Aside from an entertaining observation that “French hotel clerks and young American women learn non-verbal communication at the same place,” Mike Schaffner’s recent article in Forbes.com, “Why Companies Need Web 2.0,” provides a brief but helpful overview of Web 2.0 technology and quick thoughts on how to utilize it. Schaffner, who directs IT for the Valve and Measurement Group of Cameron, suggests applications such as:

 

• Have employees use a MySpace- or Facebook-type site to introduce themselves to the company. These can also be a resource to help employees find a potential car-pool mate, someone with a background in product design or specific experience on a product you are thinking about launching.

·        Mashups can bring together production and operations data from a variety of sources, allowing a production manager to get a good overview of her operations.

·        YouTube-style videos can be used for training or distributing important messages, such as the CEO announcing a new product launch or Joe, the IT help desk guy, receiving an award.

More significant than the “how” of Web 2.0, however, is Schaffner’s observation about the “why”:

The point in all this is that there is a new generation of potential employees and customers that are accustomed to a variety of technologies being available, and they expect to see and use them in the corporate world. Whether and how we deploy these technologies likely will have an impact on our ability to attract new talent to our companies and to find and retain customers.

 

Give me Facebook or give me a new job

His observation about the expectations of a new generation to have access to this technology is strongly reflected in Prescient Digital Media’s intranet consulting services. Executives, right up the CEO level, are showing increased interest in bringing Web 2.0 technology into their environment in order to meet demands from younger employees.

 

A recent survey of a 1,000 European office workers reveals that this concern is well founded. Conducted by IT services firm Telindus, the survey found that:

• 39 per cent of 18 to 24 year-olds would consider leaving if they were not allowed to access applications like Facebook and YouTube.
• A further 21 per cent indicated that they would feel ‘annoyed’ by such a ban.
• The problem is less acute with 25 to 65 year-olds, of whom just 16 per cent would consider leaving and 13 per cent would be annoyed

 

While the varying adoption rate of Web 2.0 technology between consumers and corporations is well documented, the Telindus survey reveals that this delta is becoming a business challenge that organizations must start to take seriously.

 

If you need to get started on your adoption, ideas from Schaffner and others will assist  in planning your strategy, as will  Prescient’s Social Media Adoption Checklist .

For the increasing number of healthcare consumers who appreciate the value of finding relevant health content, a recent article in the New York Times, Google and Microsoft look to change healthcare, offers hopeful insights into how the tech giants plan to enable people to make smarter choices about their health habits and medical care.

 

The article also provides helpful insights for those who must construct online strategies for their organizations, especially when bringing an established value proposition to a new market.

 

Controlling health content

Steve Lohr, the Time reporter, writes that:

 

The Google and Microsoft initiatives would give much more control to individuals, a trend many health experts see as inevitable. “Patients will ultimately be the stewards of their own information,” said John D. Halamka, a doctor and the chief information officer of the Harvard Medical School.

 

Already the Web is allowing people to take a more activist approach to health. According to the Harris survey, 58 percent of people who look online for health information discussed what they found with their doctors in the last year.

 

It is common these days, Dr. Halamka said, for a patient to come in carrying a pile of Web page printouts. “The doctor is becoming a knowledge navigator,” he said. “In the future, health care will be a much more collaborative process between patients and doctors.”

 

Microsoft and Google are hoping this will lead people to seek more control over their own health records, using tools the companies will provide. Neither company will discuss their plans in detail. But Microsoft’s consumer-oriented effort is scheduled to be announced this fall, while Google’s has been delayed and will probably not be introduced until next year, according to people who have been briefed on the companies’ plans.

 

A user defined value proposition

While we can only speculate at this stage on Google’s health plans, it’s a safe bet that the company will continue to extend its well established value proposition.

 

Google’s breakthrough was PageRank, a method of using the link structure of the web, rather than just the characteristics of documents, to provide better search results. Google’s databases maintain billions of pages and employ a proprietary alogorithm to "score" the relevancy of websites for each search query. The highest ranking, or "most relevant" websites for a specific query are listed first in the search results.

 

But Google does not define its value proposition in terms of technical functionality, it expresses it in terms of user experience, according to Tim Armstrong, its VP of Advertising: “Our search index is the value proposition that we offer to our users. The reason people come back to Google every day … is that we offer them non-paid, relevant information, both quickly and totally objectively.” That simple message, based on a clear understanding of customer experience, has provided the company with its growth opportunities in advertising, he adds.

