“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 you have a website and you don’t have a search engine optimization (SEO) strategy then you are not doing your job.

SEO ensures that you are doing everything you possibly can to be ranked in the highest possible position when someone Googles you or your company (or using any other search engine). And yet very few organizations have done much about SEO to optimize their search engine ranking.

Here’s just a sampling of some industry leaders, for example, that don’t even have proper page titles:

• Boston Scientific – one of the World’s largest biotechs
• Lycos – the big portal
• Con Edison – one of the U.S.’s largest energy companies
• State of Ohio – Ohio government portal

Why aren’t more organizations investing in SEO? Author and consultant Gord Hotchkiss offers up some insight into the roadblocks and challenges – and offers four key requirements – to getting an SEO campaign off the ground in his column The Real Cost Of SEO: It's Not Budget, It's Believers!...

Requirement One: Corporate Understanding

The problem with organic optimization is that it can't be owned by any one department in a larger organization. While a sponsored campaign can be launched by a single department--or by an individual, for that matter--with no impact on any other department, organic optimization needs buy-in throughout an organization. This is why we generally see the best optimization on sites where C-level executives are close to the front lines, believers in optimization, and can give a single go-ahead that will open the required doors for organic optimization to happen. The bigger the organization, the more unlikely it is that this will happen.

Usually, the need for organic optimization is recognized by someone in the marketing department. Here's the typical scenario: marketing has been convinced to try sponsored search. They're generally happy with the results, but then they read an article or attend a conference where someone (and I happen to be a prime culprit) tells them that 70 percent of the clicks actually happen in the organic results. "Wait a minute," they say. "I'm spending $4.28 a click and I could get more traffic with a free listing?" They immediately run to the nearest computer and see how they rank for the terms they're currently buying. Nothing on the first page, or the second, or the third. Ah, there they are! Number 48 for their term--stuck in no-man's land.

Requirement Two: A Friendly IT Department

In the next step, the marketing guy usually visits the IT department, which has technical ownership of the company Web site, and begins with the question, "How come we don't rank on the search engines? What's wrong with our site?"

You want to create a sworn IT enemy for life? This is the way to do it. And if this doesn't work, follow up with the comment, "If you guys can't do it, we'll have to find someone who can." This is generally where my company comes in, right in the middle of a vicious turf war between marketing and IT.

Requirement Three: No Sacred Cows

Now, the SEO experts (that would be us) start saying that the Flash on the front page has to go. Suddenly, marketing is not so sure. "We love that Flash, and it cost us a lot of money!"

It gets worse. The entire navigation structure of the site has to change, we need a lot more content, we're going to want to create separate topic areas for our main offerings, we have to reconfigure our CMS, and we have to strip out all the Javascript we have on every page and reference it as an external .js file. Suddenly, marketing is second-guessing us, IT is up in arms, legal is having a fit because none of the additional content required has been vetted, and the C-level executives are wondering what the hell hit them.

Requirement Four: Champions with Perseverance and Thick Skins

At this point, our marketing champion, who got the whole ball rolling, is on everybody's most- wanted list, and not in a good way. Everybody's thinking, "You know, on second thought, maybe it would just be easier to stick to our sponsored search campaign."

There is a cost to doing SEO. It's not the budget required, which is minimal relative to other marketing initiatives. It's the time and patience required on the part of one person to get the buy-in that's needed to make SEO happen. That's a price that many companies have been unwilling to pay up to now.

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Web marketing (Part I): search engine optimization

Evolution of search in 2006

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 specialist or sold. This allows the company to devote its energies to enhancing its core differentiators, where it can demonstrate true innovation.

THINKING AHEAD.  Even BMW, which is built on its reputation for exceptional engineering, has found value in opening up various elements of car design and manufacturing to partners. BMW recently formed a relationship with Magna Steyr, an Austrian company, to handle all aspects of manufacturing for the BMW X3 sports utility vehicle, including a pioneering four-wheel-drive system.

This move freed up BMW engineers to work on designing new vehicle models. The relationship has allowed BMW to add a new model every three months; five years ago, BMW experienced gaps of three years between models.

