Integrated Strategy: Fractured Technology

Congratulations: Your web business has grown from a redheaded stepchild into a full-fledged business model. What started out as a toe-in-the-water budget line item four years ago now represents a full department and 20 percent of your revenue.

Too bad everyone else still thinks of it as a redheaded stepchild. Your IS department hates dealing with your ISP. Everyone argues over why the inventory system staff never communicates with the site staff. Your 800-number staff gets irate every time a web customer calls to talk about what went wrong with his or her online purchase.

What is going on? You have a strong, flexible business model with revenue coming from all sides a traditional catalog service, a few storefronts, and now a web site. This is a smart, integrated strategy for businesses today. So why hasn’t the technology kept up with you?

Because the model for each of your businesses grew up separately and incorrectly. Business models for huge brick-and-mortar retailers have been evolving for decades, if not longer. E-commerce technology has been around, oh, about four years. You do the math. The software is just not there. We’re still missing basic concepts, like:

  • Commerce servers integrating with a large-scale accounting system

  • The web connecting to a complex, distributed, fluid stock system
  • Real-time credit card verification
  • A real customer-driven database, rather than an order-driven database
  • Fluid, real-time communication with a truly distributed network of real stores
  • A call-center system and e-commerce server that are integrated to communicate with each other

These things just aren’t available with the e-commerce systems that are out there. There are some very cool cutting-edge technologies coming out this year that may change this, but they are late.

I do not see this as an issue of attitude or lack of staffing or “overlooking” on the part of e-marketers not at all. This is the kind of stuff that keeps marketers and boards and VPs up at night. I believe the problem is the nature of the Internet evolution:

  • 1994: Some guy in the marketing department of Eddie Bean puts up a web site.

  • 1995: It gets attention, and he gets a budget and two staffers.
  • 1996: The site decides to throw in some e-commerce. The only thing available is an e-commerce server someone invented in a garage, dubbed GarageComm 1.0. It doesn’t tie into any accounting system or inventory, but, hey, this is just a lab experiment, right?
  • 1998: The president gets a wild hair, throws some millions at it. It still represents only 3 percent of company revenue, but it should take off soon, right? Meanwhile, your server, GarageComm, is at version 1.8.
  • 1999: This is the year of e-commerce, right? You should be there, right? GarageComm releases version 2.0 and goes public. It still doesn’t communicate with the accounting or inventory staff or with the stores or the call centers. But it still represents only 8 percent of revenue. You’ll have time to integrate later, right?
  • 2000: OK, you might generate 20 percent of revenue this year. It might be serious. Now, a full one-fifth of your sales are running on a separate inventory and separate accounting systems. You have elaborate systems in place to do batch transfers and synchronize everything about every 24 hours. But during busy seasons, you experience lapses where you promise product that went out of stock three hours ago. Or you fill orders that shipped six hours ago but were billed to fraudulent credit cards. Now what?

The whole thing happened so fast that we’ve been reacting just to keep up, rather than proactively planning how this would fit into the great scheme of things. Nowhere in there was planning for a full business model on either side.

GarageComm had no experience in business models when it designed its systems (but it understood databases and SSL, and what else did it need, anyway?). Eddie Bean couldn’t justify redesigning all systems (accounting, inventory, and ordering) from the ground up when online represented a minority of sales. Now the redheaded stepchild has grown to the point of DEMANDING a solution.

E-commerce back-end companies still aren’t getting this: We’re starting see to offers to integrate accounting, e-commerce, and inventory if you switch over to their soup-to-nuts solution. But if you’ve been around for 20 years, and stores represent 40 percent of your sales, the catalog call center is 40 percent, and the web is now 20 percent would you change everything else in your organization to comply with a mere web server whose accounting/inventory solution is at version 1.0? You’d probably wait, too, until it gets so dire that you have to find a unified solution.

This may well be the Year of the Reality Check. Companies might invest in boring stuff like infrastructure and real business models instead of buying software and hype that was created by 22-year-olds. Maybe this will be the year of integrating their bricks and clicks and calls into a single model of COMMERCE time to forget the “e-” prefix.

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