Sometimes, all it takes to boost performance on your e-commerce site is a little tidying up -- snappier pictures and graphics, maybe some new features. Consider, however, that what your site might really need is a full platform makeover.
As e-commerce gets more sophisticated and consumer expectations continue to rise, many retailers are considering prettying up their existing Web sites with improved graphics or new features in order to make them more attractive to consumers. While such enhancements can make your site more appealing in the near term, they won't change the makeup of your online store.
So, is your site better off with a few enhancements, or do you need to fundamentally re-think your approach toward e-commerce based on meeting your key performance indicators for the future?
To adequately answer this conundrum, there's a series of questions that must be answered. When addressing these questions, it's important to be honest with yourself.
On Performance:
Is your site delivering pages at lightning fast speeds and will it scale to meet seasonal peaks in traffic? What is your average site uptime? Does your conversion rate beat the industry average or can you improve your order size by adding deeper merchandising functionality? Are you having high shopping cart abandonment rates? Are you getting a steady level of site traffic from your SEO or is your current platform limiting your customer's ability to find your Web store?
On Cost:
What are all the costs associated with running the site? Are your site maintenance processes efficient or do you need a large staff in order to make frequent changes to your Web store? What are your hardware and software upgrade costs and can they be reduced?
On Growth Strategies:
Have you thought about the strategic nature of your site? Is the current platform limiting your ability to sell internationally? Can you leverage the existing platform to roll out new Web stores quickly? Is there a deeper multi-channel strategy that will make my customer relationships more profitable? Is your site secure? If not, what does it mean to your business if you have a security breach? Does the Web site meet the standards set by your competition?
As you can see there is quite a bit to think about when it comes to your e-commerce site, and the questions above aren't even the half of it. As an online retailer, you need to determine return on investment (ROI) across the business -- customer experience can't be your only benchmark for deciding how to improve the Web site. When starting the evaluation process, first benchmark your site statistics against the industry averages to get a rough idea of your performance. Some industry averages that deserve consideration include the following:
• Site uptime better than 99.88 percent (should be shooting for 99.95 percent or better)
• Sub-second page loads
• Better than a 3 percent conversion rate
• Shopping cart abandonment under 60 percent
• Average order size uplift year over year of 4 percent (excluding price increases)
• Site maintenance cost growing 15 percent year over year
Of the industry averages above only conversion, shopping cart abandonment, and possibly, customer retention numbers can be measured by making incremental visual changes to the site. You will never really know for sure if the improvements were a result of the changes you made unless you A/B test against the old page layouts. What happens if you don't have A/B testing capabilities in your current e-commerce platform?
In the age of sizzle it may be fashionable or easy to make incremental improvements to your e-commerce site that simply look good, but eventually, that lipstick will wear off, once again revealing the limitations that have always been there and holding you back. Just remember that you can't sell if the site is down or your new graphical pages take 20 seconds to load. If that's the case, your site may need more than a light makeover.
If you decide that a new platform is required, consider your overall business strategy and then decide how e-commerce plays a vital role in the big picture. Take a deep look into the ROI that can be generated with a new site including improved sales, faster time to market, and lower total cost of ownership. Lastly, build a timetable to sell the replatforming project internally, select a platform vendor that has the functionality you need and the expertise to help you grow, and set reasonable targets for launching your new sites.
Identifying your favourite website, suggest at least three (3) changes for improvement. None is not an option!!
Tuesday, February 15, 2011
Wednesday, February 9, 2011
How IT affects Decision in Business
How IT Shapes Top-Down and Bottom-Up Decision Making
What determines whether decisions happen on the bottom, middle, or top rung of the corporate ladder? New research offers a surprising conclusion: The answer often lies in the technology that a company uses.
Information-based systems, such as Enterprise Resource Planning (ERP) software, will push decision-making toward the bottom of the corporate ladder. Communication systems, such as e-mail and instant messaging applications, will push the decision-making process toward the top.
