When the then CEO of Marks & Spencer laid the blame for an 8.1% drop in sales and resulting fall in the share price on the launch of the company’s £150m new website in 2013, Econsultancy asked the question, where did the Marks & Spencer website launch go wrong?
Our view in situations like these is that the answer lies in how the organisation works.
Ecommerce is far less of a technology challenge than an organisational one. Whether it’s cultures that drive unhelpful behaviours; processes (IT and management ones) that make it difficult to respond to the customer; ways of working in digital teams that don’t reflect good practice and waste resources; or structures that create silos and encourage trench warfare, the single biggest growth area in many businesses is experiencing the growing pains of a channel in its teens.
Fixing this is one of the biggest leadership challenges in modern business. Get it wrong and you may not be around to compete in the 2020s.
Trying to fix it using what worked in the past, however, may not deliver the change you are looking for.
In the 20th century, leadership success came from knowing the answer. Experience, knowledge and critical analysis were prized above all other skills. In the 21st century leadership success comes from knowing how to get to the answer: in today’s business world your experience and what you know could even be a significant barrier to achieving your goals.
The big ideas about leadership suggest that the nature of the problem has changed
In the 1990s the Harvard Business Review introduced the idea of adaptive challenges. Defined as murky, systemic problems with no easy answers, solving them requires the involvement of people throughout the organisation. Adaptive work, the authors argued, was counter-intuitive for leaders as rather than providing solutions they had to ask tough questions and use the collective intelligence of the organisation. Fundamentally it required leaders to challenge the way ‘we do business’.
In the mid 2000s this was refined further by a suggestion that we faced three types of problems, each of which required different strategies to resolve them: tame, critical and wicked. A wicked problem, being complex rather than just complicated, is often intractable, with no obvious solution; moreover, there is no ‘stopping’ point.
A wicked problem
The automatic response is less likely to work
Leaders have a tendency to take charge and move rapidly to ‘command’ when faced with a crisis or a major issue. They move rapidly to decisions and as a consequence can treat complex problems as simple problems thus compounding the issue. However, those most ready to command may be those that are most unsuited to leadership in times of complexity.
An example of the fallibility of the command response is illustrated by Donald Rumsfeld’s famous response in February 2002, when attempting to explain how the US involvement in the Iraq conflict was not progressing to public and media expectation.
His reply, initially derided widely by media commentators, was in fact a very clever assessment of the challenges of leading in ambiguity: “The message is that there are known knowns. There are things we know that we know. There are known unknowns. That is to say there are things that we now know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”
In modern organisations it is the unknown unknowns that form the graveyard of leadership intentions and achievements. This is particularly so in digital.
Working out how to work to deliver success in ecommerce for most businesses is a wicked or adaptive problem. The leader’s role with a wicked problem is to ask the right questions rather than provide the right answers because the answers may not be self-evident and will require a collaborative process to make any kind of progress.
The context in which we lead is itself transformed
You may have come across ‘the world after midnight’ thinking that argues we are living in a new world where just about everything you ever thought was right, is in fact wrong. It suggests that the impact of digital technology on the pace of change in the social and business environments, the scale of connectivity and sheer numbers of people on the planet have combined to create a world that is changing faster than we can learn.
It begs the question: ‘why is it that when we do the same things today that used to work in the past, they no longer work?’
Its proponents argue that organisations need to develop new ways of approaching both old problems and new ones – primarily starting with key stakeholders (consumers and customers) and using insights into their actions and behaviours to generate solutions where the implementation strategy is ‘test and learn’ as opposed to the ‘big bang’ thinking that once dominated engineering, IT and other project-oriented functions.
If you are unfamiliar with this then you may have encountered the US military descriptor ‘VUCA’: a world that is volatile, uncertain, complex and ambiguous. Its relevance for leaders is in how they view the conditions under which they make decisions, plan forward, manage risks, foster change and solve problems.
The use of VUCA in business organisations is often in a strategic process that helps leaders anticipate the issues that can shape competitive conditions, understand the potential consequences of issues and actions, recognise interdependences, prepare for alternative scenarios and interpret events.
With both of these approaches the point is clear: the context has changed and that makes past assumptions questionable, and old ways of doing things potentially less likely to deliver results. This means that change is dangerous territory for leaders.
So we need a different mind-set to achieve results
We argue that the key to delivering performance under these circumstances is to shift the organisation mind-set from leadership driven by theses to leadership driven by hypotheses. In a world that is changing faster than we can learn, where problems are adaptive rather than technical, business leaders have to build the capability to understand the difference between a thesis and a hypothesis and build the processes and skills to develop hypotheses collaboratively with their customers.
