A Business Technology Place

Where operations, projects, and innovation collide and divide

To build it or to maintain it. That is the question.
It’s a classic question in organizational design. The answer of course is you have to do both. I’m not talking about the decision of a product nearing the end of its life cycle where you decide between adding additional features or putting it in maintenance mode. Rather, this is about allocation of people and teams within an eCommerce organization to maintenance or operational activities versus allocation to projects.

I’ve seen terms like “run the business”, “keep the lights on”, and “operations”.   Those terms refer to activities that an organization does to maintain service to existing customers or to maintain production of existing products. In an eCommerce team this might be activities like maintaining server equipment, network connectivity, data backups, content management.

But we also need people assigned to “build the business”, “new projects”, and “innovation”. These are tasks like building new features in the system and creating entirely new products and services that have new demand in the market place.

It’s not just an IT problem.
Other functional areas of an organization design responsibilities around this need. A typical Sales team will have inside account managers (run the business) and new partnership development (build the business). Marketing product managers are challenged with how to split time between servicing existing products (run the business) and building new features (build the business) for their product. IT is challenged with it because they have systems to maintain while also trying to help the business build features and solutions on new technology.

Eric Brown makes a good case for splitting the responsibilities and focus of an IT organization into operational and innovation areas. His point is that people are trained and have skills in certain areas. If that is “running the business”, then keep their focus on that so they do it really well. But don’t expect them to be good at bringing new innovation to the business.

Asking the question is easy. Answering it is not.
So how do you solve allocating people across operational and new project work? In my mind, there’s no single answer. It involves creating a balance and is effected by a number of criteria:

  • People: How many people do you have? Smaller organizations may not have the luxury of dedicated people per function. I think this puts them in a tough spot because to Eric Brown’s point, not everyone has the mindset (or skillset) to contribute to both.
  • Time: How do you split time between operations and project? Do you set a goal for 50/50, 70/30, etc? That’s likely tough to follow week-by-week because emergencies like hard drive failures don’t run according to a schedule.
  • Priority: What’s more important the operations or getting new business? This is such a tough question. Leaders that have incentives based on new revenue growth certainly lean towards new business. But we know that companies that neglect their existing customers and operations may not see tomorrow to have a chance to build out new business.

eCommerce teams need to find a balance.
To play the eCommerce game, teams need the ability to experiment as well as implement change. That’s how you drive new business. But maintaining the existing store is just as important. So when you create an eCommerce organizational design make sure to account for run the business as well as build the business activities.

I’d like to know how you’ve solved this within your organization. What say you?

Operational effectiveness, strategic positioning, and your Internet presence

This week I was reading an article by Michael E. Porter in the November-December 1996 Harvard Business Review entitled “What is Strategy”. The article discusses the difference between operational effectiveness and strategy. The reason I was reading it was to understand ideas around how companies can use their strategy to create different value propositions and distinguish themselves from competitors. Ultimately I wanted to draw a parallel to the business differentiators and how companies use them as part of their Internet presence. I’ll review two examples of companies using different strategic positioning and then map that to their Internet presence.

First, a few key points from Porter’s paper:

..differentiation arises from both the choice of activities and how they are performed. Activities, then, are the basic units of competitive advantage. Overall advantage or disadvantage results from all a company’s activities, not only a few….In contrast, strategic positioning means performing different activities from rivals’ or performing similar activities in a different ways.

This makes sense. Companies that create a unique product/service offering that adds value for a group of people will be successful. But companies must devise a strategy that leads to a series of differentiated activities from their competitors. Otherwise, the competition will eventually become a price war where customers choose products based on price alone. Downward prices only help as long as you keep your margins or increase units sold. Porter’s thoughts here reminded me of Blue Ocean Strategies by W. Chan Kim. If you haven’t read this book already, I highly recommend it.

So where are two examples that I see this played-out in the eCommerce world? One is Zappos.com, an Internet only company recently purchased by Amazon. The second is Chik-fil-a, a popular fast food chain specializing in chicken based selections.

The Zappos Differentiator

How did Zappos put their name on the map despite entering a crowded shoe retail market? Without a doubt it’s their policy around delivery and returns. Free delivery and free returns. One of the top issues with selling shoes online is people are worried they will not fit. Shoe sizes could vary based on style so people need to size this product before purchasing.  Hence the Zappos policy. They are creating a competitive strategy around giving the customer the ability to truly shop and try products. Its all about convenience and service. There is a market for this level of service and their customers are willing to pay a premium above other shoe retailers for that experience. For example, buy three pair of the same shoe and try them on. Return the two that don’t fit. Zappos doesn’t compete on price in this arrangement (They build the shipping cost into the price of the shoes).

How does Zappos market this on their Internet site? Their unique policy is stated both in their Internet search results description as well as on their home page. The description in the search results shown here comes from the page meta tags.

Zappos Free Delivery 2

On their site they call out the policy in upper left of the home page. Internet studies continue to show this is the most valuable piece of real estate on a page. For western languages this seems obvious because its how we read our languages.

Zappos Free Returns

Then on the right side of the page there is a link that leads to pages explaining the policy. Notice right under the link the ability to see customer testimonials. That’s not there by chance. What better way to promote trust in the customer’s mind than by showcasing selected testimonials from the Zappos community.

Zappos Free Returns 1

The Chick-fil-a Differentiator

Chick-fil-a is a well known restaurant for chicken sandwiches. Their chicken sandwich is intended to be a healthier alternative to the hamburger from other competing fast food operators. The target market for Chick-fil-a is adults and higher income demographics as compared to younger audiences with most hamburger fast food chains. But I consider one of their main strategic differentiators to be their customer service and community involvement. I’ve written before about the customer focus at Chick-fil-a locations. You may not know that Chick-fil-a doesn’t franchise to independent operators. They have a central organization of stores with owner operators that meet certain criteria and pass the process for the position. Each owner operator then becomes heavily involved in their community. They appear at local youth events, schools, and other community celebrations. Often times they give away food or sell it at a reduced price. Why? Well, mainly because community enrichment is one of their core purposes and values. However, they also know that a high percentage of people will visit their locations and buy more chicken. What other fast food operators have you seen participating in the community like this?

So I took a look of the websites for Chick-fil-a, McDonald’s, and Burger King. Guess who is the only one to have the option to order online and setup for large community events? Now some would say that cold hamburgers will not suffice and would create a negative impression of their brand. I see that as a opportunity waiting for a solution. Chick-fil-a sees it as a competitive advantage.

The online ordering is for participating stores only. When you load the page they display a nifty mash-up map that plots your geographic location with their store locations to show those closest to you.

chickfila map

Does your web site promote your value proposition and play a part in the strategic positioning of your company?