Paul McCarthy highlights the main pitfalls that trap large companies when setting up online, and offers a 10-point guide for small and medium sized firms looking to develop multi-channel strategies.
The phrase the bigger they are, the harder they fall bears a great deal of relevance to the world of business. Just look at the stock freefall of large telecoms and retail firms over the past three months. Or the high-profile Internet names which lack the substance to fill their big, branded boots. The top companies are there to be shot at and the biggest challenges they face are mobile and e-commerce.
Large companies often fail to respond to the changing world of business, especially in the unpredictable and fast moving multi-channel business environment. The Web and other channels demand pace like never before. If firms don't react quickly, they will fall behind. With e-commerce now well-established and other channels, such as wireless application protocol (Wap) and digital TV, in even greater demand, slow movers will find their most successful days behind them.
What follows is a look at the main pitfalls that large companies, backed by deep financial pockets, tend to fall into. It also provides advice for SMEs moving online whom, without substantial cash resources, need to maximise awareness and minimise costs.
Culture shock: large companies find that their sheer bulk and bureaucracy inhibits their ability to move with haste. This is no surprise, but it's not as cut and dried as that. Cisco is bigger than some of the largest banks, but it has grown up in a totally different era. The company's approach to the new economy has ensured that it has geared itself up towards multiple channels. For more traditional organisations, this constitutes a sea change in thinking and in processes and technology. It's amazing how entrepreneurial Web ideas and strong online branding are watered down on by red tape and board meetings.
A piecemeal approach: ironically, large companies are often more guilty than their smaller counterparts of lapsing into "token Web site" syndrome - the practice of building a sterile site packed with info, but lacking interaction. These sites have then evolved by being bolted onto back-office systems, followed by databases, then having some kind of response or commerce mechanism shoehorned in.
The result is a hotch-potch of ideas glued together flimsily, which just don't reflect back-office processes or the things that the Internet and other channels are good at - flexibility, targeting etc.
First-e is an example of a virtual bank that has successfully scaled this challenge. Customers can now bank using electronic channels (ie Wap, the Internet and call centres), whilst obtaining the same view of the bank with each interaction. This gives the customer a reassuringly consistent banking experience.
An Internet strategy should be indivisible with corporate strategy and processes. A project-based approach creates disparate, distributed systems that then have to be linked together. Seeing this occur time and time again, makes you wonder if companies will ever learn from the mistakes made by others.
The scalability trap: if a company is to grow and compete, it's inevitably going to offer new services to customers. If it wants to do this effectively, it's going to have to deliver these services to customers and partners over the channels they demand. Find an organisation that doesn't consider these factors and you'll see a bad investment.
A far-sighted, forward-thinking approach should underpin any Internet strategy. Therefore, any platform this is based on should be scalable and flexible and offer the potential to roll services out over multiple channels. Unfortunately for many large firms, which haven't thought this through, big, time-consuming and costly integration projects are very much on the horizon.
Security shortfalls: it's not necessary to say too much about this - the recent glut of high-profile security breaches are evidence of its importance. Needless to say, customer and partner confidence is essential for any company wanting to do business over the new channels. This means everything from a basic firewall to encryption and authentication, backed up by a cast-iron security policy.
Unfortunately, many companies don't see security as a strategic buy - it eats money and delivers no tangible results on the bottom line. But as a base for e-commerce, it's a fundamental building block. Not thinking about it is no excuse.
Integration issues: from offline to online is usually a gaping chasm, especially for those companies with huge legacy systems. These need to be incorporated into new channels in a way that reflects the business conducted on them. To build trust and retain business, companies need to ensure that customers get the same experience through each channel.
For this to happen, individual channel branding must be consistent and tied into the core business. This means making sure systems can talk to each other, but without compromising on agility or aims.
Tips for SMEs
Smaller organisations often have the guts to go out on a limb, but cast an envious eye at the resources of their larger competitors. This often stifles drive and makes ideas appear unworkable. But that isn't necessarily so. For these organisations, here are 10 keys to being a success on the Web:
Strategy: remember people - staff, partners and customers; proposition - what's the killer idea, how do you promote it (through which channels etc); process - this isn't your traditional shop window, so don't treat it as such and apply sound business principles to the online environment; and platform - what technology are you going to base your strategy on, and does it reflect your needs?
Know it all: understand the market you are competing in. This does not just refer to the traditional market, the online one contains new economy competitors already running at full tilt while you are still searching for your Dunlop Green Flash. Effective competitor analysis and due-diligence are essential to ensure that your firm does not take a pounding from the Internet-savvy start-ups and become another dotcom casualty.
Partners, applications, services, professional skills, global reach, financial backing: these are very important - you cannot do everything yourself. Choose them early on, and get them involved in the process and strategy. Don't ignore outsourcing, hosting and the application service provider market. Often it's a more cost- and labour-effective way of achieving the desired results.
Address your audience: tailor services to your customers and partners. This means everything from content to loyalty schemes and promotions. One of the Internet's killer applications is the ability to tailor information and services to individuals - so ignore this at your peril.
Don't reject anything: things change quickly in the new economy so don't ignore media such as the mobile channel which, when used correctly, could outstrip the PC. Equally, funds may be tight, so don't commit to anything you or your customers are not ready for. The key phrase is "leave the door open". Make sure new services and channels can be factored in quickly, easily and cost-effectively when time is right for change.
Don't scrimp: do it properly. If you're committed to entering into multi-channel strategies, you should be looking at a substantial investment - something like an initial outlay of £3m. Resist the temptation to start too small and then try to scale up - you may have to throw away much of the original system and end up paying much more than expected.
Get the message right: an online service shouldn't be staid and sterile - it should reflect the mentality and demands of customers. A site can't just be "funky", branding has to be appropriate for it to work.
Constant re-evaluation: test the site, try it yourself. Look at what competitors are doing. Don't stand still or you'll find your offering is out of date before you know it.
Stress test: don't assume your venture will work without testing the systems thoroughly and repeatedly. Stress testing all systems and software beforehand to ensure they can cope with expected demand is not just a good idea, it is essential to success, but not to detriment of performance. Fancy graphics will only get you so far.
Front and back: although it is the back-office that stores all the power and technological wizardry that runs the online service, cables and grey boxes will never lure customers through your 'shop window'. It is still vital to match your back-office clout and capabilities with an appealing site.
Provided companies prepare and plan the strategy for online campaigns effectively and thoroughly, there is no reason why they should hit the ground at all.
The companies that are true forward thinkers and industry pioneers, will also incorporate the personalised multi-channel capability into the online strategy. Those that do not embrace the multi-channel environment can expect to experience the slippery slope towards dotcom failure.
Paul McCarthy is managing director at e-commerce software company Brokat UK