Investing in new e-commerce platforms and solutions is rarely cheap, and carries a lot of uncertainty.
As a result, getting the necessary board-level approvals for capital investment in your e-business plans can be a major challenge.
Faced with high uncertainty and perceived risks, board-level decision makers will often dither and prevaricate, causing delays to the sign-off date (costing time-to-market vs. your competitors) and salami-slicing of the budget (damaging the scope and capabilities of your execution plan).
This advice is based on my practical experience, and sets out four ways you can anticipate and overcome the challenges.
1. Play by the rules… but shift the goalposts if you have to
First up: make sure you’re familiar and comfortable with the methodology used locally to evaluate investment cases. Whether it’s NPV, IRR, Time-to-Breakeven or something else, make proper use the preferred approach (and get yourself a friend in the finance department to coach you before you present to the board!)
But even with the right methodology, it’s likely that your e-commerce business case will show a return on investment that is less attractive than the company standard. This is because e-commerce is loaded with future imponderables and indirect benefits which established models just don’t handle very well.
At which point, you will need to move the goalposts of the investment model in your favor, to demonstrate the true value of your proposal. Here are some tips:
- In your sales and gross margin projection, ensure you incorporate a monetary value of the digital influence over physical channels (see point 2.)
- In your sales projections, model the sales growth derived from capitalizing on market volatility (i.e. using your new digital channel to win new customers churning from your competitor’s physical channels.)
- Run a company-wide opportunity cost scenario, to show the impact of doing nothing (and don’t be afraid to talk about dinosaurs, as per Point 3.)
- If the opex of running a digital operations team looks heavy, argue that developer costs should be part-absorbed by the R&D budget, and that front-end maintenance should be part-borne as a marketing cost.
- And finally, make sure the CFO is onside (“Keep your friends close, and the CFO closer”).
2. The Appliance of Science
To strengthen your business case and answer the skeptics, use the most solid data points and analysis you can lay your hands on. It’s OK to rely on industry-wide data, but try to augment it with some primary data of your own. Good science, specific to your company, will win you this argument.
For example, there is an increasing body of hard evidence to demonstrate the strong and direct digital influence over physical sales. Just check out this recent example from Deloitte. Aim to conduct a similar study of your own shoppers and customers (running a survey is remarkably quick and cheap these days).
Ask your customers how/where/why they shop, to enable you to argue with confidence that “for every $X we generate via the e-channel, we will be directly influencing $Y in our physical channels.”
3. Don’t be afraid to use the ‘Dinosaur’ argument
Back in the day, dinosaurs were the most successful and well-adapted animal group the planet had ever seen. Until, they suddenly weren’t anymore.
Their story shows that the conditions of any system can be subject to unexpected change, and that failure to adapt quickly can be terminal.
In the world of business, who would have guessed 10 ten years ago that global mega-corporations like Nokia (mobile handsets) and Eastman Kodak (image processing) would’ve collapsed quite so quickly and comprehensively from their market-leading peaks?
In this era of unprecedented upheaval in the spheres of commerce and consumption, no-one is safe, and no-one can afford to be complacent. Not even you.
Hence the underlying argument of your business case should not be about how the future will fit with your business, it’s about how your business will fit with the future.
In practical terms, a common concern I hear from CEOs runs like this: “Surely this new e-commerce channel will just cannibalize my existing physical sales channels?”
To which the response must be, “Well, if we don’t cannibalize it, then our competitors will. But if we go to market now, then we’ll be in a position to ‘cannibalize’ our competitors’ physical sales, too! Oh, and if we do nothing, then we’ll go the same way as the Diplodocus.”
4. Stakeholder Consensus needs to be owned—by YOU
E-commerce projects are notoriously disruptive: the established patterns and processes in a mature organization tend to get heavily shaken up. Indeed for some departments (IT, marketing, supply chain) embracing e-commerce requires nothing less than a whole new philosophy.
It’s scary stuff! And, as a result, leaders in these areas will be inclined to fear and mistrust the project you are leading. Don’t ignore this—instead, address it head-on.
In your preparations, take ample time to make a personal connection and demonstrate the value of what you propose to each of these stakeholders in a language that speaks to them. For IT, talk about improved speed, and the kudos of having a web-development team; for marketing, highlight the joys of increased CX sophistication; and for supply chain, focus on the opportunity for greater efficiency.
Now good luck getting that green light!
