The future of every online channel is to be "Strategic". But what does this actually mean?? It is the act of taking the wider business strategy and translating it into the digital context so the eCommerce/Digital channel has a clear roadmap designed to align to wider business growth goals.
This precise strategic alignment of the online channel to the wider business is how the online channel impacts total business growth.
This article addresses three topics...
- The challenges and common pitfalls of strategy planning
- The importance of reducing business weaknesses and why it plays an important part in the strategic planning process
- How the online channel can be utilised to reduce business weaknesses
The first topic to cover off is the challenges of being strategic in the eCommerce/Digital space.
On Being Ignorant of One's Own Ignorance - explaining the Dunning-Kruger Effect:
The phrase "Being Strategic" has been butchered in the eCommerce/Digital space due to some individuals in Agencies and within businesses holding the term "Strategy" in their job titles when they don't know the first thing about being strategic for a client/business.
This is an industry problem where there are people in positions of power and influence making strategic decisions requiring a business to focus effort and investment. There are two issues with this...
- The business listens and follows this strategic guidance
- Even though these people have no training or experience in strategic planning, they are both bullish and confident in their decisions
Point 2 is significant, and there is a heavily researched "Effect" that has been defined for people who fall within this classification: the "Dunning-Kruger Effect".
Dunning-Kruger Effect is a cognitive bias whereby people who are incompetent at something are unable to recognize their own incompetence. And not only do they fail to recognize their incompetence, but they’re also likely to feel confident they actually are competent.
This is not intended to be a harsh assessment of people, however, it's common in unregulated industries.
This "Effect" is common because too many people ignore the science of eCommerce/Digital. No business would listen to a Lawyer who does not have a Law Degree and yet, many businesses follow the guidance of those with no proven background.
Though this has been an issue for a while, it has amplified because of the Pandemic for two reasons...
- The online channel now has greater influence and power to drive wider business growth with the right strategic treatment.
- Many businesses are now vulnerable and cannot afford to invest in a direction that will not add value both immediately and in the future.
To give context to the rest of this article, a definition of what "business strategy" is important. The Harvard Business Review quotes a Business Professor from the Institute of Management Development (IMD) based in Europe...
A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions, defines how they should act, and guides how resources are allocated to accomplish key objectives.
The "guiding principles" mentioned above extends to the online channel.
The next step is to look deeper into the strategic planning process which begins with a high-level look at the SWOT.
Looking at the “SWOT”:
The SWOT analysis still remains a relevant and important method to define the position of a business and assist in strategic planning: Strengths, Weaknesses, Opportunities, Threats.
- Strengths are those business attributes that are to be leveraged to reach future desired goals.
- Weaknesses are the internal pain points of a business preventing or slowing the progress of meeting these desired goals.
- Threats are the external dangers to business success and can come in many forms. These are outside of the control of the business.
- Opportunities represent the size of potential growth but this "potential" has a strong dependency on how a business deals with its Strengths, Weaknesses, and Threats.
Some of the more commonly seen approaches to strategic planning can be summarised as...
- The act of leveraging strengths only
- Ignoring weaknesses (because they are perceived as being too hard to resolve)
- An over-focus on threats (because this is perceived as being easier than working on weaknesses)
The dangers in over-focusing on Threats:
How many times have you seen or heard a business doing everything it can to copy a competitor? This approach is common with the online channel: a business will look to a competitor and see what they are doing online and copy it.
Those who are doing the copying see this as being strategic (refer to Dunning-Kruger Effect).
Why is copying a competitor not being strategic?
A competitor is working hard to put its best foot forward when presenting its products and/or services, a competitor (or any business) achieves this by showcasing strengths.
When one business (“Business A”) attempts to copy a competitor (“Business B”), “Business A” is essentially trying to copy the strengths of “Business B”. Another way to look at this is, “Business A” is going to present “fake strengths” and attempt to go head-to-head with “Business B” who has legitimate strengths.
“Business A” will lose this battle every time.
An example of this in action:
The well-known term “You cannot out-Amazon, Amazon” reflects this approach. Back in 2017, there was a well-publicized situation where Walmart tried to do just this (copy Amazon) and failed fantastically.
In 2017, Walmart introduced a “Prime-equivalent” membership, called “ShippingPass”, offering free and fast shipping solutions if customers paid a subscription fee. However, no one was interested. Walmart quickly realised Amazon’s bundle of fast and free shipping was only a small part of the appeal to being a Prime member.
Amazon’s streaming services (music, movies, podcasts etc…) among other things, contributed to Prime being desirable to customers and a strength to the business.
Walmart’s ShippingPass offered unlimited delivery for $49, but a lack of engagement by Walmart customers resulted in the service being pulled, and subscribers refunded.
Walmart recognised a competitor strength in Amazon, its Prime subscription service, and attempted to copy it. Walmart felt it could immediately become a strength, but all it did was highlight its own weakness of not having the right bundles in place to offer value.
Correlation between Threats and Weaknesses:
The severity of a threat is correlated to a business’s own weaknesses. The greater the weaknesses, the more dangerous threats become. A business weakness creates a vulnerability that simplifies the ability for a competitor to outperform you.
Businesses weaknesses control the degree of impact threats will have on business performance.
Weaknesses and the Online Channel:
The focus on weaknesses is often neglected because the source of weaknesses commonly come from parts of the business looked upon as “immovable”: one example of this is legacy business systems.