 

The Time article also demonstrates that its value proposition is leading the company into health, because Google is the default starting point for most health searches. “And people are increasingly turning to their computers and the Web for health information and advice. A Harris poll, published last month, found that 52 percent of adults sometimes or frequently go to the Web for health information, up from 29 percent in 2001.”

 

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A 3,600% surge in page views on the day a new website debuts would certainly qualify as a success, and validate a decision to perform a comprehensive revamp of the site. That success is what the Town of Banff and its partners enjoyed last Thursday when it unveiled its new website.

 

As anyone who has even a passing familiarity with websites knows, a comprehensive site redesign is a process not an event. They also know that visits, while critical, are only one success indicator for a site.

 

In Banff’s case, the process that culminated in its successful launch began a number of months ago when it set out to improve a site it knew was not working. In tackling this project, Banff had to achieve a goal that few other municipalities with under 10,000 residents would require: bringing a unique experience online.

 

Prescient was fortunate to be chosen as the partner to collaborate with Town and its partners on this project, which let me experience first-hand the qualities that had to be captured on the site.

 

That experience can best be summarized by the first day of one trip. Walking down Banff Avenue, I had a 360-degree view of the spectacular Canadian Rockies which, because the town sits in a national park, were unobstructed by commercial development. I paused to watch some kids from the local school playing soccer on a pitch by the school before bumping into several people I’d met on previous visits. And at the end of a meeting, I was invited to go canoeing, rock climbing and running. I opted for the run, after which I dined on Buffalo cheeks in a terrific restaurant.

 

Banff, in other words, provides unmediated access to one of the world’s most spectacular environments, which makes it an exciting place to visit. It also attracts residents who have a passion for enjoying that environment. They have a deep-rooted respect for the values of the national park, and are happy to disclose their knowledge of how to enjoy the Rockies. They also appreciate that sharing the town and park with visitors is a reality of living in one of the world’s premier tourist destinations.

 

Research on the old website resulted in a number of key findings, with one emerging strongly: visitors wanted to understand what made Banff special, and residents wanted to see their experience of the town and park reflected on the site.

 

This research played a vital role in driving the process that resulted in last week’s launch. In addition to the spike in visits, Banff’s webmaster Kevin Elliott cites a number of features that have resulted in the site’s positive reception by town residents:

• There’s a lot of information on the site, and it’s easy to find thanks to an intuitive Information Architecture and other navigation aids.
• The look-and-feel incorporates many images of Banff and conveys the Banff experience online.
• The acquisition of a Content Management System (CMS) means town staff can up-date information in minutes instead of hours.
• There’s good information for visitors, but residents can still find the information they need easily.
• The weather appears prominently on the home page.

 

Another excellent feature, one that enables the residents to share their passion for enjoying the Rockies, is “what the locals do”. It means one doesn’t have to step into a Banff watering hole to learn the best way to experience the town and park from the people who know it most intimately.

There was no missing the unveiling of Apple's iPhone last week. It electrified the media and had the audience at Macworld whooping. Almost eclipsing the phone itself was Steve Jobs, and his vision for applying ease-of-use and aesthetic design principles to every device his company produces.

 

A cult of personality was not evident in the presentation by Bill Gates in the same week at the Consumer Electronics Show, however, and the media reaction to Microsoft’s flagship announcement, Vista, had little of the delight that greeted the iPhone.

 

Microsoft’s new operating system has generated interest, but not enthusiasm. While there are passionate exchanges among a certain set whenever Microsoft does anything, the mainstream emotion has been one of resignation about the software giant’s ability to brute force its OS into the market.

 

The contrasting appearances by two giants of the technology world provides an excellent opportunity to think about the role that vision plays in a company’s strategy, and a leader’s responsibility to establish and maintain that vision.

 

The Globe & Mail’s Simon Avery picked up on this opportunity to offer a useful discussion on the styles of Jobs and Gates. In the article, he quotes Roger Kay, president of Endpoint Technologies Associates Inc., a research firm in Wayland, Mass. who observes that: “Microsoft has a certain cult of personality. Gates is thought of as a special guru, and people sit at his feet trying to understand what he’s thinking. That’s totally different from Steve Jobs. He’s an autocrat. He’s a sun king. He’s very capricious, autocratic, and creative and charismatic. He’s all kinds of good things, mixed with some pretty strange things. It’s a totally unique formula.”

