Organizing for eCommerce is not a tactical decision — how a company organizes its Net efforts has strategic implications. A recent Report from Forrester Research, Inc. (Nasdaq: FORR) found that most firms are still struggling to find the optimal organization for their eCommerce efforts. To succeed, companies need to reshape their organizations along one of two lines — deploy a centralized group within the firm (Dot Corp) to take the existing business online or create a spinoff group within the company (Dot Com) to pursue new business models and market opportunities.
“Most companies have already created eCommerce groups, but they’re struggling with issues like funding, accountability, and reporting relationships,” said Ron Shevlin, principal analyst at Forrester. “What these firms fail to realize is that organization affects everything from determining a company’s priorities to retaining great talent and attracting critical funding.”
Although the specifics will vary by industry and company, the majority of companies have an opportunity to use the Net to make radical improvements in their current business model. To determine whether a Dot Corp or Dot Com approach best fits their situation, firms need to evaluate a number of factors ranging from current industry position and corporate culture to the availability of internal capital and eCommerce skills.
Forrester believes the majority of companies are strong candidates for a Dot Corp approach that coordinates sales, distribution, and support capabilities across new and old channels. To be effective, the Dot Corp group needs to report into the existing corporate structure, ideally to the CEO or a division president. The group also needs to be funded with capital outlays, analogous to new plant constructions or a geographic expansion. With the right reporting relationship and adequate funding, the group must assume management responsibilities for online products and services. This includes identifying the requirements for Net-based products and services, orchestrating technical development efforts, and defining revenue, cycle time, and cost reduction targets.
Candidates for the Dot Com approach are industry laggards that need to overcome capital, cultural, and skills limitations to catch up with the competition. Dot Com groups need to operate outside the company’s existing structure to avoid turf battles and keep the focus on eCommerce opportunities. This group should also be given the freedom to experiment, lose money, act rapidly, and be free from existing resource allocation mechanisms.
Creating new ways to do business with the Net will inevitably result in process, product, and customer ownership conflicts. In the case of Dot Corp success, companies must decide whether to hand new eCommerce apps and processes back to the old organizational structure, merge the old with the new, or let the two continue to coexist. Successful Dot Com efforts can lead to competition over customer and product ownership. Companies can either migrate the old business to the new or kill off the old business altogether, proactively destroying the original enterprise.
“Resolving these conflicts will involve shifting power bases for executives like CIOs who see their technology stranglehold threatened,” added Shevlin. “Companies that don’t resolve these power struggles will get mired in internal political battles — and find their online efforts stuck in the mud.”