CHICAGO, IL - Today I got a call from a friend who runs the online retail store of a major consumer brand. Mostly, the brand sells through department stores, but they did $24 million online last year and were budgeted to grow by 20% this year to $29 million. That was until last May, when my friend lobbied the CEO for funds to make long-overdue investments to the company's ecommerce infrastructure.
The CEO had the CFO create a cost/benefit spreadsheet which made some assumptions about how the new technology would increase sales. These assumptions were debated and blessed in a C-level vacuum and mandated back down to ecommerce, along with a new sales target of 42% growth for the current year (to $34 million). Like a good soldier, my friend quietly agreed to the budget, and now he regrets it because his current compensation and 2009 numbers are being pegged to the CFO's estimates.
The result, in plain old recruiter-speak: My friend is now "open to new opportunities" and "would consider any reasonable (read lateral) move."
Some thoughts:
1.) This is a shame for my friend's employer, as my friend is underpaid and will be expensive to replace. The market for people with his background is 25% higher than what he earns, and recruitment fees and relocation costs will leave a hickey.
2.) There are three (and only three) shareholder value levers: Growth, Efficiency, and Capital Optimization. Increasing shareholder value is what keeps CEOs awake at night, yet CEOs need to be careful about who's telling them what. CFOs have no business estimating how any investment will drive sales. In fact, CFOs typically know less about growth than anyone, and I'm not being disrespectful. CFOs know about optimizing the financial structure of a business. That's their job.
Had the CEO involved my friend in the debate, the CEO might have realized that if your market is not growing by 42% per year, then for you to grow at 42% means that you will have to dislodge customers from your competitors. Pie-rearranging competition is much more costly than pie-enlarging competition, even online where switching costs are supposedly low. Yet these things will impact my friend's paycheck in the coming months and possibly years. He should have pushed back.
3.) All marketing can be boiled down to one mission: Sell more stuff to more people more often for more money. Ecommerce managers whose job security is tied to growth must do extensive reference checks on their technology vendors to ensure that the investment will move the needle in each of these areas. Moreover, vendors should be held accountable when there are directly attributable shortfalls. My friend should have been more diligent back in May.
The moral of points 2 and 3: "You don't get what you deserve. You get what you negotiate." Or, as my dad used to say, "Life is a contest of wills."
Beyond that, my friend should stop agonizing over incremental improvements that are only going to make his bosses want more, more, MORE -- and look for a quantum improvement in his business. Sure incremental improvements are necessary, but big growth comes from big ideas. Especially in mature markets.
Gary Halbert used to call this the "gun to the head theory." Specifically, ...
"What would you do if you had to QUINTUPLE your business in the next 365 days, or you would be shot dead?"
Roberto Goizueta of Coke did this when he stopped asking "What's our share of the soda market?" and started asking "What's our share of stomach?" Only then did Coke get into the hydration business.
The idea is that when you redefine your market so that it's ten times larger than it is today, then the possibilities for growth seem endless.
Something for ecommerce executives to think about.
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