 

Where Jobs sets a strategy based on a vision of innovation and elegance, Gates has positioned Microsoft to be a “fast follower,” letting Netscape or Google develop a market and then moving in to dominate it.

 

Famously, before it followed Netscape, Microsoft pursued and then overtook Apple. This story is told in the remarkable PBS documentary “Triumph of the Nerds.” The series not only documents the birth of the rivalry between Jobs and Gates, it also reminds us that the vision on display from both men was present when they conceived their companies decades ago.

 

Consider this statement from Jobs: “The only problem with Microsoft is they just have no taste, they have absolutely no taste…I don’t mean that in a small way I mean that in a big way. In the sense that they don’t think of original ideas and they don’t bring much culture into their product… if it weren’t for the Mac they would never have that in their products and so I guess I am saddened, not by Microsoft’s success - I have no problem with their success, they’ve earned their success for the most part. I have a problem with the fact that they just make really third rate products.”

 

According to Apple’s ex-CEO, John Sculley, Microsoft succeeded because, “The problem was the industry wasn’t measured by who has the best selling personal computer or who has the most innovative technology. The industry was measured by who had the most open system that was adopted by the most other companies and the Microsoft strategy ultimately turned out to be the better business strategy.”

 

The unique qualities of Jobs and Gates could foster admiration more than emulation. But while few of us possess the intelligence, ego, insight, charisma, and drive required to transform industries, the success of both men teach valuable lessons about vision and strategy that we can all apply:

• First, a strategy requires a vision, and it’s the leader’s responsibility to ensure it exists, whether she creates it or facilitates her team to do so.
• Second, it requires a commitment to sustain the vision even when the external environment changes. The same focus on design principles that drove the Mac is guiding the iPhone today, just as Gates is promoting a world of networked entertainment.
• Third, the leader can’t allow the organization to deviate from the vision, especially by trying to emulate a competitor’s strategy. Jobs may begrudge Microsoft its success, but stays focused on inventing products with culture. Gates may admire the elegance of the iPhone, but he’s not going to be first to market with one.

 

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The NY Times has redesigned their website to make it more like the paper version (credit to Tom Marciniak ).

 

Famed Canadian media guru Marshall McLuhan, called the "Oracle of the Electronic Age", coined the phrase and book title, The Medium is the Massage (not ‘message’ but massage… though it’s assumed that this was a carefully crafted pun). While this quote has largely been bastardized and misinterpreted, McLuhan espoused that the medium or channel that conveyed the message shapes the message (or alters it). In other words, the complete message or meaning of a story on TV could be different than the same story communicated in, for example, a newspaper.

 

 

The NY Times is attempting to make the website look and feel more like the newspaper with a five column layout, less color, etc. However, a website is not a newspaper and shouldn’t be mistaken for a newspaper. People read very differently online than they do when actually holding a physical newspaper. When reading a newspaper you can be sitting in almost any position with no screen glare, no animation, no up-to-the-minute stock quotes, etc.

 

However, I must admit, there are things that I really do like about the new site… and the more I look at it the more I like perhaps better than any other newspaper site.

 

The home page is rather busy with its five columns – I don’t know quite where to start reading. But I like the white space. It looks clean. I very much like the three column layout they use under the Today’s Paper tab which includes an enlargeable JPEG of the actual paper version.

 

When reading an article, the page offers the reader a number of interactive options including E-mail, Print, Reprints, Save This and Single Page (though I’m not sure what this option actually does except strip out one or two ads). Also presented a tabbed box called Most Popular. It lists the top 10 most e-mailed articles, the top 10 most blogged articles, and the top 10 most searched terms (top searches were ‘immigration’ and ‘Colbert’ (as in the very funny current affairs comedian and talk show host).

 

 

 

I like the new site; it works for me. What is agreeable to me though is not necessarily agreeable to the masses. (In fact, I guarantee you the NY Times get a handful of both complaints and kudos.) Users generally like a far more simple layout and less cluttered look. In addition to it hugely effective search engine, there’s a reason why Google is so popular. The Google home page is simple to digest and fast to load. The trend to simplicity is more than just a trend – users demand simplicity.

 

Should you consider a five column layout or try to emulate a hard copy publication? I certainly wouldn’t do it. The medium is the message. However, more important than media theory, is an intimate understanding of the needs and expectations of your users and delivering flawlessly.

