Serious skills shortages are threatening to derail e-commerce projects. Follow our 14-point guide to win yourself kudos and perhaps even turn yourself into a paper millionaire
If you dream of making millions by setting up an e-commerce division for your company, you’ll have to act fast. You are sailing uncharted territory and the staffing challenges are enormous. What is more, the sector is developing so rapidly that three months in e-commerce is equivalent to one Internet year. You may have only weeks to establish your virtual sales operation before a new upstart steals your business.
- Create a separate company
Decide how many of your existing staff you want on the project. Choose people with good collaborative skills and train them in e-commerce and Web languages over the project. Choose people with good collaborative skills and train them in e-commerce and web languages over the project duration. “Creation space on the edge or within your organisation, and get the project completed within two months,” says Roger Wyn Jones, e-commerce partner at management consultancy PricewaterhouseCoopers. “If you don’t by then very often your competitors will have done it.”
As the group HR director, you will probably retain control of this division, until it gets big enough to warrant its own HR manager. The advantage with creating a separate company is you can offer staff shares, which could make them very rich when you float the company.”
2. House it in a separate building
If you are a traditional firm and you want to create a Net-based offshoot marketed at the public, you will have to create a separate brand such as Co-op’s Smile or Prudential’s Egg. In effect you are launching a direct competitor to yourself but it is better to cannibalise your own company than let some young e-tail upstart do it.
New branding suggests a new culture, which suggests separate premises. An oppressively corporate atmosphere is a real turn-off for the young Net heads you are seeking to attract. They will want to wear jeans and T-shirts and work flexible hours, which could cause resentment among the rest of your workforce.
Dixons has housed its e-commerce offshoot Freeserve in another building within a stone’s throw from the main offices, near enough so that hungry Web staff can nip over to the canteen for a cooked meal and far enough to develop a discrete identity.
Prof Richard Scase, who advises the DTI on e-commerce, says, “Stick with your current premises and staff at the moment and if you are a big business you should set it up as a separate operation and see how it goes.”
3. Form alliances to get results fast
You may have to swap notes and share profits with another company, or risk missing the boat, says Jones at PwC. Get advice from a management consultancy if you are breaking into a different sector – it may loan you a team of experts to start your project.
4. Don’t forget business customers and your own suppliers
If you are a manufacturer your customers are probably businesses themselves, so you need to check that your planned e-commerce system meets their needs. You should also persuade your own suppliers to automate their sales and distribution systems so you can make the supply chain as lean as possible.
“Most developments of e-commerce will occur in business-to-business relationships,” says Professor David Birchall, director of development at Henley Management College. “To be competitive against new start-ups you will have to strip out costs from the whole supply chain by linking them with systems such as enterprise resource planning.”
5. Staff the e-business from within if you can
This way you know that staff already understand your “bricks and mortar” business before they sell on the Web. Go for innovative, creative types. Decide how many people you are going to take with you and how fast.
“The big secret is to release the innovation of your own people,” says David Taylor, an e-commerce consultant and president of the IT directors’ association Certus. In your customer call centre you will need an army of people day and night to answer customers’ e-mail queries. These people need to know your business and they must also sound friendly and warm when communicating by e-mail – a big challenge.
6. Get an e-commerce director on board within weeks and make sure they are overqualified
The e-commerce manager should report direct to the group’s main board director. Speed is paramount when hiring your head of e-commerce. There is no substitute for e-commerce experience, says Craig Coverman, global operations manager for IT recruitment consultancy Best International. “It is definitely worth buying in somebody who has been through this before because it is a costly investment and they need to know all the things that can go wrong,” he says.
Consider headhunting in the UK and overseas for e-commerce experience. And if that doesn’t work, the next best thing is home shopping firms, such as Freeman’s or Great Universal Stores, which have been quick to incorporate Internet ordering to their portfolio of mail order, telephone sales and even interactive (digital) television.
Your head of e-commerce will probably be a high-flier in their 30s, says Charlie Kingdon, head of retail at headhunter Odgers International. They should be strong on commercial management and strategic marketing, he says, and will probably have an MBA and experience working for a management consultancy such as Booz Allen or McKinsey.
If finding the perfect permanent is looking hopeless, consider hiring a temporary or interim manager with no e-commerce history, rather than holding out for three to six months, and missing your window of opportunity. Draft in an overqualified former group marketing or IT director who will learn about the business, find their replacement and teach them the ropes within the six- to 12-month contract.
“An interim manager will hit the ground running, and you can try before you buy,” says Chris Hindle, director of headhunters and interim management consultancy CalibreOne, which places about 10 e-commerce managers a month.
Interims cost between £800 and £1,500 a day, which compares favourably with the £2,000-3,000 a day charged by management consultancies.
7. Pay for the best IT staff – you’ll need them
If you are going to manage the whole-e-commerce operation yourself you will need managers for three IT sections – the infrastructure manager, who sets up the servers, communication links and databases, the programmers who make the pages work, and the web-designers, generally graphics designers with coding ability. Infrastructure experts – also known as systems engineers or database specialists – ensure your site is reliable so potential customers can call up the web site without problems.