A thesis is a theory put forward as a premise to be maintained or proved whilst a hypothesis is a proposed explanation made on the basis of limited evidence as a starting point for further investigation. The ‘old world’ model of arguing a thesis to justify investment is no longer tenable – given that there are no longer right answers that are clear and obvious. If test and learn is the best way forward, then organisations have to be able to test against hypotheses that are informed by ‘deep data’ about customers and the market.
These hypotheses can be used to test solutions that can be rapidly adopted as ‘business as usual’ should they be successful. Organisations who continue to look for theses where all the data and thinking is aimed at justifying a single (and often costly) solution are far less likely to succeed.
This thinking underpins our approach to improving ecommerce performance in both optimisation and digital marketing. The biggest challenge our clients face is shifting how their organisations think about and respond to the customer. But we need to understand that the organisation can conspire to thwart our ambitions.
In our book we introduced the idea of ‘mis-organisation’. Mis-organisation is not mismanagement. This is a malaise of modern organisations that don’t understand the need for adaptive responses and try to treat wicked problems using approaches that are only suitable for technical ones.
You can spot mis-organisation where, despite a well-thought out strategy, people coalesce around processes, policies and practices that conspire to undermine its ability to achieve its goals. Once spotted, fixing it requires people to change behaviour as well as capabilities to improve performance.
In ecommerce, mis-organisation results in significant investment in capital and resources in order to achieve commercial goals being fed into platforms, web design, sales execution and performance analytics that fail to deliver.
In traditional channels, organisations would have acted swiftly to change activity, processes or people at the first sign of persistent under-delivery; in digital channels we seem to be more willing to make the same mistakes again and repeat the cycle with the same inevitable outcome.
Expertise only takes us so far. What differentiates the superior performers is that they have realised that their digital channel is the same as any other.
The drivers of mis-organisation
There are five drivers of mis-organisation:
1. Failure to engage the customer: we use the word engage here carefully. Many businesses ask their customers to rate them, like them, follow them and give them feedback. Far fewer engage them in a way where they can understand what they are saying and why.
What this leads to is the establishment of a ‘customer agenda’ that isn’t really a customer-set agenda, but one that is established internally on information of variable quality.
2. Constant changes to sales execution: changes to sales executions are in themselves neither good nor bad, they can however be costly, time consuming and they definitely will have a commercial impact. Many ecommerce teams seem to make changes against an internal agenda or even as a response to competitor activity.
Though once in a while these might get lucky and deliver a commercial improvement, many will have no impact on the top line and some may well accompany a decline in revenue.
3. Failure to test and learn: not having the right insight is unfortunate, not testing proposed changes to see if there is or is not a positive impact is downright careless. And just because someone tells you they are testing does not mean that they are testing effectively.
We have come across all sorts of testing strategies, few of them really effective. Testing internal ideas is better than nothing, but unless you are testing against real customer insight then it will not drive your business forward to its full capability.
4. Inflexible and slow IT change processes: it would be unfair to single out IT here as a blocker to ecommerce effectiveness, however some of the processes and structures the function has adopted to help deliver a stable and 99.9% reliable systems platform do not necessarily help an organisation that needs to respond rapidly to changes in the marketplace.
LEAN and ‘Agile’ and other standards have their place, but ensuring you have as much flexibility and responsiveness for small changes and a way of fast tracking successful testing outcomes into full operation are critical for success.
5. Poor returns on investment: you might initially think this as an outcome from the four above and in one sense it is. It is the consequence of not having an effective ecommerce operation, but once it exists as an outcome it becomes a driver of mis-organisation in itself.
Frustrated commercial senior leaders faced with continuing under-performance will do what they always do under these circumstances and push for greater and faster change. This puts the system under pressure and encourages shortcuts which mean that the responses are less likely to be based in deep customer insight and even less likely to be tested.
These five drivers work in combination to create a vicious circle in many ecommerce organisations that damages morale in the team and confidence in the business.
For example, the longer the sales execution fails to deliver expected revenue, the more business leaders want to see it changed. If IT change processes are restrictive and inflexible so pressure builds up and when changes are finally made (no doubt at some cost) and they still fail, so the pressure for change increases even further.
These changes fail because they in turn are not being driven by insight into customer interactions at point of transaction, or by poor quality insight, and they have not been put through a rigourous process of testing prior to implementation.
In our experience, the answer to the question ‘how can we improve performance’ that is least likely to deliver improved performance is one containing the words: website, rebuilding, re-skinning and new platform.
For more on this topic, check out these Econsultancy resources: