Tuesday, January 19, 2016

Part 1: Investing in eCommerce - Why Developing a Digital Strategy First is CriticalBlog Post


If you are a manufacturer or distributor, eCommerce investments are likely at the top of mind right now as B2B online sales are growing rapidly across all industries and approaching $1 Trillion in revenue in the US. Supporting mobile devices is critical, and business buyers now expect the user experience to be as robust as any B2C store.

If you are new to eCommerce, I will be the first to tell you to choose a scalable, feature rich platform to support your online channels. But, don’t make your ecommerce platform decision the first thing on your to-do list. Too many companies shop for an eCommerce platform first, only to find their selection is either way to much or way too little to meet their business needs. 

The first step should be to figure out where you are going and develop a strategy to get there. How can you have a successful eCommerce channel if you don’t know what your initial objective is and how you are going to measure success? Spending $1 Million dollars on a platform and project that will deliver deep personalization makes no sense if your business objective ends up being to reduce costs through customer self-service portals. 

Digital is disruptive. The intent is to leverage digital technologies and channels to be more efficient and create new opportunities for growth. Companies with successful digital strategies benefit by increasing revenue, lowering costs, and defining a competitive advantage over non-digital competitors.  In most cases achieving those outcomes takes years of committed investments in people and technology. As you start your journey it is unlikely you already have the resources, technology or processes to support eCommerce successfully.

The purpose of this post is to encourage you to define your strategy for all things digital before you start selecting ecommerce platforms. Digital commerce (aka eCommerce) will disrupt every part of your business – from sales to fulfillment to customer service. Make sure you understand the impact on people, processes, and technology and have a plan before you begin. 

The Wrong Way to Start

My first question for companies evaluating an eCommerce platform is always “What are your business objectives?” Surprisingly, many are unable to respond to that question directly. Instead they respond with “we want an online store, it has to integrate to XYZ ERP, be mobile friendly, have an Amazon like user experience, and launch within six months” or something similar. Notice there is no mention of “why” they want those things or how success will be measured. 

As a result, most of the dozens of RFPs I’ve seen in the last couple of years include a spreadsheet detailing their functional and/or technical requirements as the focal point of the RFP. A few provided a concise summary of the background on the project and what the eCommerce objectives were, but that is a very small percentage.

Instead, most RFPs focus on the requirements spreadsheet. Some had as few as 13, others nearly 1,000. Most include a feature description and column to indicate whether your platform supports it out of the box, with configuration, or through customization. A few RFPs include prioritization and separate the requirements into functional and technical lists. Very few include specific use cases or a tie in to business drivers. In many cases, vendors were expected to quote on an implementation cost from the list of requirements with little or no conversation with the stakeholders.

Most requested features are ones commonly available in B2C sites because that is what most people are familiar with. In many cases mandatory requirements that support existing B2B business processes are overlooked because no one asked the right questions during the requirements gathering. In the previous example of a self-service portal, the integration requirements and user experience will be quite different than a site that is trying to aggressively increase revenue through personalized upsells and merchandising.  

The problem a “features first” approach is that your requirements are frequently not aligned to business objectives, resources or business processes. Worse yet, it may not deliver the required customer experience. Why? Without proper guidance, project stakeholders tend to want everything at once based on features they have observed while shopping themselves or what they know about their specific area of responsibility. This frequently results in a project that is expensive and difficult to manage.

Worse yet, if you don’t understand your buyer’s journey, the site may not deliver the capabilities that they are looking for at the time they make a purchase decision. For example, let’s start with a business objective of increasing the number of orders you receive from your existing customers by 10% in 2016. Your repeat business buyers may make their buying decision based on which supplier has inventory in stock and can meet a specific delivery timeline or cost. They may need items on a single order shipped from more than one warehouse and by more than one carrier. Exposing that in the user interface may be much more important than having alternate images with zoom and pan, a frequent B2C requirement. 

For many buyers, product availability is even more important than the price of the product. They may simply be reordering by a part number and not the least bit interested in the product image. However, an engineer looking for a part that will meet a certain specification may want all the product details that are available for it. Without proper research or a deep understanding of your buying personas and their path to purchase, eCommerce solutions frequently deliver a disappointing user experience. 

From the perspective of a potential vendor, asking them to provide an implementation estimate is from a spreadsheet is ridiculous. The likely responses will either be a very wide range (the best response you can hope for), highly inaccurate, or the number the vendor assumes it will take the win the business. A top tier solution provider with digital experience should challenge the approach and offer to do a discovery project first. That may put the deal at risk, so most just go ahead and respond to the RFP and hope they will be able to redirect the process later. 

Please don’t focus on features first. You are setting yourself, your customers, and your vendors up for failure. 

A DJ performing

The Right Way to Start

Back to the earlier question on business objectives – here’s an example of what I want to hear about an eCommerce initiative. 

Within 3 years, we want to develop a new digital business unit that is the most profitable one in our company. We will get there by investing in $5 Million in technology and human resources.  We will start with an online store for existing customers that will launch in Q3 2016. Our initial goal will be to migrate 50% of our existing customers to the online channel for their recurring purchases by the end of 2017. We expect that will result in a cost reduction per order of 25%. We also expect our AOV to increase by 15% through more effective merchandising of the rest of our catalog. IN 2017, we will also target new customer acquisition through aggressive search marketing and ……

That type of response tells me that this prospect has been taking a holistic view of the eCommerce initiative. I know they are new to ecommerce, have specific objectives that are measurable, and likely have a resource commitment to support the program. They have addressed organizational issues, and they have a longer term vision and strategy. They are poised to execute more detailed planning and make investment selections for technology and resources. 

As they begin a platform selection process, requirements can be mapped to the specific objectives that have been established. For example, knowing that you are targeting existing customers with recurring purchases means a finite set of products and personas that will be purchasing them. Use cases, user experience requirements, content migration, integrations, and timelines will be much easier to identify. The eCommerce platform capabilities must align to those requirements. 

The resulting vendor selection process will be easier and carry much less risk for all parties involved. By starting with strategy, “C” level executives have briefed on the project and investment up front. Ideally, one of them will be the executive sponsor. Other stakeholders and project owners have a clear path and understand what success looks like. 

Choosing a digital partner who understands the commerce is also a key to success. In other words, don’t do this alone! 

The next post on this topic will provide details on how to develop the digital strategy and properly invest in people, processes, and technology. It will also include a structured approach to selecting the technologies to support your digital commerce initiative.