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Is Your Organization Ready for Cross-Channel?


What is required to build a successful cross-channel organization and how does one insure maximum return on those investment dollars? Point of View By Andrew Macey Vice President Strategy, SapientNitro

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									           POINT OF view
            POINT OF view

Is Your Organization Ready
for Cross-Channel?
By Andrew Macey, Vice President, Strategy, SapientNitro

 2010 Black Friday sales were up only .3 percent over last year, yet online sales are up 16 percent
 against last year. And, 60-70 percent of offline, store and catalog sales are now impacted in some way
 by digital commerce, either through comparative ratings and reviews, research, or targeted promotions
 and personalized campaigns. Almost all retailers are making significant investments, ranging in scale
 from about 1-3 percent of revenue, in cross-channel capabilities including online, mobile and social
 media to build brand and drive new revenue streams.

 Despite all this momentum and spend, however, few companies have managed to successfully bring
 together the thinking, skills, and experience required to create a unified, successful cross-channel
 organization. What’s required for a company to build a successful cross-channel organization? How
 does one ensure maximum return on all those investment dollars?

 1. Change your mindset
 The first and most important step is to think of cross-channel as a combination of touch-points that
 together must create a seamless customer experience, and an organization has to accommodate that
 change in thinking. It doesn’t matter whether your customer is buying online to pick up in the store,
 returning online purchases to the store, doing comparative price checks on a phone while in the store,
 or using mobile coupons in the store — marketing and merchandising have to be able to work together
 to create that seamless customer experience. A helpful tool to use is a day-in-the-life map of what your
 customer actually does and wants to be able to do as he or she moves from online to store to catalog
 and back again. Design a set of experiences around those day-in-the-life scenarios.

 2. Evolution, not revolution
 Recognize that any organization has to evolve over time. It’s not reasonable to believe that all best
 practices and new ideas can be adopted from day one. A framework that can be helpful to gauge
 relative strength is a maturity model (in Figure 1).

                        © Sapient Corporation, 2011
                    POINT OF view

Organizations move “up” the matrix from level one to level five as they develop more cross-channel
capabilities. Aspects of the organization should be evaluated, designed, and built with respect to
incentives and rewards, people and culture, business processes, technology, and internal structure as
companies develop a more sophisticated set of capabilities.

                                         INCENTIVES                  PEOPLE & CULTURE                         PROCESSES                      TECHNOLOGY
                                                                                                                                              TECHNOLOGY                       STRUCTURE

     Level 5: Optimized          • Incentives broadly rolled out   • Distinct multi-channel culture    • Process updated for           • Technology enables            • Full update to optimal
                                                                     bedded in organization              multi-channel                   tracking of multichannel        stucture for the
Full roll-out, organization is   • Continuously monitored /                                                                              customers
                                                                                                       • Completed end-to-end                                            organization type
nimbly responding/executing        optimized / communicated        • Continuously monitored /            product lifecycle, shared     • Use of flexible cloud-based
          on metrics                                                 optimized / communicated            future vision and scenerios     systems considered

                                 • Incentives adjusted in          • Roll out initial activities and   • Core processes updated        • Core technology upgrades      • Structural changes for
 Level 4: Limited Execution        select cases                      partnerships, working               for multi-channel              rolled out                       high-priority areas
Implemented changes across                                           groups, vision                                                                                      completed
   high-priortiy channels

                                 • Plan developed for              • Shared vision created             • Plan developed for cross      • Close on major                • Excecutives have identified
    Level 3: Alignment             addressing conflict                                                   channel visibitlity             investments needed              structural changes needed
                                                                   • Broaden consensus
Gained consensus on design                                                                                                             • Vendor identified
  elements to be changed                                           • Determine approach to
                                                                     shaping culture

                                 • Identification of where         • Conversation Started              • Current state processes       • Identified gaps in cross-     • Excecutives have shared
    Level 2: Assessment            incentives are in conflict                                            identified                      channel tracking                vision of gaps and current
      Identified gaps and          completed                       • Consensus built around                                                                              challenges
   established foundational                                          need for change                   • Gaps Identified               • Created baseline state
                                 • Baseline metrics set                                                                                                                • Consenseus built around
   vision & baseline metrics                                                                                                                                             need for change

                                 • Channel conflict and mis-       • Culture fails to recognize        • Internal processes            • Technology gaps prevent       • Organizational structure
                                   aligned incentives slow the       the value of multi-channel          oriented to single-             single view of multi-           inhibits optimized multi
         Level 1: Initial          adoption of multi-channel                                             channel or silced activites     channel customer                channel customer
 Initial organizational status     operations                                                                                                                            experience
                                                                                                                                       • Lack of flexible

3. Evaluate internal capabilities with an unbiased eye
Figure out where the current organization lies within the maturity model by assessing its capabilities
in each functional area, including marketing, merchandising, Web commerce, fulfillment, customer
service, international expansion, and IT. Consider the ability to design and execute things like targeted
campaigns, seamless cross-channel support, dynamic and consistent pricing, or cross-channel
analytics. Evaluate against several criteria including depth of skills relative to the future vision,
readiness and ability to change, and expected impact and size of impending change.