And that means developing an IT strategy isn't all about deploying the best technology, says Raffaella Sadun, an assistant professor of strategy at Harvard Business School.
"The bottom line is that whoever is in charge of the acquisitions and the IT strategy, they obviously cannot just think about the technology side, they also have to think about the organizational side," she says. "Traditionally, technology is thought of as a tool that enables empowerment, but that's not always the case."
Sadun discusses the issue in "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," a paper she cowrote with Nicholas Bloom of Stanford University and Luis Garicano and John Van Reenen of the Centre for Economic Performance, London School of Economics.
"Technologies that make the acquisition of information easier at the lower level of the hierarchy are associated with a decentralization of the decision-making process," Sadun says. "On the other hand, we have the communication technologies, which actually do exactly the opposite."
IT's different roles
Companies, however, often fail to consider the disparate roles of their software systems, let alone their effects on organizational behavior. Rather, they lump "information technology" into one amorphous idea—the "IT" department—which encompasses all the technology in the organization.
"Technology tends to be dumped into a single category," Sadun says. "The reality is that IT is a huge, heterogeneous set of technologies."
Similarly, when examining issues such as organization and productivity, industry and academic studies historically tend to treat information and communication technologies as "an aggregate homogeneous capital stock," according to the paper. To that end, Sadun and her fellow researchers set out to show how—and why—managers need to consider the very different organizational effects of communication and information technologies.
"This difference matters not just for firms' organization and productivity, but also in the labor market, as information access and communication technology changes can be expected to affect the wage distribution in opposite directions," their paper states.
The researchers looked at non-production decisions such as capital investment, new hires, and new product plans. Such decisions are either centralized near the top of the corporate ladder or decentralized and delegated to the top of a particular business unit. And the decision makers often depend on ERP software, which facilitates the dissemination of information throughout a large company, enabling detailed coordination among various operating units.
Next, they looked at production decisions, which involve figuring out the tasks necessary to meet the goals and deciding how to pace them. These decisions are generally the bailiwick of either a factory floor worker or a supervisor. For those cases, the researchers studied the role of Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) software in decision-making.
In both instances, the researchers hypothesized that the information software would lead to decentralized decision-making. Because the software eases access to the information necessary to make important choices, both the ERP and CAD systems would increase the likelihood that plant managers and production workers would make decisions and act on them without having to consult an executive at headquarters.
On the other hand, the team hypothesized that a rise in leased lines and corporate intranets would lead to a rise in centralized decision-making at the top of the corporate ladder.
Enabling micromanagement
In the past, communication often depended on faxes, overnight delivery services, "snail mail," or site visits. Even with phone calls, it was difficult for anyone at headquarters to make educated decisions and communicate them to branch offices. In those cases, it was natural to cede control of daily operations to a local manager.
With today's networking technologies, it's easier for top executives to keep a constant flow of communication with branch offices. However, the network may actually deter innovation. When technology makes it easier to communicate, erstwhile independent workers may find themselves pestering their bosses with e-mailed questions throughout the day. Micromanaging executives find themselves making all the decisions and constantly sending mandates down the corporate ladder.
"Whenever there is a reduction in the cost of transmitting information, it's easier for the person down in the hierarchy to communicate with the CEO," Sadun says. "And the CEO can monitor constantly what this person is doing and just give orders, rather than rely on the judgment of those below."
The research team evaluated data from some 1,000 manufacturing firms in eight countries, including detailed technology rollout histories and surveys that gauged the relative decisional autonomy of plant managers and floor workers. (In gauging the factors that determine whether a firm adopts any given technology, the researchers considered geographic variables that might affect the cost of acquiring the technology—the firm's distance from the Walldorf, Germany, headquarters of ERP market leader SAP, for instance, and the fact that telecom industry regulations vary from country to country, which means networking prices vary, too.)