Building a brand is tough. And it’s getting tougher. Advertising Age numbers reveal that, for example, the number of brands on North American grocery store shelves has tripled since 1991 from 15,000 to 45,000 products. At the same time, the number of your competitors with websites likely has grown ten-fold (or perhaps even greater) since 1995.

 

On the Web, the power of Google has leveled the playing field between the haves and the have nots – big brands can’t necessarily spend their way to a better brand, and new kids on the block are constantly emerging from seemingly nowhere.

 

A recent McKinsey article (Better Branding; subscription only) highlighted the dilemma for marketers: “Building strong brands isn’t getting any easier. An explosion in the number of brands—as well as a proliferation of ways to communicate them, from hundreds of cable channels to the Internet, product placement in movies, and even mobile-phone display screens—has made it tougher to get messages through,” writes McKinsey’s Nora A. Aufreiter, David Elzinga, and Jonathan W. Gordon in Better Branding. “In addition, converging product-performance and service levels in many industries have made it more difficult to sustain existing brands. Meanwhile, the economic downturn has hamstrung marketers by cutting their budgets.”

 

All of that clutter and competition makes it harder to stand out in a crowd. Cash fueled advertising campaigns may create awareness and recognition, but not necessarily build a ‘better’ brand. The brand is all encompassing – from product to service to perception. Understanding your target audience, your users and their expectations and needs, and delivering accordingly, is tantamount to success.

 

Easier said than done.

 

Understanding the user audience requires an analytical approach to consumer research. Although research itself cannot build a brand, the adoption of both old and new analytical approaches to understanding customer behavior and preferences can build sounder strategies for enhancing the corporate brand and winning the hearts and wallets of consumers.

 

“The solid analytics at the heart of the new approach may not only require new skills in the marketing department but also highlight steps that other parts of the organization—from product development to operations to customer service—must take to help deliver the brand,” say Aufreiter et all. “Moreover, some marketers may worry that adopting more quantitative techniques will compromise their creativity. In our experience, though, getting analytical about customer needs and the brand identity helps channel the imagination into areas in which it makes a difference. And the ability to avoid costly trial and error and to build a better brand more efficiently is too compelling to pass up, particularly in challenging economic times.”

 

The good news, however, is that the web is still a relatively new media, when compared to, for example, the ultra competitive retail world. Yet the Internet, as we are coming to know by experience, can propel no names and young kids working in garages into branding superstars.

 

Brand building

 

It goes without saying that building a web brand is far more complex than marketing. A number of key contributors must be carefully mixed and executed to create a valued resonation:  

 

• Site design
• Usability
• Site layout
• Content quality
• Product value
• Order fulfillment
• Customer service

 

Of course these are not the only contributing attributes to the web brand. Some attributes, what Mckinsey calls “antes”, are auxiliary or added benefits that some customers might, for example, expect from a competitor. Think of Amazon.com’s free deliveries – now commonly offered by many of its competitors. Or a hotel website that offers 360 degree pictures of their rooms and property.

 

Successful brands deliver on both customer expectations and also differentiate from the competition.

 

 

Those web brands that have high relevance and a high degree of differentiation from the competition include Ebay, Google and MySpace.

 

Understanding your users

 

Notwithstanding more complex methodologies such as pathway modeling (see Successful Brand Repositioning: Aspirations vs. Achievable Strategies) and conjoint analysis that you may not be looking to digest in a 45 second blog read, there are a number of key measurement tools you should know and use…

 

• One on one interviews
• Customer surveys
• Focus groups
• Usability testing
• Call center tracking
• Market segmentation
• Benchmarking
• Etc.

 

A multiplicity of tools is recommended using both quantitative and qualitative tactics. Depending on your site’s position in the evolutionary curve, some tools and tactics are better than others (see When to use what research tools and Measure your efforts).

 

Moments of Truth

 

Brand is built and reinforced at web touchpoints or moments of truth. Moments of truth would include the initial impression of the site (color and design), product information, checkout process, search engine use, etc.