Beyond this, pages must not take more than a few seconds to download, otherwise surfers will click on to a quicker site. This is why server and database experts can command contract fees of £120,000-200,000 a year.
The three main web languages are Java, HTML and C++. Coverman predicts a huge skills shortage in Java this year. “Every day we get big organisations coming to us saying they need 200, 300, even 400 Java people – and they are just not there,” he says.
“Companies are going to have to delay their launches because they are not finding the right people or losing the important people.” These programmers earn currently between £35,000 and £60,000 a year as permanents – or £350-550 a day as contractors.
8. Fight for a big marketing and content budget
“Half of making a web site successful is how it is marketed and the content,” says Coverman. Remember that search engines need to find your site easily, and it is no good having a great site if people don’t know it’s there. It is very easy to underestimate the money you’ll have to pour into TV and press advertising.
9. If you can’t handle it, outsource it
Deciding how much to outsource is the tricky bit. It could set you back £1m to get your servers on-line because bandwidth is so expensive. Some US companies such as IBM will host your operation for you. Once you are comfortable with e-commerce and making a profit, you can take over this function yourself.
If you feel completely out of your depth you can outsource the whole e-business to a specialist agency, which will charge you royalties for helping you draw up a strategy, designing and running the site and writing or customising the transaction software. US consultancy Interworld (interworld.com), and e-co (encommerce.com) offer this service.
This may be the best bet for many manufacturers whose conservative environment will be anathema to the non-conformist types attracted to e-commerce. But Prof Birchall warns that you must make sure you understand what has to be done before you delegate it to someone else.
“Can you outsource something you don’t understand?” he points out. “It is important you have a clear understanding of business models and what needs to be done. But whether to outsource to one supplier or engage a range of contract skills and project manage them is a dilemma.”
10. Give e-staff a share in the winnings
E-business is growing so fast that stock options are a powerful way to attract recruits. Bookseller Amazon.co.uk gives all staff share options, a fifth of which they can cash in after a year, another fifth after two years and so on. This gives staff an incentive to work the long hours needed to stay ahead of their rivals.
11. Go all techie, wacky and luvvie
Net heads will be impressed if they are working on the latest technology, as the investment creates the perception that the venture will succeed. Get groovy with your names for teams, departments and job titles. Some “e-tailers” have departments called “people”, and “money”, while others let staff make up their own job title such as “world acknowledged expert on …” Web design consultancy Razorfish calls all its employees “fish”.
12. Remember, good business is good e-business
Companies often fall into the trap of thinking e-commerce is somehow different from the real world,” says David Taylor. “The virtual world is just going to become a mirror of the real world, and they will work in parallel.” Also, remember that if you are using a new brand on the Internet, people will not have heard of you, so you must deliver excellent customer service to remain credible.
Make sure customers’ e-mails are answered the same day, and that products are delivered on time. “Companies spend a lot of money on all-singing, all-dancing web sites but don’t have enough people in their call centres to answer queries,” says e-commerce consultant David Bosdet. “It only takes one screw-up and people won’t come back to you.”
13. Teach your other staff about e-commerce
You can end up alienating the bulk of your workforce if you keep them out of the whole Net business buzz. So once your e-commerce site is running, you should start spreading some of the skills to staff in the mother business. The BBC, for example, is training TV producers in HTML so they can edit content on the corporation’s web site.
14. Do it all again for digital TV
Web selling may be the latest craze but interactive TV promises to be even bigger. The small screen will bring electronic commerce to the masses, and companies such as Cable & Wireless are already offering to install digital TV boxes for free. So be prepared to start from scratch to reach customers in their front room.
Case study: Clicks and mortar: Egg
Prudential’s spin-off Egg was one of the Internet success stories of last year attracting in the region of 800,000 customers in 15 months with the lure of competitive interest rates and the promise of greater control over their own finances.
But the Internet bank’s launch and phenomenal rate of growth presented a major staffing challenge to what was an already “new” business. Prudential Bank, established two years previously, had grown from a staff of three to 800 in 18 months. And to gear up for Egg’s introduction in October 1998, an additional 1,000 staff were recruited for a new site in Derby. This involved sourcing permanent and temporary staff in the space of months.
According to Jean Tomlin, Prudential’s personnel director, the company’s intention is to replace or convert its contracted staff into permanent employees but the speed of growth has meant it still relies on a balance of the two. Job functions range from call centre associates, to marketeers, treasurers, and e-commerce gurus, as well as a range of support functions. And having three sites – Derby, Dudley and London – presents challenges in how the organisation maintains team spirit and communications. But Egg was unable to give specific examples.
So does the Egg culture differ from Prudential? “Our culture is emerging as we grow and learn but it can be characterised by our determination to achieve the impossible,” declares Tomlin.
The HR function has also had to develop policies and procedures appropriate to a rapidly developing business. Tomlin spends a great deal of her time “brokering” relationships and communications within and between the senior teams. “It is highly engaging and means a hectic schedule of getting people together to achieve positive outcomes.”