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GUEST COMMENT Think fast: How to accelerate ecommerce growth

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GUEST COMMENT Think fast: How to accelerate ecommerce growth

Hamza Khan, a partner at McKinsey & Company’s Marketing & Sales practice
Hamza Khan, a partner at McKinsey & Company’s Marketing & Sales practice

It’s been nearly a year since the onset of the pandemic. Most retailers have shifted focus and resources towards digital sales, in response to overwhelming customer demand. To make that shift sustainable and act as a fast-moving ecommerce company going forward - executives need to think of a number of things differently, from technology choices, to talent deployment and new ways of working. McKinsey research has found that three fundamental elements are particularly important to success that we will explore in more detail: a test-and-learn culture, operations to support rapid reaction, and a customer-first commitment.

 

 

Uncover new knowledge

Our research shows that over 50 percent of companies whose revenue growth is in the top ten percent - are more effective than their industry peers at testing ideas, measuring results, and executing changes to products, services, and ways of working. A prerequisite of successful testing and learning is an acceptance of de-risked failure as the cost of uncovering new knowledge. Recent McKinsey research shows, in fact, that respondents at successful organisations are more than twice as likely as their peers elsewhere to strongly agree that employees are rewarded for taking an appropriate level of risk. Digital natives have this mindset as part of their DNA, and support it in three ways:

 

  • Embed learning – A culture of learning has to extend to every corner of an organisation, but it starts with leadership. At top-performing companies, senior leaders continuously scan for new tools and practices that can accelerate performance, taking the time to learn a new solution at least monthly, compared with quarterly at slower-moving companies. They also take steps to spread knowledge.

 

  • Reward experimentation, even when it fails – A cornerstone of digital culture is the ability to continuously improve and innovate. Teams are empowered to test, learn, and improve without the need for cumbersome approval processes, allowing them to test new go-to-market approaches, improve the ecommerce platform, or even get new products to market first. This requires the right incentives to support this approach and excite teams to take ownership.

 

  • Build learning skills – The best companies approach learning with the same focus and discipline as they do ecommerce. As top-performing companies set goals for new growth strategies or sales channels, they create deliberate programmes to anticipate the needed skills and capabilities and a strategy for developing them. In practice, that comes down to comprehensive, tailored learning programmes; a focus on frequent, frank on-the-job coaching and feedback; as well as targeted hiring to complement not only the technical skillset required but also the new mindset needed. New hires who can bring new skills and mindsets can be instrumental in embedding learning as well as jump-starting the development of new capabilities.

 

React rapidly to new customer demand

Truly digital players have fully integrated ecommerce and digital sales with the rest of the business value chain. This allows them to quickly react to new customer demand, adapt existing offerings, introduce new products and services, and deliver them to customers fast.

 

Doing this well starts with being able to spot opportunities quickly. That requires good data and a commitment to making the most of it. Nearly half of the best-performing companies in a recent McKinsey survey, in fact, collect and analyse customer data at least weekly, compared with just 16 percent on average. Companies then need to have the operational flexibility to move quickly to go after identified opportunities.

 

Agility in operations and supply chain has a cumulative strategic advantage. By the time a competitor shows up with a me-too product, the first mover will have rolled out scores of improved versions, established a cost/ complexity advantage through operational excellence, and already established a solid go-to-market approach. We found that during the crisis, many companies were able to make changes to their ecommerce front-end capabilities, but struggled to adapt their operations and logistics to support the surge in demand.

These tasks are never “finished.” It’s important to continually monitor and measure results and push for improvements across the full set of business activities

The primary business goal: customer satisfaction

One reason that focusing on the customer accelerates a business’s pace is that it helps to provide clarity on what is critical and cuts down on doing other things.

 

Successful digital innovators treat customer satisfaction as a primary business goal. In practice, that means investing heavily in analysing and mitigating any customer friction points and embracing a zero-defects mentality. How do they do that? The best companies intimately understand their customers’ experience, focus on the details of what their customers really want, and layer in data to fill out the picture. To drive this focus, they use data and analytics to synchronise the ecommerce experience with physical stores, social media, inside sales, customer care, and other customer-facing channels, making it seamless for the customer to shift across them.

 

For businesses today, omnichannel has become a cornerstone of great customer experience. According to McKinsey’s Covid-19 UK consumer-sentiment survey, 77 to 83 percent of UK consumers intend to continue using contactless services such as click-and-collect to a greater extent, even after the crisis is over.

 

How to make the change

Becoming a fast-moving ecommerce company requires a number of simultaneous changes. However, we have found that executives need to focus on getting three things right.

  • Understand what good looks like – As simple as this may seem, many executives find it challenging to know what excellence is in the digital realm. Even for the most experienced executives, it is crucial to step out of the day-to-day, look outside the organisation, and reimagine the business. That can happen in many ways, from setting up an internal group of experts, or “tiger team,” to visiting other top-performing companies to see the culture in action.

  • Be comfortable testing your way to the answer – Even when a company has a vision of where it wants to go and what good looks like, leadership may find it difficult, even impossible, to chart a direct path to get there. In digital, so much is unknown that traditional planning—sizing up a potential opportunity and systematically executing on the steps to seize it—isn’t possible. This is where a test-and-learn mindset is most valuable. By creating a safe place for line leaders to “test the ground” through small pilot programs and learning from their success or failure, leaders can course-correct until the best path forward becomes clear. When done well, this begets an iterative cycle of testing, learning, and planning—for example, developing a series of A/B tests or testing minimum viable products in the marketplace.

 

  • Walk in your customer’s shoes – Most executives will say that their companies are customer-centric, but often the reality is that business pressures, stakeholder demands, market forces and notions of ‘how we have always done it’ are top of mind. Even when leaders do commit to trying to better understand the customer (think Undercover Boss), they generally just end up experiencing the employee’s perspective, not the customer’s. Instead, we’ve found it’s much more eye opening to analyse individual customer journeys and experiences in depth in dedicated workshops with small groups of company leaders. This allows executives to really question each step of the process and understand what the customer is experiencing.
  • Mindset matters as much, if not more than resources

Any effort to quickly scale ecommerce requires significant resources, from new kinds of talent to data analytics to IT infrastructure. While those resources are critical, we continue to believe that a learning mindset that values speed over perfection, embraces failure as much as success, and empowers team members is even more critical, and companies can start the change today. Without that mindset, all the resources in the world will not result in a truly digital organisation.

Author:

 

Hamza Khan, a partner at McKinsey & Company’s Marketing & Sales practice

 

 

 

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