The findings were consistently parallel with the hypotheses: An increase in the penetration of ERP systems led to a substantial increase in plant manager autonomy. A CAD/CAM deployment raised the likelihood of floor worker autonomy. But communication technologies served to lower autonomy, meaning more decisions happened at the corporate level.
"I was reassured and surprised at the same time that these results were holding across countries and industries," Sadun says.
The importance of trust
That said, Sadun notes that technology is hardly the only factor that determines whether a firm allows decision-making both up and down the corporate ladder. Another major factor lies in cultural differences across and within countries. In a separate study, Sadun found that otherwise similar companies showed huge differences in decision-making tactics, according to their geographical location. In the paper "The Organization of Firms across Countries," coauthored with Bloom and Van Reenen, she documents that firms located in areas with high levels of trust tend to be systematically more decentralized than those in areas with low levels of trust.
Sweden and Portugal, for example, seem to be on opposite ends of the trust spectrum. "There's huge cross country heterogeneity in the way even apparently similar firms decide how to allocate decision rights within the firm," Sadun says. "Take Swedish manufacturing companies, for example. You see that they are completely decentralized, and the middle manager is basically a mini-CEO with loads of decision-making power. And then you take a firm that produces exactly the same good, but instead of in Sweden, it's in Portugal. And there, the middle manager doesn't decide anything and is completely dependent on the authority of the CEO.
"In our research," she continues, "we argue that different levels of trust are a key determinant of these differences. If a CEO can trust his senior managers, he will be more willing to decentralize decision-making. For example, there might be a lower concern about the fact that managers will use their power to pursue their personal interests instead of those of the firm."
Businesses may not want to integrate an IT system, rather opting for the collation of their resources manually. Discuss the pros of implementing such a system to enhance their overall operations in three separate areas of the business.
What determines whether decisions happen on the bottom, middle, or top rung of the corporate ladder? New research offers a surprising conclusion: The answer often lies in the technology that a company uses.
Information-based systems, such as Enterprise Resource Planning (ERP) software, will push decision-making toward the bottom of the corporate ladder. Communication systems, such as e-mail and instant messaging applications, will push the decision-making process toward the top.
And that means developing an IT strategy isn't all about deploying the best technology, says Raffaella Sadun, an assistant professor of strategy at Harvard Business School.
"The bottom line is that whoever is in charge of the acquisitions and the IT strategy, they obviously cannot just think about the technology side, they also have to think about the organizational side," she says. "Traditionally, technology is thought of as a tool that enables empowerment, but that's not always the case."
Sadun discusses the issue in "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," a paper she cowrote with Nicholas Bloom of Stanford University and Luis Garicano and John Van Reenen of the Centre for Economic Performance, London School of Economics.
"Technologies that make the acquisition of information easier at the lower level of the hierarchy are associated with a decentralization of the decision-making process," Sadun says. "On the other hand, we have the communication technologies, which actually do exactly the opposite."
IT's different roles
Companies, however, often fail to consider the disparate roles of their software systems, let alone their effects on organizational behavior. Rather, they lump "information technology" into one amorphous idea—the "IT" department—which encompasses all the technology in the organization.
"Technology tends to be dumped into a single category," Sadun says. "The reality is that IT is a huge, heterogeneous set of technologies."
Similarly, when examining issues such as organization and productivity, industry and academic studies historically tend to treat information and communication technologies as "an aggregate homogeneous capital stock," according to the paper. To that end, Sadun and her fellow researchers set out to show how—and why—managers need to consider the very different organizational effects of communication and information technologies.
"This difference matters not just for firms' organization and productivity, but also in the labor market, as information access and communication technology changes can be expected to affect the wage distribution in opposite directions," their paper states.
The researchers looked at non-production decisions such as capital investment, new hires, and new product plans. Such decisions are either centralized near the top of the corporate ladder or decentralized and delegated to the top of a particular business unit. And the decision makers often depend on ERP software, which facilitates the dissemination of information throughout a large company, enabling detailed coordination among various operating units.