 

It goes without saying that there are a lot of touchpoints in a standard web transaction – whether or not e-commerce is involved. So, to leave on a practical note after many wasted paragraphs on Mckinsey influenced brand theory, here are some practical suggestions for reinforcing you web brand:

 

•         Prominently display your organization name/logo (upper left corner is now considered standard)

•         Organization’s “tag line” or “value proposition” should also be prominently featured

•         Design that differentiates from competitors

•         Emphasize the most frequently used and high-priority tasks/information

•         A single “Home Page” that is clearly distinguishable from all other pages

•         “About Us” and “Contact Us” sections are clearly labelled in the global navigation or footers on all pages

•         Sections and categories designated with customer-oriented language

•         Site offers multiple navigation paths to priority content and tools

•         Primary navigation area is prominently situated and similar items are grouped closely

•         Straightforward, informative language

•         Succinct grammar, with consistent capitalization and design standards

•         Concise instructions for necessary tasks

•         Search engine optimization (strong page titles, active links, keywords, etc.)

•         Clearly communicated and supported customer service and privacy policies

•         Deliver on your promises

 

Last word of note: branding is not a one-off exercise. Web branding is a continual, fluid journey that requires constant attention, tweaking and care.

 

Here is some additional reading (all the articles are more than a year old but all have offer good lessons – both implicit and explicit):

 

Don't Shout, Listen (Fast Company)

On the Web, Branding Is Back (Business Week)

Web branding is more than skin deep (Gerry McGovern)

A common issue unites all companies, regardless of size and industry: there is never enough money to throw at every opportunity or threat. That fixed budget means investments in one area of the business come at the expense of others.

 

For Small and Medium Sized Businesses (SMBs), those budgetary decisions are especially difficult and visible. By definition, there’s fewer dollars available than in large corporations. And when there’s less than 100 employees and a relatively small customer base, it’s very apparent where resources are going and where they aren’t.

 

As result, investments are made in the areas that offer the most obvious return, and for many SMBs that is not perceived to be their website. Research indicates that 57% of SMBs are making money from their websites, either online or via offline sales. While it’s a growing percentage of revenue, it’s not yet reached the level where every SMB can quantify the benefits of investing in their website.

 

Every company can calculate the benefits of adding salepeople or investing in improved supply chain management systems, however, so it’s easy to understand why the website can lose out to other areas of the business.

 

This question of how to justify website investments was an important part of a seminar we presented to a group of business owners this week. Their companies ranged across a variety of sectors. Their websites, in turn, varied widely in functionality, content quality and visual appeal.

 

We reviewed ROI models that quantify the company-wide benefits created by a site that strongly links to organizational objectives. While each company worked with numbers that were unique to their business, there was one measure they all factored into their plans: 1/20^th of a second.

 

That’s the amount of time in which viewers judge your site, according to researchers in Carleton University’s Human-Oriented Technology Lab. They reached their conclusion by flashing websites for 50 milliseconds and asking study participants to rate them for visual appeal.

 

“Unless the first impression is favorable, visitors will be out of your site before they even know that you might be offering more than your competitors,” says Carleton’s Dr. Gitte Lindgaard. The research, which is reported in E-Commerce Times, suggests that the first impression forms an initital bias that dictates long-term opinions.

 

A positive first impression carries over to other features of the site, such as content. Since people like to be right, Lindgaard reasoned, they will continue to use a website that made a good first impression.

 

It’s an eye-catching stat, and one that certainly captured the attention of the business owners. While the benefits of a well designed site are difficult to quantify, the risk of creating a negative impression in a fraction of a second can be quickly understood.

 

And with that understanding comes an obvious justification for improving the design of a website.

                                                 

 

 

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When you launch your web browser, are you engaging in civic-related communications? Or are you initiating a commercial transaction? Your answer may determine what role you would accept for government involvement in your online experience and what responsibility you believe corporations have for enabling your communications and transactions.

 

Why is this significant for web strategy? Because, in western democracies, we have the luxury of assuming that businesses and their customers will have guaranteed access to the Internet at a reasonable price. That assumption rests on decisions made by governments regarding how to regulate, or not, the Internet. It is also shaped by how the companies who create and manage the backbone of the Internet interpret their responsibility toward customers and shareholders.

 

In a high-profile example of what can happen in countries that lack our democratic tradition, we witnessed Google agreeing to censor its site in China. The move has been criticized, but not by Bill Gates, who defended his rival’s decision. Gates said that Internet technology contributes to political freedom and added that “I think [the internet] is contributing to Chinese political engagement . . . Access to the outside world is preventing more censorship.”

 

A recent article in The Nation, “The End of the Internet?” suggests we shouldn’t take inexpensive Internet access for granted in North America. The writer, Jeff Chester, states that: “If we permit the Internet to become a medium designed primarily to serve the interests of marketing and personal consumption, rather than global civic-related communications, we will face the political consequences for decades to come.”

