ebusiness in Canada: Pushing beyond Good Enough How Canadian ebusinesses can better prepare to meet global competition SUMMARY

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1 ebusiness in Canada: Pushing beyond Good Enough How Canadian ebusinesses can better prepare to meet global competition SUMMARY Table of Contents: 2 Background 3 Summary 4 Creating the Management Conditions for Success 6 Innovating Beyond Price & Delivery 7 Accelerating CEM and Analytics Implementation 8 Building High- Performance Teams 9 Getting Beyond Good Enough Why is Canada ranked as a global ebusiness Player, but not a Leader among G20 countries? Are Canadian businesses, rather than Canadian consumers, holding back ebusiness development in Canada? And what are some of the specific challenges and opportunities from the perspective of the Canadian ebusiness / ecommerce Manager? In the winter of 2013, epath Consulting conducted a survey of Canadian ebusiness / ecommerce Managers to gain insight into some of these questions. The survey was also created to help shape the development of the new ebusiness / ecommerce Management Certificate program at the University of Toronto s School of Continuing Studies a unique professional development program to help Canadian ebusiness Managers better compete with their global peers. The highlights of the survey results can be found at This report references and builds on the survey results, by providing additional insight and recommendations based on epath s 15+ years experience in the Canadian ebusiness/ ecommerce space as both consultants and educators.

2 BACKGROUND In a landmark 2012 report 1, the Boston Consulting Group sized- up the $4.2 Trillion growth opportunity of the ebusiness industry sector across the G- 20. Based on measures such as % of GDP and annual growth rates of the ebusiness sector, Canada was determined to be a Player not a Leader, ranking significantly behind countries such as the UK and the US. This despite the fact that Canadians consume more online content per capita than any nation in the world 2 ; despite almost half of Canadian internet users indicating that they have engaged in ecommerce 2. So where is the disconnect? A Federal Government report 2 alludes to an underinvestment by Canadian businesses in ICT solutions. Are businesses, rather than consumers, holding back ecommerce development in Canada? If so, how? To gain some insight, epath conducted this survey of Canadian ebusiness and ecommerce Managers, including some of the largest and most prominent Canadian ebusinesses. The survey shows ebusiness Managers pushing to perform beyond good enough. For a summary of the survey results, go to The results of this survey are being used to help shape the new ebusiness / ecommerce Management Certificate program at the University of Toronto SCS, and to better equip both current and future ebusiness / ecommerce managers to compete and excel in the global environment. This report references and builds on that survey, by providing additional insight and recommendations based on epath s 15+ years experience in the Canadian ebusiness/ ecommerce space as both consultants and educators. For a summary of the survey results go to 1 the Internet Economy in the G- 20. The Boston Consulting Group. March Ecommerce in Canada: Pursuing the Promise. Report of the Standing Committee on Industry, Science, and Technology. May 2012 Page 2 of 9

3 SUMMARY Why are most Canadian ebusinesses finding it difficult to get beyond good enough? As expected, many Canadian ebusinesses identified lack of scale as a key issue. According to this argument, if your business model limits you geographically to the Canadian market, as is the case for many of our largest Canadian etailers, then the market is simply not big enough to justify the ebusiness investment and resources of the larger competitors to the south. Since Canada s population is less than the population of the state of California, this common complaint is understandable (but not justifiable - see the Innovation section in this report). Also expected is the typical Canadian aversion to risk, preferring good enough over market leadership, as summarized by the landmark Canada 2020 report 3. Many Canadian ebusinesses favour the safer strategy of operating as a market follower, instead of operating as a pioneer or innovator in their industry. In addition, Canadian ebusinesses often benchmark themselves against their risk- averse Canadian competitors, instead of their more innovative US or global online competitors, creating a low- risk- justification feedback loop. Although this strategy is clearly shortsighted, it is also understandable given our Canadian cultural norms. The less expected insights from the survey can be grouped into four broad actionable opportunities. In our opinion, these issues are more easily addressable by Canadian ebusinesses than the lack of scale or cultural aversion to risk obstacles above. The four opportunities are: 1. Creating the Management Conditions for ebusiness Success 2. Innovating beyond Price and Delivery 3. Accelerating the implementation of CEM and Data Analytics Initiatives 4. Building High Performance ebusiness Teams 3 The Canada we want in canada2020.ca Page 3 of 9