Next, they looked at production decisions, which involve figuring out the tasks necessary to meet the goals and deciding how to pace them. These decisions are generally the bailiwick of either a factory floor worker or a supervisor. For those cases, the researchers studied the role of Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) software in decision-making.
In both instances, the researchers hypothesized that the information software would lead to decentralized decision-making. Because the software eases access to the information necessary to make important choices, both the ERP and CAD systems would increase the likelihood that plant managers and production workers would make decisions and act on them without having to consult an executive at headquarters.
On the other hand, the team hypothesized that a rise in leased lines and corporate intranets would lead to a rise in centralized decision-making at the top of the corporate ladder.
Enabling micromanagement
In the past, communication often depended on faxes, overnight delivery services, "snail mail," or site visits. Even with phone calls, it was difficult for anyone at headquarters to make educated decisions and communicate them to branch offices. In those cases, it was natural to cede control of daily operations to a local manager.
With today's networking technologies, it's easier for top executives to keep a constant flow of communication with branch offices. However, the network may actually deter innovation. When technology makes it easier to communicate, erstwhile independent workers may find themselves pestering their bosses with e-mailed questions throughout the day. Micromanaging executives find themselves making all the decisions and constantly sending mandates down the corporate ladder.
"Whenever there is a reduction in the cost of transmitting information, it's easier for the person down in the hierarchy to communicate with the CEO," Sadun says. "And the CEO can monitor constantly what this person is doing and just give orders, rather than rely on the judgment of those below."
The research team evaluated data from some 1,000 manufacturing firms in eight countries, including detailed technology rollout histories and surveys that gauged the relative decisional autonomy of plant managers and floor workers. (In gauging the factors that determine whether a firm adopts any given technology, the researchers considered geographic variables that might affect the cost of acquiring the technology—the firm's distance from the Walldorf, Germany, headquarters of ERP market leader SAP, for instance, and the fact that telecom industry regulations vary from country to country, which means networking prices vary, too.)
The findings were consistently parallel with the hypotheses: An increase in the penetration of ERP systems led to a substantial increase in plant manager autonomy. A CAD/CAM deployment raised the likelihood of floor worker autonomy. But communication technologies served to lower autonomy, meaning more decisions happened at the corporate level.
"I was reassured and surprised at the same time that these results were holding across countries and industries," Sadun says.
The importance of trust
That said, Sadun notes that technology is hardly the only factor that determines whether a firm allows decision-making both up and down the corporate ladder. Another major factor lies in cultural differences across and within countries. In a separate study, Sadun found that otherwise similar companies showed huge differences in decision-making tactics, according to their geographical location. In the paper "The Organization of Firms across Countries," coauthored with Bloom and Van Reenen, she documents that firms located in areas with high levels of trust tend to be systematically more decentralized than those in areas with low levels of trust.
Sweden and Portugal, for example, seem to be on opposite ends of the trust spectrum. "There's huge cross country heterogeneity in the way even apparently similar firms decide how to allocate decision rights within the firm," Sadun says. "Take Swedish manufacturing companies, for example. You see that they are completely decentralized, and the middle manager is basically a mini-CEO with loads of decision-making power. And then you take a firm that produces exactly the same good, but instead of in Sweden, it's in Portugal. And there, the middle manager doesn't decide anything and is completely dependent on the authority of the CEO.
"In our research," she continues, "we argue that different levels of trust are a key determinant of these differences. If a CEO can trust his senior managers, he will be more willing to decentralize decision-making. For example, there might be a lower concern about the fact that managers will use their power to pursue their personal interests instead of those of the firm."
Businesses may not want to integrate an IT system, rather opting for the collation of their resources manually. Discuss the pros of implementing such a system to enhance their overall operations in three separate areas of the business.
