It has been over a decade and businesses are still struggling with the correct organizational alignment for eBusiness. The issue of correct organizational alignment is of tremendous significance to companies that are blending eBusiness into their business models. Is your company on the right track?
It has been over a decade and businesses are still struggling with the correct organizational alignment for e-Business. The issue of "correct" organizational alignment is of tremendous significance to companies that are blending e-Business into their business models.
"Pure plays" do not have this issue for obvious reasons. But how many real pure plays exist today? Most companies are, in the least, multi channel. Over the short term, a significant majority would convert to e-Business as an integral part of their business model.
The move to e-Business has come from both extremes i.e. "pure play" and "brick and mortar." Pure plays started moving in the other direction as they realized that they have to be where their customers are and their customers did have lives and interests offline. "Brick and mortar" finally accepted that their customers did live online. They also understood that their business models would be demolished if they did not address the competitive threat from e-Business enabled competitors and/or business opportunity provided by e-Business.
"Pure plays" were entrepreneurial by nature and change comes naturally to entrepreneurs. Hence, they adapted, with relative ease, their operations, organization design and culture etc. to accommodate a blended business model. They also attracted "brick and mortar" employees who were amenable to change. The result is that their blended organizations are working in a more coordinated manner. This is not to say that they have got their organizational design right but only to highlight the fact that they are better positioned to do so.
"Brick and mortar" companies have had a tough time adapting to e-Business. Their history and the complication it brings has made change difficult, indeed, insurmountable in some instances. They realize that e-Business is critical to their success. However, they have not identified a way to leverage it correctly.
Unfortunately, time is running out for some of them. e-Business is causing fundamental changes in even the most staid of industries. If organizations in these industries do not adapt they will find mention in history textbooks next to dinosaurs.
Since this problem is more pronounced and causes more difficulties in "brick and mortar" companies dabbling in e-Business, the rest of the discussion focuses on these organizations and their travels and travails with this paradigm shift.
The history of e-Business in traditional organizations
Companies tend to organize themselves along functional lines such as marketing, finance, operations, IT etc. This model has obvious benefits and limitations. The latter are even more pronounced when e-Business is placed in a function within the existing organization structure.
Initially, the "responsibility" for e-Business was within the marketing function. With the "business requirements" coming from marketing, IT was responsible for creating, hosting and managing "websites" i.e. the underlying applications and infrastructure.
Some organizations went a little further and created "new media" teams within marketing. These teams were focused on website creation using the new cool technologies and tools. These websites, or front-ends or user interfaces, were then hooked up with "traditional" back end systems by IT, which continued to host and manage them.
The understanding at that time was that e-Business is about websites and websites were new media - interactive brochures created using new technologies. Further, e-Business marketing was about buying banner advertising, hence marketing was the best place for advertising - online or offline. IT had the deep programming skills required to connect back end systems to these user interfaces, hence they continued to do that.
As time progressed, the model essentially remained the same but the rationale changed. The new justification was that e-Business is about "online distribution" so the logical placement was once again within the marketing function.
As you can see, the functional mindset bundled and unbundled e-Business "functions" differently but the focus was unmistakably on the new functions necessitated by e-Business and their placement within existing organizational structure.
A few years ago, some organizations started distinguishing the e-Business function from marketing function. They hired a "head of eBusiness" and their teams now had "online" skill sets - from creating websites to marketing them online. IT still maintained the hosting and management of the underlying applications and infrastructure.
Even under this new thinking the focus was still on functional placement for e-Business. Some had this new combined function reporting to marketing. Some others, arguably more misguided than the others, had it under IT!
Does this paradigm work?
The proof, as they say, is in the pudding. How many traditional organizations are considered e-Business powerhouses?
- How many policies has Prudential or Metlife sold online? To my knowledge, none
- How many policies has Progressive sold online? By one estimate 28% of auto insurance is now sold online. Progressive is a pioneer in this space and has a large percentage of that market. But the fact remains that
- Progressive is a pioneer in non-traditional distribution. They also are pioneers in telephone sales
- Progressive stands alone among its competitors in this staid industry with its e-Business accomplishment
Why does this paradigm NOT work?
In order to understand the correct placement for anything, one has to understand what it is all about. The mistake companies made and continue to make is in not understanding what e-Business is!
Here are a few myths about e-Business:
- e-Business is about websites
- e-Business is about a new distribution channel
- e-Business is about online customer support
- And last but certainly the most misguided, e-Business is IT!
e-Business is as much about websites as Albert Einstein was about his moustache. A website is a face to e-Business.
e-Business is as much about online distribution or customer support as the telephone was at the turn of the last century. If your company was in catalogue sales then you got the picture right. If not, you need to rethink the big picture.
And e-Business is IT as much as marketing or supply chain or customer service or finance. IT is an enabler of business functions.
So, like the seven blind men, business leaders in "brick and mortar" companies continue miss the elephant in the room!