4 CREATING THE MANAGEMENT CONDITION FOR EBUSINESS SUCCESS As revealed in the survey, Canadian ebusiness Managers have many of the ingredients for success at their disposal. They generally have full responsibility for strategic and operational aspects of their ebusiness, including financial. They are broadly educated, skilled, visionary, and have no lack of access to specialized ebusiness talent and resources. And they have no lack of confidence in their abilities to manage their ebusinesses. So why are most Canadian ebusiness Managers such underperformers relative to their US and global competition? What s holding them back? In our opinion, executive management and ebusiness management are often NOT speaking the same language. The survey indicates that a surprising 40% of ebusiness Managers in large companies indicate that they are NOT getting the necessary leadership from the executive team. Follow- up comments from ebusiness Managers point to a surprising lack of understanding by traditional executive management of ebusiness dynamics and opportunities. A 2011 study by econsultancy 4 on Digital Organizational Structures indicates that digital training continues to be a relatively low priority for organizations outside of the digital departments. In our opinion, high- level executive education should be a priority certainly not to turn executives into digital specialist but to equip them with the knowledge necessary to provide leadership for online initiatives and strategies. On the flip side of this speaking the same language issue, the study also revealed a common frustration by ebusiness Managers in building online investment proposals that resonate with traditional executive management. From our experience, many ebusiness Managers do not know how to employ the predictive analytics (see Analytics section in this report) needed to make compelling investment pitches that focus on credible financial payback for key ebusiness initiatives. And so, as much as corporate executives need to become more comfortable with the language of ebusiness, ebusiness Managers also need to become more comfortable with the language of the corporate executive - especially ROI, NPV, and Risk Mitigation. 4 Digital Marketing: Organizational Structures and Resourcing Best Practices Guide. econsultancy. Dec 2011 Page 4 of 9

5 Another surprising finding is the lack of integration between offline and online business units in bricks and clicks organizations. Over 65% of large ebusinesses surveyed indicate that their online businesses are not at all or only loosely integrated with their offline counterparts. Integrating both online and offline businesses is often made difficult by legacy technology, processes, and cultures on the offline side. Moreover, follow- up comments by ebusiness Managers indicate that the traditional offline side of the business still calls the shots for the online business via corporate strategies and budgets. In our opinion, companies need to put the online part of the business on more even footing with the offline traditional businesses. This is especially critical as the customer journey evolves to become a more integrated combination of online and offline activities (e.g. ROPO - research online purchase offline; Showrooming - in- store use of digital devices). Finally, the survey revealed that ebusiness Managers are surprisingly confident, and possibly overconfident in their abilities. Over 74% of all ebusiness Managers surveyed (and an incredible 85% of ebms from large companies) indicated that they fully possess the qualifications, skills, and experience for current and near future challenges. This is in stark contrast to a number of reputable global surveys, including by IBM 5 and econsultancy 6, that show that Digital Managers are usually overwhelmed by the pace of change in online business models, technologies, and skills. Does this overconfidence by Canadian ebusiness Managers stifle innovation and progress? Does the ebusiness Manager have access to unbiased advice that will challenge his/her default wisdom? We are reminded of the famous Andy Grove quote at Intel: Only the paranoid survive. 5 From Stretched to Strengthened. IBM Global CMO Study Digital Marketing - Organizational Structures and Resourcing - Best Practice Guide econsultancy Page 5 of 9

6 INNOVATING BEYOND PRICE AND DELIVERY Our survey indicates that an astonishing 62% of Canadian ebusinesses, almost two- thirds, do NOT have a formal innovation process or program in place in their organization. This is surprising in a market where waves of disruption new technologies, new business models, increased business agility, and evolving customer expectations are the norm. It is also surprising considering that only 2% of respondents indicated that innovation was not a priority. We believe this lack of innovation process is a major contributor to the relative underperformance of the average Canadian ebusiness. For Canadian etailers, in particular, this lack of innovation manifests itself in an unhealthy focus on competing on price and delivery. Because of the limited scale available to most Canadian etailers (see earlier in the report), a focus on price and delivery is unfortunately not a sustainable long- term strategy. To get beyond price and delivery, Canadian ebusinesses need to become more adept at building innovative, value- added offerings. There is a common misperception that innovation is tied to R&D. In fact, under the right conditions, innovation can occur in all parts of an organization. Roger Martin wrote an excellent HBR article The Innovation Catalyst 7 on how Canadian software company Intuit became an innovation machine by developing a robust innovation process. In its simplest form, an innovation process includes three steps: Ideation, Evaluation, and Realization. From our experience with the Canadian Innovation Centre, ideation is not the biggest challenge for most Canadian businesses. Most organizations generate sufficient numbers of new ideas through employees, suppliers, customers, and other stakeholders. For most Canadian organizations, the problem is an absence of a formal process to collect, evaluate, and manage those ideas. In our view, every Canadian ebusiness can become an Innovator by implementing a robust innovation process and culture that leads to a balanced portfolio of incremental, evolutionary, and revolutionary innovation. In the University of Toronto s new ebusiness Management Certificate program, we stress the value of innovating not just in products, but also in services, processes, organization, and business models. The bottom line: You don t need to have a Steve Jobs leading your organization to be an Innovation leader. But you do need a robust process. 7 The Innovation Catalyst HBR. June 2011 Page 6 of 9