It's a mistake to think "letting go" is just another way of saying "outsourcing." Collaboration takes many forms. Not only can it lead to new innovation in product design but it can create entirely new business models that drive organic, sustained growth for leaders willing to let go.

THE RIGHT RELATIONSHIPS.  Take Li & Fung, a Hong Kong company that supplies apparel to retailers in the U.S. and Europe. It's interesting to note that it doesn't make anything. Instead, it draws on a web of 7,500 suppliers to orchestrate the manufacture and delivery of apparel to meet quickly the specifications of its 350 customers around the world. In a low-margin trading business, Li & Fung has parlayed its role as master collaborator into remarkable business performance, doubling revenue and tripling profits over the past three years in an industry with a 2% growth rate.

The common denominator in all these examples is enlightened leadership. The leaders who understand the implications of a flat world are changing their business models and their company cultures to let go of some control, opening up their organizations to work with external partners in new, deeper ways than traditional supplier relationships.

In our collaborative age, this is the right formula for creating breakthrough innovation, which will ultimately drive growth for all successful companies in the flat world.

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AOL’s success not failure

Forrester Research reveals that e-commerce sales are booming – growing 22% from $141 billion in 2004, reported DMNews.com (Forrester: E-Commerce Sales in Multichannel World Surged 22% to $172B in 2005).

If Forrester’s projections come true, this growth will continue to boom with current sales doubling by 2009. Forrester projects:

·         $198 billion in 2006

·         $228 billion in 2007

·         $258 billion in 2008

·         $288 billion in 2009.

·         $316 billion in 2009  (13 percent of projected overall retail sales)

This growth is no doubt fueled by the ease-of-use and relaxing concerns about the potential for fraud. An estimated 40% of the U.S. population is now doing some form of online shopping. Forrester also claims that consumer use of the Internet as a research tool influences more than $100 billion in annual offline sales.

The average income of online shoppers – in the low $60,000s – is still higher than offline shoppers, but it fell from the mid-$80,000s just a couple of years ago, she said.

The research however does reveal that a majority of consumers still prefer face-to-face shopping (83% of shoppers) and are the most satisfied with in-store service and the least satisfied with customer service over the telephone.

ANALYSIS:

Do invest in e-commerce opportunities, but not at the expense of in-person and traditional forms of sales and service.

AOL has always been one of the great Internet success stories. It’s on the same tier as Yahoo!, Google, Amazon, and E-Bay.

Tom Grubisich, a former AOL editor, has written a piece in the USC Annenberg Online Journalism Review criticizing Steve Case for ‘fumbling’ the company. From Who 'shackled' AOL - and when?...

Aol.com was supposed to throw off those shackles and offer compelling new content, according to Case's strategy. But it never happened. Case let AOL retreat from his ambitious plans and the company failed to develop high-speed content and platforms that it could test with its potential new audience that was exploding on the Internet. Aol.com wound up becoming nothing much more than a docking station where AOL members could read their e-mail at work and where non-members could sign up for AOL's Instant Messenger service, or try to join the invitation-only ICQ social network.

So why didn't Case follow through on his pledge to let AOL grow beyond its walled garden? I believe the answer is embedded in the company's need to continue producing solid quarterly financial results that would keep the stock going up -- results based on membership, not on edgy content. In 1997, subscriptions for the main service were pumping more than $1.5 billion annually in AOL's coffers -- 80 percent of all revenue. Case and his top decision-makers did not want to tamper with the Wall Street-pleasing metric of subscriber growth -- even though they made public gestures toward a revenue model more balanced by advertising. (We now know, of course, that a lot of that advertising was a phantom).

In one sense, you couldn't blame the Case team. AOL's numbers seemed invincible in 1997 -- a third of all Internet users in the U.S. were AOL members at that time. Throw in the existing placeholder site, aol.com, and AOL controlled 50 percent of Internet traffic. If you had an office on the fifth floor of AOL's headquarters in Dulles, Va., you could imagine you were on top of the Internet world.

