January 28, 2007

A Brief History Of The Internet, And Leadership Development

In 1995, I accepted a job at Eddie Bauer as Manager of Analytical Services. One of my 'demands', was to have a personal computer with internet access, and an e-mail account. One could sense that the internet channel was about to change the way we worked.

Within a year, we had individuals focusing on internet marketing. If I remember correctly, we called the channel 'I-Media'.

Our Vice President of Marketing would kid our 'I-Media' person. "How many orders did we get yesterday, six or seven?" he would joke. The 'I-Media' person would just plug along, doing work that none of us really understood.

Six or seven orders a day became an annual total of $65,000,000 three years later. Vice Presidents paid attention to that number. These sales appeared to be largely 'free'. We didn't have to spend $10,000,000 marketing to the customer to get these sales ... at least on the surface, it didn't appear that way.

In 1999, I was Director of Circulation for a $500,000,000 catalog business that was stumbling along. Sales were no longer increasing, in fact, catalog demand was decreasing year-over-year, on a comp basis. But we had $65,000,000 of 'I-Media' demand. What's not to love about that? The P&L looked great. We earned nice bonuses.

By late 1999, the 'I-Media' channel was garnering attention at Eddie Bauer. The E-Mail and 'I-Media' folks were moved to another building, to focus on growing sales in the online channel. The rest of us were sequestered in our building, trying to figure out why we couldn't grow sales in the catalog channel anymore, in spite of the fact that 'customers buying from multiple channels are the best customers'. If those customers are the best customers, why do they keep spending less and less in catalog? Today, we know why. Back then, it was a bit of a mystery.

I don't know if these trends happened at other companies. What I do know is that, in many cases, the internet marketers and e-mail marketers developed their analytical tools, marketing strategies, and a network of co-workers/friends outside of the regular processes within our businesses.

While the rest of us tried to maintain a robust profit and loss statement by cutting costs, circulation and pages --- by shifting management of customer acquisition to businesses like Abacus, the online marketing folks were frequently off in their own world, building relationships with CheetahMail, Google, AOL, Yahoo! and MSN. They literally built their own businesses, independent of the core business.

Over the past five years, there has been an enormous focus on integrating the internet channel into the rest of the business, across all of our multichannel businesses. Our failure to integrate the business sooner caused us to spend too much time developing skills in our specific niche. We didn't build enough skills across functions or channels. Couple this fact with an ever-decreasing number of 30-40 year olds in our businesses, and we're now heading for talent trouble.

The only folks who tried, in some way, to integrate business units were merchandisers. Customers liked buying merchandise online, in catalogs, or in stores. The merchandising folks, keenly aware of the importance of growing sales, probably did the best job of understanding how merchandise sold across channels. They didn't understand how the channels worked together, but they did get to see how merchandise sold across channels.

The rest of us were busy tackling unique issues that caused us to not have the skills necessary to lead a business in the year 2007.

Catalog folks focused their energies on a dying business model, trying every technique possible to improve efficiency and profitability, becoming more and more like a fossil in the process.

Retail folks feared that the online channel would cannibalize their sales, and viewed the internet as an enemy, never understanding that so many of their customers were researching merchandise online before coming into the store.

Online marketing folks, never knowing the pain of having the distraction of managing a downturn in business, integrated their businesses with Google, to a point where they depend on the search channel for between ten and forty percent of their sales. More on that in a future post.

Like everything else in the first decade of the 21st century, we fragmented ourselves into targeted niches. Not enough of us built General Management skills to manage a fragmented, multichannel business, in the year 2007.

The result is an utter lack of General Management talent in the multichannel retailing industry. There simply aren't enough people who know the entire business. There are plenty of people who know one specific aspect of the business.

A decade of focusing on keywords yielded thousands of talented individuals who know exactly how to work with Google. These folks have not been given the experiences to manage anything outside of a relationship with Google.

A decade of writing copy that is search friendly yielded thousands of talented individuals who know exactly how to write copy that is appealing to Google. These folks were never given an opportunity to write copy that romanced a customer.

A decade of writing catalog copy that romances the customer yielded thousands of talented individuals who know nothing about writing copy that is appealing to Google. These folks were cut off from the future of the business, and failed to acquire necessary skills for the future, through no fault of their own.

A decade of reducing catalog expenses yielded thousands of talented individuals who know how to communicate to Abacus what type of model they want built for catalog customer acquisition. These folks don't have the tools necessary to understand what type of customer they are acquiring with their catalog mailings. They are giving up management skills, in exchange for the skillset of working with Abacus.

A decade of managing open rates, click through rates, and conversion rates yielded thousands of talented individuals who know how to send an e-mail that converts a customer to a sale today. These folks were never given an opportunity to build something that lasts, something that customers save --- as evidenced by the fact that 75% of people don't even bother to open a marketing e-mail.

Because merchandisers had to sell product across all channels, we now focus our leadership opportunities on these folks. Leadership jobs in the multichannel industry are likely to go to merchandisers over the next five years.

Our businesses must do a better job of cross-training our highly talented online marketing individuals, so that they can assume leadership positions in our multichannel organizations.

If we don't do this, we simply yield more control of our business to algorithms, Darwinian-style evolution of merchandising strategy, Abacus, and Google. At some point, we must grow our talented online marketers, giving them broad cross-functional opportunities to become leaders. If we don't do this, we're subject to a world where merchandisers tell us to tell Abacus and Google what to do. We won't be left with a meaty, meaningful job.

Multichannel marketing is moving ever-closer to an algorithm-driven business that lacks warmth, humanity, and gut instinct. We need to begin adapting to this trend now, and need to begin developing marketing leaders capable of doing more than working with Google and Abacus.

2 comments:

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