Is Your Organization Ready for Cross-Channel? by SapientNitro

POINT OF OF view POINT view

Is Your Organization Ready for Cross-Channel? By Andrew Macey, Vice President, Strategy, SapientNitro

2010 Black Friday sales were up only .3 percent over last year, yet online sales are up 16 percent against last year. And, 60-70 percent 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 1-3 percent 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? 1. Change your mindset 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 he or she moves from online to store to catalog and back again. Design a set of experiences around those day-in-the-life scenarios. 2. Evolution, not revolution 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 a maturity model (in Figure 1).

POINT OF view Organizations move “up” the matrix from level one to level five as they develop more cross-channel capabilities. Aspects of the organization should be evaluated, designed, and built with respect to incentives and rewards, people and culture, business processes, technology, and internal structure as companies develop a more sophisticated set of capabilities. FIGURE 1: THE SAPIENT MATURITY MODEL INCENTIVES Level 5: Optimized Full roll-out, organization is nimbly responding/executing on metrics Level 4: Limited Execution Implemented changes across high-priortiy channels

Level 3: Alignment Gained consensus on design elements to be changed

Level 2: Assessment

Identified gaps and established foundational vision & baseline metrics

Level 1: Initial Initial organizational status

• Incentives broadly rolled out

PEOPLE & CULTURE

PROCESSES

TECHNOLOGY TECHNOLOGY

STRUCTURE

• Distinct multi-channel culture bedded in organization

• Process updated for multi-channel

• Continuously monitored / optimized / communicated

• Completed end-to-end product lifecycle, shared future vision and scenerios

• Incentives adjusted in select cases

• Roll out initial activities and partnerships, working groups, vision

• Core processes updated for multi-channel

• Core technology upgrades rolled out

• Structural changes for high-priority areas completed

• Plan developed for addressing conflict

• Shared vision created

• Plan developed for cross channel visibitlity

• Close on major investments needed

• Excecutives have identified structural changes needed

• Continuously monitored / optimized / communicated

• Broaden consensus

• Baseline metrics set • Channel conflict and misaligned incentives slow the adoption of multi-channel operations

• Conversation Started • Consensus built around need for change

• Culture fails to recognize the value of multi-channel

• Full update to optimal stucture for the organization type

• Use of flexible cloud-based systems considered

• Vendor identified

• Determine approach to shaping culture • Identification of where incentives are in conflict completed

• Technology enables tracking of multichannel customers

• Current state processes identified

• Identified gaps in crosschannel tracking

• Gaps Identified

• Created baseline state

• Internal processes oriented to singlechannel or silced activites

• Technology gaps prevent single view of multichannel customer • Lack of flexible technologies

• Excecutives have shared vision of gaps and current challenges • Consenseus built around need for change • Organizational structure inhibits optimized multi channel customer experience

3. Evaluate internal capabilities with an unbiased eye 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. 4. Look outside for comparative models 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, Web site, mobile, and capital spending responsibility, but no direct P&L (profit and loss statement). 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. A Web site, 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

POINT OF view or business lines. 5. There is no one-size-fits-all best practice answer 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. 6. Centralize or decentralize? 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. 7. Include IT as a part of the cross-channel organization plan IT cannot remain an island, and it has to be a big part of the success of any future digital or cross-channel COE. Application development, testing, QA, and maintenance and support each need to be considered as they relate to new capabilities. Outsourcing can also work in the new model, as it is unlikely that an organization would have all its needed skills in-house from day one, and investing to bring on the right talent takes time, money, and effort. Focus on building only the most strategic capabilities in-house, like enterprise architecture or selected application development, while relying on outsourcing either for forward thinking, strategic perspective, and specific expertise, or for more commoditized IT needs. In conclusion, there is no better time for any company to be moving toward a new set of digital and crosschannel 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. ideaengineers.sapient.com

Andrew Macey, Vice President, Digital Strategy at SapientNitro Andrew Macey is Vice President, Digital Strategy at SapientNitro, 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.

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