is embedded within each business line, and it is no longer a separate organization. This is the most evolved and advanced organization, and the hardest to achieve without a lot of duplicated cost in various brands or business lines.
It may sound obvious, but it’s worth reiterating that there is no one-size-fits-all best practice. The challenge is to decide what functional aspects of a digital or cross-channel organization should constitute the COE for a given company. A good way to think through how to build the COE is often to distinguish between things like transactional commerce capabilities versus creation, development, editing, and publishing of content. Content generally should be locally produced (or outsourced), but in accordance with standardized workflows, methods, and tools that govern how content will be published, maintained, and reused across channels. It also assumes a content management system to enable reuse.
The benefits of centralizing a lot of business functions include generally lower total cost, more control, and clear standards. Potential negatives are that a COE runs the risk of being further removed from the customers than are the P&L business lines, and the fact that response to the market could be slower than if driven within P&L-based business lines. On the other side of the coin, decentralizing digital functions can create a quick response to market needs, but with a loss of central control, consistency, and standards and a likely increase in duplication and higher total cost to the company. For all these reasons, a balanced approach to a COE that evolves over time is usually most appropriate for customers, employees, and company needs.
In conclusion, there is no better time for any company to be moving toward a new set of digital and cross-channel capabilities. Momentum is strong, future growth in digital is all but certain to continue, and consumers will continue to expect more seamless interactions that build brand experiences, boost loyalty and retention, and bring in new customers – but planning, creating and evolving the digital organization to make use of any investments in social, mobile, or cross-channel commerce is the hard part, and without the right organization, it’s impossible to win.
Andrew Macey is VP strategy at SapientNitro (www.SapientNitro.com), where he is primarily focused on helping companies think through the challenges and benefits of future business models, organizational capabilities, and new ways to create meaningful and rewarding experiences across channels for business and consumer customers.