Tuesday, February 1, 2011
Streaming TV
Hype surrounding streaming TV services is a bit over the top
Today, almost all Canadians watch TV by subscribing to what are called broadcasting distribution undertakings (BDUs): cable, IPTV and satellite TV. But with a broadband Internet connection, you can cut out those distributors and go around them and watch television on your TV, laptop or tablet for (theoretically) less money – otherwise known as Over-the-top (OTT).
This is expected to be a big thing in 2011, so much so that this has been proclaimed the “year of the cable cut.” So why are we much more skeptical about OTT penetration this year?
1 – Many of these potential cord-cutting solutions have been available in the U.S. for most of 2010, but very few consumers have cancelled their TV subscriptions. There was a drop of 700 000 subscriptions in the last quarter, but it appears that the losses were mainly in older, poorer households without Internet connections. Looks like the economy is more to blame than OTT. Based on the data so far, only about 3 per cent of U.S. homes have cut the cord... and kept it cut.
2 – In the 1980s, the initial adoption of VCRs was slowed by the fact that there were competing platforms: VHS and Beta. The lesson learned was that there is a significant risk to betting on one video or TV technology before the eventual standard emerged. We are seeing some of that in OTT adoption today. With so many non-compatible technologies, many consumers are waiting for a clearer picture.
3 – Many folks never figured out how to make their VCR stop blinking 12:00, let alone get it to do more complicated things. OTT is worse. A few months ago a former tech exec, current venture capitalist and licensed pilot tried an OTT service. Afterward he tweeted “I tried XXXXXX TV yesterday. Flying a Cessna is easier and has fewer controls than the XXXX remote.” (Names have been redacted to protect the innocent. Or the guilty.) Complexity and difficulty to install are big barriers, at least for most users.
4 – Watching TV is a passive activity. Viewers aren’t called couch potatoes for nothing. Most of the time, we tend to watch what is on and don’t bother actively thinking about what we want to watch, search for it, stream it, etc... We are “linear” TV programming addicts. Even in markets with 50 per cent DVR penetration, only about 3-5 per cent of television content is watched in a non-linear fashion. We know that sounds low, but a lot of content doesn’t lend itself to being recorded or streamed. Have you ever saved the Weather Channel from last July and watched it now?
5 – Video, especially TV-equivalent quality video, uses up a lot of bandwidth. YouTube is one thing, but every hour of HD you stream is about 2.6 Gigabytes of data. Given that most Canadians have monthly bandwidth caps from their ISP, even those with the biggest plans can stream fewer than 30 hours per month. Not much when the average home watches 30 hours per week.
The bandwidth cap situation is much better in the U.S. Some of their ISPs have theoretically unlimited usage. But that may not last. In the most recent quarter, streaming TV was watched by only a tiny percentage of Americans…but that tiny percentage accounted for more than 20 per cent of all internet traffic during prime time. If OTT grows even a bit, we predict that we will see most U.S. ISPs instituting bandwidth caps. We are also likely to see Canadian caps go up to U.S. levels over time due to competitive pressures.
6 – Finally, the TV industry is very cautious about OTT. They aren’t sure that the new revenue model will be as profitable as the old model, and they are not making all their crown jewel programming available via streaming. As a consumer, you may be mad at them for doing that, but as long as that stays their policy there will continue to be two big problems for consumers trying to cut the cord. First, you will need to stitch together OTT services or devices to duplicate even 90 per cent of the content you get now. Second, getting that last 10 per cent will be impossible. The networks and other players will deliberately keep their biggest audience grabbers (things like American Idol) away from the paws of the streamers as long as they can.
None of the above means that OTT won’t be huge some day. None of it means that a number of Canadians won’t mind missing some content, won’t mind being an early adopter, or won’t do virtually anything to cut the cord. But for 2011, we predict that out of the more than 9 million households in this country that pay for cable, satellite or IPTV services, fewer than 250,000 will do so.
Discuss: What might be some of your concerns with streaming TV vs. the traditional methods? What are some of the benefits you might experience? Idenitfy one other source of streaming TV other then Netflix.