 

People who launch their browser to participate in political dialogue will nod enthusiastically at this point, lobby their government for greater regulation and propose clear responsibility for corporations in enabling citizens to engage in free discourse.

 

Many, many more people, who use the Internet to research and make purchases, will roll their eyes, perceive no role for the government and expect corporations to be responsible for delivering better products at a cheaper price.

 

Chester’s article can’t be easily dismissed, however. For one reason, telecos and cable companies have a responsibility to their shareholders to deliver a return on their investment. To that point, he quotes Ed Whitacre, chairman and CEO of AT&T, who told Business Week, “Why should they be allowed to use my pipes? The Internet can’t be free in that sense, because we and the cable companies have made an investment, and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!”

 

For another reason, Chester points out that these large corporations are aggressively lobbying the U.S. government to enact legislation that will support their revenue goals. “Under the plans they are considering, all of us—from content providers to individual users—would pay more to surf online, stream videos or even send e-mail.”

 

An imminent threat? No, but it’s certainly an issue to include in your “environmental scan” as you assess your Internet strategy.

 

In the meantime, you can take in the ACLU’s projection of how web technology and rich data can turn a simple transaction, ordering pizza, into an interaction with Big Brother.

Last week Yahoo! reported record profits – double the profit of last year. What was Wall Street’s response? Hammer it. The stock dropped quickly because it failed to reach the expectations of a few analysts. Those ‘expectations’ were off a couple of pennies per share. Yahoo’s stock is now less than it was a year ago despite doubling its profit on tremendous grouwth. Yahoo’s price-to-earnings ratio now sits at under 27.

 

Pessimism continues to proliferate Wall Street and Main Street. Ironically, this is the complete opposite of the trend six years ago when Wall Street couldn’t buy enough Internet stocks – sending prices to outrageously high and unconscionable levels. Those same sage investors now turn down their noses at Internet stocks, driving the prices to levels lower than would otherwise be seen as reasonable to outside onlookers. USA Today’s index of 50 Internet stocks increased just 1% in 2005. Without Google, it would have lost 8.2%.

 

Does this mean you should hesitate to invest in your website? An informed decision is required. Let’s take a look at some of the numbers:

• Almost 80 percent of North Americans have Internet access.
• More than 50 percent have made online purchases.
• A majority use the Internet as a decision-making tool.
• Online retail sales in the two weeks preceding Christmas were up 29% over last year to US$3.03 billion.
• The Internet is cited as the most influential channel on luxury purchasing (cited by 44 percent of affluent purchasers).
• 35% of first-time buyers consider the Internet to be their most important informational tool, as compared to 8.2% naming TV
• Online newspaper reading is up 30% to 53.6 million visitors a month during the fourth quarter of 2005
• 39%of North Americans use online banking.
• 73.5% of e-commerce sites estimate sales growth of 15 to 35% this year.
• 60% of chain retailers estimate web sales growth of 25-200 percent.
• Time spent online by adult Canadians has increased 50% since 2002 and Internet use is ready to overtake watching television.

Those numbers reflect a different story then the dogged, pessimistic tale woven by Wall Street. Its credibility as it relates to Internet stocks was ruined in the bubble of 1999 – 2000. That credibility continues to fail today.

 

“And it's not for a lack of profit,” writes USA Today’s Matt Krantz in Dot-coms' song and dance no longer entertains investors. “Forty-eight of the current members of the Internet 50 that were public in 2000 have seen their profits as a group quadruple since then. Google and Salesforce.com were private in 2000, so that doesn't even include Google's massive profit contribution.”

 

Here’s another key fact: according to the IDC FutureScan, all the indicators depict an expectation of 5% growth in U.S. IT spending this year. In other words, off the street and in the offices, business is investing in IT and the Web.

 

Don’t be scared away by Wall Street. Instead, listen to and embrace what your customers demand.

 

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© 2006 Toby Ward - Prescient Digital Media

“While companies might have an intended strategy, the strategy that actually emerges can be very different.”

 

There’s no arguing with this statement, made by Harvard Business School professor Clark G. Gilbert, especially when applied to Internet strategy. An extensive body of literature addresses how to ensure that an organization’s intended strategy is executed. Gilbert, along with professor Joseph L. Bower, have contributed to this important topic in a new book they have edited, From Resource Allocation to Strategy.

