In the Mckinsey article, The Seven Habits of Highly Effective Digital Enterprises authors tell 7 traits of effective digital enterprises. My book The Mouse Charmers which studies the most successful digital businesses of India also talks a bit about these traits through some detailed case studies. Let me focus on one aspect that both the authors of the above articles and I agree upon. Digital businesses need to be standalone businesses and not extensions of existing businesses. It is not another sales channel you add to your existing channels and hope to add to your sales.
Effective Digital Enterprises
It is a channel that needs 100% attention from the team that manages it. It needs a strategy of its own which may not be tightly coupled with the rest of the organization. Needs a different focus as the dynamics involved are different.
Take the example of a grocery store. An offline grocery store is all about inventory management, store location, and store operations. While an online grocery store can technically have infinite inventory the key factor here is logistics. How you deliver from your hubs to homes in an efficient and predictable way. Similarly, online general stores like Snapdeal need to have a huge supplier network. They need to devise methods like discount coupons and deals to emulate online sales through partners.
The biggest expense for an offline store is the store itself and the staff to manage it. Making sure that people turn up at the store and hopefully find what they are looking for. For the online store, the big expense is logistics costs, efficient route planning every day, and managing the expectations of the customer when they can not touch and feel the products they are ordering. The retail store customers are located in a vicinity and it is easier to profile them. For online anyone with an internet connection is a potential customer and it is not so easy to profile them.
As we see in this example the basic skill sets required to run the same business offline and online are very different. The business model is different and so is the strategy. If one business is treated as an extension of another, there is bound to be a lot of loss in an attempt to synergize or even measure them on the same parameters.
Online businesses have their own challenges as well, that are specific to them. Will talk about them in another post.