Today, almost all Canadians watch TV by subscribing to what are called broadcasting distribution undertakings (BDUs): cable, IPTV and satellite TV. But with a broadband Internet connection, you can cut out those distributors and go around them and watch television on your TV, laptop or tablet for (theoretically) less money – otherwise known as Over-the-top (OTT).
This is expected to be a big thing in 2011, so much so that this has been proclaimed the “year of the cable cut.” So why are we much more skeptical about OTT penetration this year?
1 – Many of these potential cord-cutting solutions have been available in the U.S. for most of 2010, but very few consumers have cancelled their TV subscriptions. There was a drop of 700 000 subscriptions in the last quarter, but it appears that the losses were mainly in older, poorer households without Internet connections. Looks like the economy is more to blame than OTT. Based on the data so far, only about 3 per cent of U.S. homes have cut the cord... and kept it cut.
2 – In the 1980s, the initial adoption of VCRs was slowed by the fact that there were competing platforms: VHS and Beta. The lesson learned was that there is a significant risk to betting on one video or TV technology before the eventual standard emerged. We are seeing some of that in OTT adoption today. With so many non-compatible technologies, many consumers are waiting for a clearer picture.
3 – Many folks never figured out how to make their VCR stop blinking 12:00, let alone get it to do more complicated things. OTT is worse. A few months ago a former tech exec, current venture capitalist and licensed pilot tried an OTT service. Afterward he tweeted “I tried XXXXXX TV yesterday. Flying a Cessna is easier and has fewer controls than the XXXX remote.” (Names have been redacted to protect the innocent. Or the guilty.) Complexity and difficulty to install are big barriers, at least for most users.
4 – Watching TV is a passive activity. Viewers aren’t called couch potatoes for nothing. Most of the time, we tend to watch what is on and don’t bother actively thinking about what we want to watch, search for it, stream it, etc... We are “linear” TV programming addicts. Even in markets with 50 per cent DVR penetration, only about 3-5 per cent of television content is watched in a non-linear fashion. We know that sounds low, but a lot of content doesn’t lend itself to being recorded or streamed. Have you ever saved the Weather Channel from last July and watched it now?
5 – Video, especially TV-equivalent quality video, uses up a lot of bandwidth. YouTube is one thing, but every hour of HD you stream is about 2.6 Gigabytes of data. Given that most Canadians have monthly bandwidth caps from their ISP, even those with the biggest plans can stream fewer than 30 hours per month. Not much when the average home watches 30 hours per week.
The bandwidth cap situation is much better in the U.S. Some of their ISPs have theoretically unlimited usage. But that may not last. In the most recent quarter, streaming TV was watched by only a tiny percentage of Americans…but that tiny percentage accounted for more than 20 per cent of all internet traffic during prime time. If OTT grows even a bit, we predict that we will see most U.S. ISPs instituting bandwidth caps. We are also likely to see Canadian caps go up to U.S. levels over time due to competitive pressures.
6 – Finally, the TV industry is very cautious about OTT. They aren’t sure that the new revenue model will be as profitable as the old model, and they are not making all their crown jewel programming available via streaming. As a consumer, you may be mad at them for doing that, but as long as that stays their policy there will continue to be two big problems for consumers trying to cut the cord. First, you will need to stitch together OTT services or devices to duplicate even 90 per cent of the content you get now. Second, getting that last 10 per cent will be impossible. The networks and other players will deliberately keep their biggest audience grabbers (things like American Idol) away from the paws of the streamers as long as they can.
None of the above means that OTT won’t be huge some day. None of it means that a number of Canadians won’t mind missing some content, won’t mind being an early adopter, or won’t do virtually anything to cut the cord. But for 2011, we predict that out of the more than 9 million households in this country that pay for cable, satellite or IPTV services, fewer than 250,000 will do so.
Discuss: What might be some of your concerns with streaming TV vs. the traditional methods? What are some of the benefits you might experience? Idenitfy one other source of streaming TV other then Netflix.
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