 

Gilbert and Bower’s book examines how strategy is developed and implemented in multinationals, but their insights should be of interest to any size of organization that is developing a strategy.

 

In particular, this is a topic that gets to the core of developing and executing an Internet strategy, because the functionality of web resources should play a fundamental role in determining the strategic possibilities that exist for an organization. Unfortunately, as Gilbert and Bower discuss, the disconnect between the strategic process managed by senior leaders and the resource decisions made at the operational level can result in a strategy other than that described in the official plan.

 

Organizations are becoming increasingly aware that they must understand and manage the resource allocation process because it can get in the way of the strategy. But the authors point out that those allocation decisions, which are most often made at the operational level, are important because they are also where the ideas often come from in the first place.  

 

In an interview with HBS Working Knowledge, Gilbert and Bower provide an example that probably sounds uncomfortably familiar for too many organizations:

 

Operating managers often constrain strategy adaptation in ways that are very powerful. We have seen this in the response of print media organizations to the Internet. For example, senior management at a U.S. newspaper company says, "We need to get into the Internet, we need to prioritize this and make a big investment." But then at the operating level of the firm you have a sales rep who is used to selling a display ad for $40,000. The new business has a lower gross margin, the customer who is buying it isn't the rep's traditional customer, and the price point isn't the same. And so that sale rep says, "Well, I can sell a $40,000 display ad, or I can go out and find one of these new customers and sell them a $2,000 banner ad." Every day as that sales rep comes into work he makes a resource allocation decision at the operating level—how to allocate his time and attention—which de facto keeps the investment from happening, even though financial resources have been procured.

 

The solution to eliminating the disconnect between strategic formulation and resource allocation is clear: conduct a thorough assessment and planning phase prior to strategic development. Ensuring this phase includes input from customers as well as key operational stakeholders ensures the good ideas are captured in the strategy, and early buy-in is secured at the operational level. In particular, the organization can determine what resources to allocate—not just for technology, but for change management initiatives to ensure behavior changes to support the strategic intent.

 

Why doesn’t this obvious step happen more often? Lack of resources. Either leadership doesn’t know to budget for it, or the operational level doesn’t request it in their budget proposals.

 

So what do you think should come first?

If your website is delivering true value, it’s no longer just a communications channel.  The website is a subset of the business that includes communications, customer service, sales, fulfillment, vendor relations, etc. Treat your website as if it is your business.

 

In a BusinessWeek Online article (Businesses must learn to let go) Linda Sanford, an SVP with IBM, recommends “focusing on core expertise and collaborating with partners in innovative ways are the keys to growth.” While specifically speaking about the businesses, the same is true for the website in a competitive environment.

STAY FOCUSED.  Companies outperforming their peers today -- and not teetering on the edge of the flattened globe -- have adopted an approach to building the 21st-century business in which they find their place not by strengthening their command and control posture, but by focusing on core expertise, collaborating with partners in innovative ways that drive value and growth for all participants, and strategically sourcing the rest. I call this philosophy: "Let go to grow."

Here are a few examples:

Leaders in many industries are embarking on projects involving collaborative innovation -- opening up their borders to work with others -- in a profound shift from the past. Procter & Gamble (PG), for example, now has an entire division devoted to collaborating with external partners on new products and technologies.

That was the genesis of the Mr. Clean Magic Eraser, a household cleaning tool that has flown off the shelves since it was introduced in 2003. P&G CEO A.G. Lafley has declared that half of all new P&G products should originate outside P&G. Talk about letting go to grow.

TAKE IT OUTSIDE.  As P&G understands, no company today can corner the market on innovation. For the first time ever, we have the luxury of a global market for brainpower -- largely because of the Internet -- and this talent does not have to be on the payroll for a company to leverage it. U.S. pharmaceutical giant Eli Lilly (LLY) has set up the Web-based InnoCentive to build a virtual talent pool of more than 50,000 scientists in 150 countries. Lilly posts R&D problems any scientist can tackle if he or she has the right expertise. The success rate has been far higher than in-house performance, at around one-sixth of the cost of doing it all in-house.

To let go to grow, the first step a company must take is to zero in on the things it does well and that are differentiating -- and identify functions that can be done more effectively either through process change or partnerships. This analysis is done by componentizing your business -- breaking it down into interchangeable building blocks of functions, processes and services.

The components in which a company excels should be used companywide. If there's no advantage in continuing to perform an activity in-house, that component should be passed to an outside spec