7 ACCELERATING THE IMPLEMENTATION OF CEM AND ANALYTICS INITIATIVES Interestingly, the survey showed that Canadian ebusiness are emphasizing similar strategic priorities to grow their ebusinesses as their global counterparts. Indeed, two of these priorities Web and Customer Analytics and Customer Experience Management (CEM) offer substantial opportunity to raise their competitive level. Unfortunately, the skills required to execute on these goals may not be widely available in Canada at this time. 71% of respondents are focusing on Web and Customer Analytics to grow their ebusiness. This makes sense, as Analytics (and Big Data) have become the new big buzz. However, there are two concerns. First, too much of the current focus is on web analytics ( How many hits did our website get? ) and not on the broader base of data available to online/ offline businesses. Second, from our experience however, few Canadian companies have the skills and experience to take advantage of the analytics opportunity, both at the management and staff levels. To address this skills shortage, educational Institutions like the Queens School of Business are taking the lead by offering a Masters of Management Analytics graduate program. For staff professionals, the University of Toronto School of Continuing Studies is offering courses in Business Analysis and Business Intelligence, and heavily integrating data analytics into their ebusiness/ ecommerce Management certificate program. As well, 61% of respondents indicate that they will focus on Customer Experience Management to grow their ebusiness. This approach can be very transformative, generating many high value opportunities to improve the customer experience. Yet from our experience, many Canadian ebusinesses are process- centric, rather than customer- centric. Tools such as customer experience mapping are rarely used in Canada. And in most ebusinesses, no single group or individual owns and manages the complete online/offline customer experience. Page 7 of 9

8 BUILDING HIGH- PERFORMANCE TEAMS According to the survey, only 16% of Canadian ebusinesses are frequently unable to source the skills and experience needed on their ebusiness team. This is surprising because it is in stark contrast to other global studies 8 that show a growing global trend towards a skills shortage in key areas of the digital domain such as Web and Customer Analytics, Content Marketing, Social Media, Web Development, and Mobile. Why the discrepancy? Either we have unusually high supply of these specialized digital skills in Canada, or perhaps the average Canadian ebusiness is not really seeking and hiring top ebusiness talent in these areas. Perhaps the Canadian preference is to hire less- expert staff, and then develop that staff on- the- job as the job requires. Survey responses seem to support this Canadian preference for internal development. The survey reveals that 75% of Canadian ebusinesses use internal development to acquire the skills needed on their ebusiness team. But this raises another question: Who does the training, and how do Canadian ebusinesses ensure that they include global best practices in the training? Follow- on interviews with survey respondents showed that the quality of internal training is a concern for many ebusiness Managers. In our experience, most Canadian ebusinesses have not succeeded in building high- performance ebusiness teams. A lack of best in class expertise (by global standards) in key digital positions is one reason. Another is lack of T- shaped skills within teams. Both are addressable through focused training. To quote Tim Brown of IDEO 9 : T- shaped people have two kinds of characteristics. The vertical stroke of the T is a depth of skill that allows them to contribute to the creative process. The horizontal stroke of the T is the disposition for collaboration across disciplines. In the University of Toronto s ebusiness Management Certificate program, we focus on building T- shaped individuals, those with highly specialized skills in one area of ebusiness, but with a level of empathy and understanding of other digital disciplines on the team. T- shaped skills are especially important in the ebusiness environment, which is characterized by often siloed, highly- specialized skills within a highly- collaborative environment. 8 Digital Marketing: Organizational Structures and Resourcing Best Practices Guide. econsultancy. Dec chiefexecutive.net - IDEO CEO Tim Brown: T- Shaped Stars: The Backbone of IDEO s Collaborative Culture. Jan 2010 Page 8 of 9

9 GETTING BEYOND GOOD ENOUGH The primary findings of epath s Canadian ebusiness Study are that Canadian ebusiness managers are fundamentally well positioned for success, however a combination of cultural, organization and environmental conditions inhibit the risk taking and aggressive goal setting displayed by industry leaders in other countries. This situation does not equip Canadian companies well to defend against foreign invaders or achieve major success outside of Canada. Based on these findings, epath has identified 4 specific strategies for Canadian ebusinesses to pursue in order to get beyond good enough. 1. Create the Management Conditions for ebusiness Success 2. Innovate beyond Price and Delivery 3. Accelerate the implementation of CEM and Data Analytics Initiatives 4. Build High Performance ebusiness Teams These are described briefly in this document and will be explored in more detail in upcoming blogs on the epath website (epathconsulting.com). In a broader sense, epath recommends the following 6 best practice principles as cornerstones of ebusiness management: 1. Learn from the Leaders: Examine the successes of leading ebusiness players around the world to identify opportunities for your business. 2. Integrate Online/Offline Strategy: Ensure that your corporate strategy fully exploits the potential of your online business to contribute to corporate goals. 3. Provide a Seamless Customer Experience: Leverage the most impactful ebusiness technologies and techniques to create an integrated online/offline experience for your customers. 4. Engineer Results through Analytics- based Modeling: Use a data- driven model of your online business to enable detailed planning, predictive analysis and the engineering of ebusiness results. 5. Measure and Manage Performance: Employ best practices in goal setting, monitoring and performance scorecards to drive continuous improvement in ebusiness performance. 6. Foster Innovation: Develop the culture and processes to tap the innovation potential of your organization. epath has found that these approaches to ebusiness management are key enablers of the success of ebusiness leaders. epath believes that, in concert with the 4 strategies identified in this report, they provide a sound foundation for Canadian ebusinesses seeking to get beyond good enough. Page 9 of 9