4. Look outside for comparative models
There is no one best model for cross-channel organizations, despite the intuitive appeal such an idea
offers, but there are a small and finite number of viable options that can be adapted, and the core
element of best thinking revolves around developing a cross-channel or digital Center of Excellence
(COE) that serves as the building block for future capabilities for domestic and international needs.

The first model is a COE or digital operations hub with strategy, Web site, mobile, and capital spending
responsibility, but no direct P&L (profit and loss statement). IT, such as it relates to digital, online,
and call center operations, is part of this organization, and the organization serves its business line
P&L counterparts through named liaisons that help prioritize capital spending and investment across
the company as a whole. In this model, there is a great ability to try new ideas, experiment, and learn
without disruption to the traditional, P&L-based business lines.

The second model is a digital operation COE that has its own P&L for direct sales. A Web site, call
center, and fulfillment for any digitally-enabled orders run through this organization. This simplifies
investments, since there is no longer competition between channels, but the change is large and it’s a
big strategic shift to execute in this model.

Finally, the most sophisticated version of the cross-channel organization is where digital is embedded
within each business line, and it is no longer a separate organization. This is the most evolved and
advanced organization, and the hardest to achieve without a lot of duplicated cost in various brands

                                           © Sapient Corporation, 2011
             POINT OF view

or business lines.

5. There is no one-size-fits-all best practice answer
It may sound obvious, but it’s worth reiterating that there is no one-size-fits-all best practice. The challenge
is to decide what functional aspects of a digital or cross-channel organization should constitute the COE
for a given company. A good way to think through how to build the COE is often to distinguish between
things like transactional commerce capabilities versus creation, development, editing, and publishing of
content. Content generally should be locally produced (or outsourced), but in accordance with standardized
workflows, methods, and tools that govern how content will be published, maintained, and reused across
channels. It also assumes a content management system to enable reuse.

6. Centralize or decentralize?
The benefits of centralizing a lot of business functions include generally lower total cost, more control,
and clear standards. Potential negatives are that a COE runs the risk of being further removed from the
customers than are the P&L business lines, and the fact that response to the market could be slower than
if driven within P&L-based business lines. On the other side of the coin, decentralizing digital functions can
create a quick response to market needs, but with a loss of central control, consistency, and standards and a
likely increase in duplication and higher total cost to the company. For all these reasons, a balanced approach
to a COE that evolves over time is usually most appropriate for customers, employees, and company needs.

7. Include IT as a part of the cross-channel organization plan
IT cannot remain an island, and it has to be a big part of the success of any future digital or cross-channel
COE. Application development, testing, QA, and maintenance and support each need to be considered as they
relate to new capabilities. Outsourcing can also work in the new model, as it is unlikely that an organization
would have all its needed skills in-house from day one, and investing to bring on the right talent takes
time, money, and effort. Focus on building only the most strategic capabilities in-house, like enterprise
architecture or selected application development, while relying on outsourcing either for forward thinking,
strategic perspective, and specific expertise, or for more commoditized IT needs.

In conclusion, there is no better time for any company to be moving toward a new set of digital and cross-
channel capabilities. Momentum is strong, future growth in digital is all but certain to continue, and
consumers will continue to expect more seamless interactions that build brand experiences, boost loyalty
and retention, and bring in new customers — but planning, creating and evolving the digital organization to
make use of any investments in social, mobile, or cross-channel commerce is the hard part, and without the
right organization, it’s impossible to win.

                                Andrew Macey, Vice President, Digital Strategy at SapientNitro
                                Andrew Macey is Vice President, Digital Strategy at SapientNitro,
                                where he is primarily focused on helping companies think through the
                                challenges and benefits of future business models, organizational
                                capabilities, and new ways to create meaningful and rewarding
                                experiences across channels for business and consumer customers.

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                          © Sapient Corporation, 2011

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