However, through the right strategic planning and proper utilisation of the online channel, weaknesses can be overcome (see the Case Study below for a good example of this in action).
Another example of addressing weaknesses in strategic planning is seen with new tech companies and/or business start-ups who take on established traditional industries and quickly take market share. They design their own business strengths from known weaknesses of competitors in a specific industry (or retail vertical).
A great example of this in action is Casper, known as the “Warby Parker of mattresses”, a bed retailer turning the industry on its head by starting its entire offering online-only, something never accomplished previously.
The mattress industry is a racket. You walk into a store expecting a confusing experience, but you don't expect the 35 models offered to be basically the same product with different labels. It's worse than buying a used car. But who knows how many springs are good for you?”
And because Casper began online, it launched immediately with a long list of strengths that were the weaknesses of its traditional counterparts.
Some examples of Casper’s initial strengths which were known weaknesses of its competitors…
- Comprehensive product content that was easy to engage with online (on mobile devices)
- Multiple online payment solutions
- Strong and easy o follow product guarantees and returns policies
- Superior home delivery shipping and bed-packing solutions
- Superior business system architecture and the connectivity between each business system (information transfer from one system to another was to a high standard)
We consider ourselves a tech company first. We've created software that lets us know exactly where our raw materials and mattress components are and how to forecast what and when to build. If the UPS truck is delayed, we can reach out to the customer and say, ‘Hey, we've been tracking your order and noticed something has gone awry.’ If you've bought a mattress, instead of having to find your order number, our customer-care expert knows who you are without even asking.
The strategic approach to creating strengths from known competitor weaknesses is a simple way to describe what many call “disruption”.
It's not really disrupting, it's being strategically superior.
How to use the Online Channel to treat weaknesses:
There is a lot of research and auditing required to accurately define business weaknesses, but by way of a high-level summary, there are four steps to achieve this.
Understand what the desired future of the business needs to look like. This is the executive team’s perspective of how the business should be performing in the future: desired goals. This first step is crucial, and without this context, weaknesses cannot accurately be identified.
When reviewing/auditing a business, focus on those internal issues seen to be preventing a business from reaching its future goals.
Take the known weaknesses and look to the online channel to leapfrog existing constraints. Construct a plan that enables the online channel to work smarter so as to compensate and effectively reduce (or ideally eliminate) the weakness.
Lead a change project which brings the plan to life.
It's important to note, the above four steps run in parallel with a full strategic planning process that incorporates the assessment of Strengths, Opportunities and Threats. The above talks specifically on how to identify weaknesses.
Case Study – an example of eliminating a business weakness:
A large retailer had the desire to become better at personalised communications, scale its customer support function AND drive sales growth by 400% in a short period of time.
The business is nervous to grow headcount prematurely for two reasons...
- COVID introduced a certain level of fear of this type of investment
- The business did not know where to grow its headcount
Other work with Comma Consulting resulted in strong sales growth, however a ripple effect of this was, the support teams became inundated with phone calls and emails: over 80% of these incoming calls were due to customers seeking order updates.
The business had three main issues...
- Legacy technology created constraints
- The current eCommerce technology had capability restrictions
- The supply chain became unreliable due to the Pandemic
Because the future goals of the business centred around the desire to introduce personalisation and support at scale, a plan was created to address the following weaknesses...
- A support function not equipped to deal with the increase in sales
- An order fulfilment function not prepared to handle an increased volume of sales
- Existing business systems not ready to share the right information
A plan was created comprising the following characteristics:
#1. Introduce new technology which could complement and connect (integrate) to existing legacy business systems: an email marketing software selected to fulfil these new business needs.
#2. Create a comprehensive “communication plan” which would activate highly relevant and personalised emails to a customer informing him/her as to the status of their order.
#3. Design these communications to “trigger” ("trigger" = be automatically created and sent) across multiple steps of the existing order fulfilment and supply chain process.
This is an important point to call out! The existing order fulfilment and supply chain function of the business was not touched due to a variety of larger complications. This plan was all about elegantly setting customer expectations at scale.
#4. Introduce new snippets of content within these communications to activate new online buying behaviours.
Once the project was implemented and put live, this retailer benefit from the following outcomes...
#1. Incoming customer calls reduced by 90% which freed up staff to better support the online and fulfilment teams.
#2. Online sales grew for two reasons...
- Returning customer volumes increased due to the great experiences they received
- The new “email updates” included new promotional content which stimulated more online buying
#3. This new communication strategy bought this retailer time to properly fix/enhance its order management function. Because the initial issue of unhappy customers was resolved, the business could take time to properly scale the order fulfilment and supply chain functions.
#4. The complaints have now turned into an influx of positive customer reviews and testimonials which the retailer is repurposing on social channels, stimulating more online sales.
The above case study is merely one example of how a weakness can be eliminated via a mix of strategic planning and proper utilisation of the online channel.
The key takeaway from this research is, the Pandemic has amplified the impacts the online channel has on overall business growth. It no longer matters what part of the business has a weakness, if done right, the online channel can heavily contribute to its elimination.
The impacts of the Pandemic are here to stay. If a business is struggling to find ways to rapidly evolve, engage with a specialist and aggressively taken on weaknesses. Not only will it protect your business, but it will also drive growth.