Alright; I’m sure Mr. Grubisich is a fine person, but if he’s going to step up to the soapbox he better understand the maxim “live by the sword, die by the sword.” The article is well written, but Grubisich shouldn’t quit his day job as an aspiring screenwriter (his byline says he is a screenwriter though a search for published work did not reveal any published scripts… though he maintains an MSN email account – the hallmark of screenwriter superstardom).

Firstly, this article on AOL makes references to shackles, fumbles, and blame. Is there anyone on the planet that thinks of AOL as a failure or a case study for losers? AOL is a massive success story. AOL’s success is so massive (28 million subscribers and billions of dollars in revenue) that only a fool would intimate that AOL has somehow “fumbled.”

Yes, AOL has been overtaken by others in terms of total revenue and eyeballs. Much blame could in fact be laid at the feet of Time Warner that has done almost nothing with it since acquiring it years ago.

However, Grubisich blames AOL’s ‘fumbling’ on Steve Case and a failure to invest in content. Talk about sour grapes from a former disgruntled employee.

Did I mention that he was a former, AOL editor who was paid to write content for AOL?

Grubisich claims AOL’s failure stemmed, in part, from a lack of investment in high-speed content. Good lord; please name for me one high-speed content site that makes significant money?! The answer is none. The vast majority of users are not willing to pay for it and most get if for free. AOL’s strategic focus was never content – it’s not a newspaper nor a magazine nor a video channel. To the contrary, AOL’s success has come as a result of its strategic focus on subscribers.

I mentioned a few leaders in my opening line: Google, Yahoo!, Amazon and E-Bay. Each of these companies built successful strategies based on a principal focus – to be the very best at their core expertise:

• Google – the top search engine
• Amazon – the top e-commerce site
• E-Bay – the top auction site
• Yahoo! – the top integrated portal

AOL’s focus: be the top ISP subscriber. AOL stuck to its focus and found massive success. Had it invested in content it would have failed miserably. Just ask Yahoo! who only recently got cocky enough to hire its own dedicated writers to cover current affairs with underwhelming results. Grubisich lays blame for allowing Google and Microsoft to overtake AOL. Google is a search company, with a lightning focus on search; Microsoft is a software company. AOL is neither a search company nor a software company. AOL’s primary focus is being an ISP. (And of Microsoft, ask them how their stock price has been for the past seven years trying to be an Internet company and how their Internet revenues compare to their software revenues).

Note that I say ‘primary’ as every large company diversifies and AOL is no exception. However, the primary focus continues to be that which has made them a success: subscribers. Not subscribers of content, but subscribers of ‘access’ (to the Internet). I am not suggesting that AOL should never invest in any content. They should, but only as a means to an end, not as a primary strategy.

Here’s the lesson that I will underscore using the first and most important of the 22 Immutable Laws of Marketing penned by the great Al Ries and Jack Trout:

Law #1: The Law of Leadership

It’s better to be first than it is to be better.

To quote Ries and Trout: “It’s much easier to get into the mind first than to try to convince someone you have a better product than the one that did get there first.”

AOL would fail horribly if it shifted strategies to focus on content – it’s not a newspaper, magazine nor video channel. And the paying public would never fail to mistake AOL for anything but an ISP. Others focused on content and beat them to it. Despite Time Warner’s meddling (or lack thereof), AOL has enjoyed massive success because of its primary focus on adding and maintaining subscribers. For AOL, content is not king.

The prognostications continue. David Berkowitz writes a fine piece on his predictions for the search market in 2006 (weekly Search Insider column The Definitive Guide To 2006.) David makes some great predictions (unabridged)….

1) Mobile search remains confined to text messaging. The easiest way to access Google on your cell phone is by text messaging GOOGL (46645). On a recent date at an Indian restaurant, I demonstrated my geek chic by sending Google the text message "Indian 10024" (noting the zip code). I then received messages listing two restaurants, one of which was the place we were eating (amazingly, I had a subsequent date with her). Meanwhile, if I had tried to show her Google on my wireless browser, the check would have been paid well before I could fire off a search query. Factoring in network speeds, device screen sizes, and usability, text messaging will remain the killer mobile app for search next year, and it really isn't search at all. That being said, the recent announcement that iCrossing is the first search engine marketing agency to join the Mobile Marketing Association will spawn a slew of related stories. That's smart prep work for a time to come, but 2006 isn't the year. As an aside, with iCrossing's Web site now referring to the company as a "digital marketing agency," its mobile ambitions may not be search-related at all.

