What should Web 2.0 mean for Luxury Brands ecommerce strategies?

[NOTE: I had written this article back in 2006 but could not publish it then. I can now do so and it is still very much relevant 16 months later!] 

It is bizarre how an acronym so widely used as “Web 2.0” can lack an unanimous definition. What most experts tend to agree on however is that Web 2.0 is made up of at least two key concepts (as noted by the journalist Phil Muncaster in ITWeek 02/Oct/06 issue- http://www.itweek.co.uk/ ): “Improved user experience and collaboration. The democratisation of information.” The latter concept refers to the fact that information becomes ubiquitous and relatively easily and cheaply accessible by potentially anyone.

Democratisation also implies virtually no control over this “open” information. Companies cannot control what is said about them and about their products. They cannot even hope to read all this information relevant to them due to the shear amount involved. The former concept is I believe even more specific to the Web 2.0. It relates to the fact that the web users are increasingly expecting a positive and memorable experience while visiting a site. By “experience” is meant: as user-friendly as possible, as interactive as possible and as unique as possible. In the case of ecommerce sites, this will be on top of the Web 1.0 criteria such as reliability, overall performance, competitive product prices and efficient and effective integration with back-end delivery and CRM systems. As Phil Muncaster concludes in his article: “So whether you believe all the hype or not, Web 2.0 is changing the way users behave, retailers react and enterprises interact with their staff and business partners. Those who fail to embrace it will probably be left out”. 

So then what does this new environment entails for the luxury products companies launching ecommerce initiatives? 

As for all other companies, it means both an opportunity and a challenge. An opportunity since the Web 2.0 should enable companies to better satisfy their customers by being more in tune with what they expect and desire. A challenge because of the relative difficulty to get it right first time using emerging Web 2.0 technologies (such as Ajax, Mashup) and because of the growing concerns for the Web security and privacy issues. 

I would however infer that the luxury market companies are particularly well positioned to seize the opportunity and take on the challenge. The reason is that these companies are already by nature in the business of providing customer-centred, differentiating, memorable, even unique experiences to their customers. I believe you can make a parallel between: 

· The individualized experience expected when we enter a Cartier, Louis Vuitton or Gucci boutique compared with the standardized experience expected in a Tesco or Wal-Mart superstore; and 

· our expected experience on the Web 2.0 compared with the original Web 1.0. 

Ecommerce customers of luxury companies will expect and value a Web experience as differentiating as purchasing in their high street shops. Therefore, these companies’ ecommerce websites must be highly innovative and take full advantage of the Web 2.0 context. This is totally in line with the following statement I made in my earlier post “Customers increasingly demand more personalized products and services” in Dec/05 : “This new competitive environment indicates that luxury Brands should focus on bridging the gap between them and their customers through co-creation of value with the customers”. 

The basic principle is to build this personalized experience through collaboration with the customers, which happens to be the other Web 2.0 key characteristic! 

Luxury goods companies need to first realize that they must and can be as exclusive on the Web as on the high street. They then need to engage in a sincere and continuous collaborative process with their customers to not only deliver what they seek, but to surpass their expectation.

A great little KM story

Found on CIO.com this great little knowledge sharing story in a context where it was least expected (among retail sales staff used to compete with one another): "Around the holidays in 2000, a Giant Eagle deli manager hit on a way to display the seafood delicacy that proved irresistible to harried shoppers, accounting for an extra $200 in one-week sales. But uncertain of his strategy, he first posted the idea on the KnowAsis portal. Other deli managers ribbed him a bit, but one tried the idea in his store and saw a similar boost in sales. The total payoff to the company, for this one tiny chunk of information, was about $20,000 in increased sales in the two stores. The company estimates that if it had implemented the display idea across all its stores during this period, the payoff might have been $350,000. Previously, "there was no tradition of sharing ideas in the store environment," says Jack Flanagan, executive vice president of Giant Eagle business systems. Seeing the bottom-line benefits of sharing knowledge propelled the employees over their initial misgivings, spurring them to try and out-hustle each other on having the best suggestions, rather than the usual metrics. "Now they're competing in the marketplace of ideas," says Russ Ross, senior vice president of IS and CIO at Giant Eagle. "It became a 'Look What I Did' showcase. Everyone wanted to put something in there," says Brian Ferrier, store director of Giant Eagle's South Euclid, Ohio, supermarket. " This is a typical example of a user-initiated quick win that made a whole KM solution become effective. It does seem so simple and common-sense, doesn't it? But why such simple and common-sense concept be so hard at implementing? "

