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Field Notes: The Digital Path to E-tail

Apr 17, 2014

In three previous posts, we discussed trends in retail and ecommerce (“e-tail”) that we observed during visits to customers who are actively reshaping commerce as we know it. The first installment ("E-tail, Data and the 'Smoosh'") covered the commonality of data for multichannel (or “omnichannel”) user access, in both retail and ecomm. The second ("API Archtitectures for E-tail") took a high-level look at API architectures to implement this. The third post ("How E-Tail Benefits from Digital Transformation") took a deeper dive into some of the implications for three particular e-tail sectors.

In this final post of the e-tail series, we summarize some of the overall key dynamics of API-enabled digital transformation in modern B2C commerce.

It’s the NPS, stupid

Ideally, digital transformations are directly tied to immediate revenue—but it doesn’t always work this way. Sometimes the revenue will come from slower and sometimes painstaking investment in building the right business structure. Investing to achieve this then becomes an act of faith: the company has to believe in a positive outcome.

A number of companies have a strongly stated corporate vision and a roadmap laid out over several years to get there. Others lack as much conviction, however, and need some means to evaluate return on investment and progress on a given plan. In these “empiric” types of transformations, it’s the user experience that is used as the primary gauge (and as a kind of surrogate for revenue).

So net promoter score (a methodology to snapshot a user’s reaction to the online experience they just had), and the costs required to achieve that NPS, become key metrics to justify the investment in the program and measure its progress. Closely aligned with this is the fact that much of the necessary investment is coming from marketing and product budgets (with the “product” being the store’s digital presence) rather than from IT, as has historically been the custom for cloud expansion.

Don't be out-reached

Although businesses believe that investments in digital transformation will pay off in many ways, they also realize that they have no choice. Technology can be a double-edged sword; if you don’t have the latest or most effective, you’re at a disadvantage relative to anyone who does. In e-tail, not having a big data backed, multi-channel capability leaves you susceptible to losing customers and revenue to competitors who do and who can out-reach you, out-convenience you, and out-offer you.

So, in a way, it’s a matter of survival as much as an effort to thrive. Another aspect of this is that large diverse retailers tend to suffer when competing with smaller, single-channel competitors who can better guarantee the customer experience. The consequences of getting multi-channel wrong are huge.

The real work is…

… in the organization. Though implementing the technology to enable digital transformation might not be easy, it is generally a known industrial process at this point, and just takes good planning and execution. Overall, there will probably be much more effort necessary within the social structures of the company—evangelizing, regrouping, aligning, and retraining—based on the post-transition business operations picture.

Jobs will change, sometimes dramatically. Customers will change, too: they’ll be more informed, and have higher expectations. For the e-tailer, this is an opportunity to present an enthusiast to the buyer rather than just a sales person, and to therefore transform the experience. Again, think of the Apple store experience, though Apple is able to “cheat” by being a single brand (more or less) operation rather than a multi-brand supermarket.

Cannibalize your way out of the innovator’s dilemma

Should e-tailers agonize over whether they can cater to demand for new customer experiences, and from new customers, given the need to serve existing customers? No, they don’t have this luxury, because their customers are changing every day, and the Internet of Things is already happening. So e-tailers don’t see this as a “pick a customer” problem.

Yet they may need to deal with some internal conflict as they subsume older, existing channels into the new model. Historically, each customer access vehicle (direct mail campaigns, paper catalog, web, and physical retail) was a separate line of businesses, and structured accordingly. That’s changing as companies seek to unify into a single operational capability, to maximize agility and efficiency. (This is why Apigee prefers to use the term “omnichannel” to refer to the pattern that many e-tailers call “multichannel”.)

Mass personalization

Though it may seem a contradiction in terms, mass personalization is really just a completely individually targeted and specific response that is affordable and feasible at massive scale. Since ancient times, deals have closed because of the best sellers’ abilities to determine an offer the buyer can’t refuse.

With today’s technology, offers and insights on buyer behavior and preferences can be extremely precise and highly customized to each buyer and in real time (rather than having to wait days, weeks, or months for something out of a data warehouse or data mart). As a consumer, you can see this as an insidious intrusion into privacy or useful (why waste time on irrelevant offers? and of course you want the best deal!). However it’s viewed, it’s here to stay.

A revolution beyond e-tail

So this wraps up our exploration of API-enabled digital transformations in commerce, one of the oldest of human endeavors. We looked at  the commonality of digital transformations in commerce, a hallmark use case that the industry views as a kind of Holy Grail for early 21st century shopping, and the fact that API-controlled data must underlie all of this; it’s the key to the user experience.

There are logical ways to structure these API controllers so as to enable social efficiencies within your organization, and minimize back end perturbation but maximize reuse of existing resources, all while maximizing a Darwinian riot of user-facing application revolution. E-tailers that put in the effort are better equipped to compete for the all-important customer, can be smarter about how to manage each customer opportunity, and are much better equipped for the economic realities of 21st century global business expansion (moving into new markets and operating geographies).

Looking forward, it’s worth noting that almost everything we discussed applies outside e-tail, as well. Essentially every sector of our economy, and even civilization, is going through similar evolutions and revolutions. So you should be able to spot these dynamics happening in your area of interest. We’d love to hear about that!

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