2) Yahoo! is the partner everyone wants to dance with. Google's the player to beat in the search space, which gives Yahoo! clout as the No. 2 (even as its properties pull in more traffic). Now, with Google's stake in AOL, Time Warner's competitors, ranging from print publishers to TV networks, will be even more intrigued to talk to Yahoo! CEO Terry Semel, who spent over two decades at Warner Bros.

3) Google Wallet goes Base jumping. Google will integrate its credit card-based transaction system (now used for AdWords and most recently Google Video) with Google Base, its new classifieds offering. This will complete Google's evolution as a competitor to eBay (along with Monster, Amazon, and too many others to name). By accepting consumer payments as part of Google Accounts, Google will welcome its first significant revenue stream outside of sponsored links.

4) Measurements debut for engagement; search is neglected. I had a discussion with my colleague Chris Johnston about engagement, and the topic of classifieds came up. CJ noted how classifieds can be considered a baseline for measuring engagement. That doesn't mean they'll be included in any studies. The same will be true for paid search ads, which are similar to classifieds, but with broader targeting and more interactivity.

5) Jeeves goes local. 2005: InterActiveCorp acquires Ask.com. 2006: It aims to really get its $2 billion worth. This prediction ran in an April, 2005 column, "The Many Faces of Local": "The word 'local' isn't in IAC's mission statement, nor is any synonym, but given IAC's expertise and its dreams for Ask Jeeves, that should change immediately. Jeeves, the beloved Ask.com butler, could become the face of local search if Diller invests in it with the same type of fervor in which he bid for Ask Jeeves in the first place."

6) iTunes overhauls its search functionality. Google wants to be a music search engine. For many digital music lovers, iTunes fills that role. As Google competes more with iTunes, Apple can't let another one-up it here.

7) MSN fells more trees. Think of the "tree falling in the woods" paradigm. If no one hears it, does it make a sound? MSN, for 2006, will be in the business of knocking over trees--it'll clear entire forests. The media will fawn over MSN's achievements. Marketers will open their eyes and their wallets, a bit. But consumers are far harder to impress. MSN is a strong player for long bets. It's akin to the prediction for mobile search, which has another interesting connection to MSN. Microsoft's power stems from its operating system. If Microsoft gains traction with powering mobile devices, MSN can in turn win mobile search. Again, none of that's happening in 2006, but print this out, and check back to this point as your paper starts to yellow.

8) Behavioral targeting and search join forces. I can see it coming one day this year: I get all excited about covering a new development in search, and find out that it's already been covered in Mediapost's Behavioral Insider. This happens to Gord Hotchkiss and me all the time with search, but overlap with BT (ed: behavioral tracking) is overdue. MSN AdCenter provided a road map last year for how to combine demographic targeting with search marketing. One or more search titans will set a similar bar for BT and search.

Here’s another prediction, one not touched upon by Berkowitz: click fraud will turn the paid search industry topsey turvey. Hackers will find better ways to embellish click-through rates and to cover up others.

This increase in click fraud will hammer Google and its stock price. The honeymoon for Google will end. Long-term, Google is still a giant. But Google’s Teflon coated luster will scratch this next year. Furthermore, it will come to light that some metrics analysis programs (log analysis programs) are not accurately tracking click-through rates.

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Web marketing (part II): Paid search

Web marketing (Part I): search engine optimization

Linking web visits with offline sales

Spamming is killing us. Well, death may be overstating the problem, but spamming is frustrating users and marketers alike and its financial impact on legitimate marketing can’t be understated.

Read rates of marketing e-mail is in serious decline. More and more users hit delete before they even glance. DoubleClick reports a 24 percent year-over-year decrease for all mail in its Q2 2005 E-mail Trend Report. That means a dramatic downturn in average campaign revenue and an industry loss of tens-of-millions of dollars compared to previous years.