“Forming an ‘inside-out’ company is the secret to innovation in business”

On the PA Consulting website, I found this very interesting news article dated April 2007. It is about a research by Dr Carsten Sørensen of the London School of Economics (LSE) and PA Consulting Group (PA). This is the part I must highlight: “[..] The research found that IT is the enabler for innovation across the whole business. What we are starting to see is the forming of the ‘inside-out’ company, where interactions and relationships with stakeholders actually shape strategy rather than are subject to it. The research concludes that we are approaching a tipping point, where technology will be cheap enough and intuitive enough to make collaboration as valuable a source of innovation to the business as computation has been a source of efficiency. Technology is changing the way we interact and customers (business and consumer) are demanding a richness of dialogue. [..]” First, I am pleased to see that this confirms what I wrote on the knowledge-driven organization back in 2005, and more recently in Jan 2007. Then this article does correctly make the link between the need for a change in the organizational culture and the introduction of new technologies facilitating collaboration. It is implied that you need both in order to foster value-generating innovation throughout the organization. I spotted the following culture-related change in the article: * Organisations that see their customers and their staff as sources of untapped potential and ideas * unlocking this pool of innovative talent will require collaborative management and not traditional command-and-control-style management * interactions and relationships with stakeholders actually shape strategy rather than are subject to it * senior executives are taking a more facilitative than directorial role, acting as a catalyst or ‘lightning conductor’ for innovation wherever it may evolve * this new outlook on innovation and technology has changed traditional management models towards a new ‘collaborate and control’ model * You do not have direct command-and-control anymore. You are working far more across virtual teams. Teams that are brought together just for specific projects. * The trend towards networks and away from hierarchies and the user empowerment that this entails is changing the way we interact. Executives are seeing a similar phenomenon in business, with users across the organisation demanding that businesses are more reactive to their needs and being willing to take responsibility for improving their working environment. * In order to identify the strategic value of IT it is necessary to employ the technology in developing relationships, listening to customers, and engaging them actively in the production of innovative services Good stuff! The culture change described here is the kind that would do away with the cultural barriers to knowledge sharing I have been repeatedly writing about (mainly here, here, here and here). A few more high-profile articles like this one and I might be able to rest my case...

Great synthesis of KMers' current thinking

On 22nd Jan, I informed you of Colleen Carmean's PhD work on new practices in design and support of shared knowledge environments, and that I was proud and delighted to be in the shortlist of KM specialists asked to participate in her research. 

Well, Colleen has now completed the synthesis of all the participants inputs and has now posted it in a wiki for all to see. Read it! It's truly a great summary of the current thinking of KM specialists on the following 6 key concerns: 

 1. INHERENT CHARACTERISTICS of effective emergent learning environments 

2. Fostering INDEPENDENT, AS-NEEDED KNOWLEDGE ACQUISITION 

3. Fostering SHARING, COLLABORATION and NETWORKING of organizational knowledge 

4. Fostering better expression and sharing of TACIT KNOWLEDGE 

5. Potential TOOLS or PRACTICES for finding, creating and encouraging organizational knowledge 

6. GREATEST PRIORITY in creating a more effective digital workplace I must agree with it all as I was given a chance to revise it before publication. 

 You can post comments here as Colleen reads my blog or here is her site.

The importance of culture when implementing new technology

Thanks to Bertrand Duperrin, I found out that only 6 days ago, Peter Evans-Greenwood (Cap Gemini CTO in Australia) posted on his company's very good "CTO blog" his thinking on the importance of organizational culture when implementing new technology and in particular Enterprise 2.0. Do read it. It is totally in line with my last post.