The problem is spam. Spammers give all marketers a bad name. The good news is that the law is now starting to hammer some of these e-mail bandits. An Iowa judge pounded a Florida spammer, awarding $11.2 billion in damages to an Iowa ISP after it received millions of unsolicited e-mail. Yes, billion. You probably received some of the wicked e-mails from the notorious hood in question advertising mortgage and debt consolidation. Damages were calculated at $10 per illegal e-mail.

An increasing challenge, compliments of the trend wrought by spammers, is that more and more users are turning-on image blockers that turn-off images in an HTML e-mail. While spam e-mail images are turned-off, so are legitimate e-mail images.

To overcome these challenges you have to build trust with your readers which requires their permission and a transparent relationship with synchronous (two-way) communications.

Here are a few tips for overcoming these challenges:

• Get their permission.
• Double opt-in is strongly recommended.
• Opt-out option on all correspondence.
•  Privacy Policy is a must .
• Write succinct, punchy subject lines.
• Strong opening body text (non-image) emphasizing the buyer benefit.
• Third-party lists are strongly discouraged; ditto for sharing.
• Provide links to back issues and related information.
• Ensure a strong offer in every e-mail.
• Call to action should have short deadlines.
• Measure response to e-mail offers; tailor campaigns based on response.

Ultimately your e-mail success will depend largely on how well you know and understand your readers and how well you tailor your efforts based on their needs and expectations. As such, don’t be afraid to ask for feedback and to undertake surveys. Heck, try phoning a few with a polite telephone survey – you might just further strengthen a valuable relationship.

Oh the pundits are raving about Web 2.0 – the latest buzz phrase to describe the next generation of the Internet. In short, Web 2.0 is merely a catchy marketing phrase developed by a marketing company (O'Reilly Media) to label the next generation of the World Wide Web (best represented by new social media such as blogs, wikis, RSS, podcasting and social bookmarking).

Now every pundit and prognosticator who fancies themselves a leading mind is writing about and espousing about the virtues of Web 2.0 with many predictions and insights into the future of our online lives (and now, myself included J). Ah, so much hype

I will however spare you any predictions. I like the approach of my friend and fellow blogger Mark Evans who writes about his favorite Web 2.0 applications (Must-Have Web 2.0 Apps..and Some Much-Needed Pragmatism). Some of my favorite 2.0 applications include:

• Skype – who doesn’t like to VOIP?
• Technorati – the dean of the blogosphere.
• del.icio.us – social bookmarking site.
• My Place – the next generation of Geocities.
• Google News – news subscription service offered by the big G.
• Talk Digger – tracks who and what is being said about your web page, blog, etc.
• My Yahoo! – Yahoo! Has been around a long time, and so has its personalization portal My Yahoo!. However, RSS has revolutionized the personalized portal space and My Yahoo! Keeps getting better and better.
• Writeboard – a free wiki service. While I’m sure there are far better wiki solutions this one is free and I understand its limitations.
• Plone – a free content management system (CMS) platform. The next generation of Zope and open source CMS.

In addition to those apps, some other applications that Evans likes include:

• Pandora
• Omnidrive
• Blogbeat
• Firefox 
• Pingoat
• Qumana

As interesting as some of these new tools are, many won’t likely see profitability. They’re cool gadgets with little real business promise (sound familiar circa 1999… anybody remember the iSniff and the proposed Snortal?). Cool just doesn’t cut it in the absence of strategy and a defined plan.

 “The big problem, however, is too many of them have adopted a "build it and they will come" business model based on the idea that you attract a critical mass of users first and then come up with a way to generate enough revenue to build a viable business,” says Evans. “Unfortunately, this is a flawed premise because once you offer a service or product for free, it's difficult to get users to pay for it. Far too many Web 2.0 start-ups also seem to be relying on (Google) AdSense as the foundation for their businesses. That's fine if you're an enterprising entrepreneur hoping for a few bucks to help pay the mortgage but it's not the revenue stream to build a real business.”

INTRANETBLOG:

Successful employee yellow pages

Top 5 New Year wishes of an intranet consultant

Open source intranets

Assessing your security risk

Enter the soothsayers of 2006