The
New Direct Marketing Management Structure:
Evolving Trends From The E-Com Revolution
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By and large, all of those core competencies are still in place at direct and catalog marketing companies today. But, where those companies have morphed to E-commerce or dot-com companies, those classic structures and their characteristics remain intact, but they are the middle layer of management and not the senior management.
Senior management in an E-commerce or dot-com organization has simply layered itself on top of these classic managers and reduced them to a functional, categorical middle management. Senior management today may consist of bright, technological and conceptual creators, but they rarely have a solid, experiential direct marketing background. That’s why they are hiring every experienced direct marketer they can find with promises of get-rich-quick opportunities and phantom stock deals, some of which actually happen. In short, E-dreamers have to hire savvy direct marketers to render themselves real. E-dreamers have discovered what direct marketers have known for some time: the customer is the king. Unfortunately, with the advent of E-commerce and the ubiquity of the Web, the customer now controls price and defines satisfaction as “free, accurate and immediately.” If you are the web-based business in the middle, you have to be a very smart and efficient direct marketer—in both the classic and the E-com sense of the term—to be able to compete in this “E-nvironment.”
Alliances and Relationships. The core competency of E-commerce and, indeed, successful web-based companies, is that of structuring alliances. Perhaps no other characteristic is as prevalent among the E-com marketers as that of seeking and consummating strategic alliances and relationships. The new managers are skilled in networking, albeit a networking based on immediate advantage and benefit rather than the traditional “who you know” and “loyal old friend” quid pro quo network. The speed in establishing functional and revenue-generating alliances and relationships is often breathtaking; the norm often seems to be, “That sounds good…let’s do it!” E-com marketers can have a new relationship established and be up and running cooperatively in hours versus the weeks and months it takes old-guard marketers to act. As a result, ideas are tested quickly and either abandoned or expanded in a very short period of time. The ability to conceive, structure and revise alliances and relationships in E-com time is an essential element in managing the E-com enterprise.
Alliances and relationships are also being forged between E-com and traditional managers having either shared or disparate visions and relational motivations. The combinations of possible relationships are: Traditional DM aligning with Traditional DM; E-Com aligning with Traditional DM; or E-Com aligning with E-Com. The first form of alliance results in more of the same; the second in new strategies and tactics with the stability of proven support; the third in unproven and uncontrolled potential. To operate at either extreme is dangerous; to operate with a transformational structure (E-com aligned with Traditional DM) likely has the greatest percentage chance of success. This realization has led to the significant number of strategic alliances and acquisitions among E-com and traditional catalog or direct marketing companies. The fastest way to secure operational capability is to buy it or to align with it. Interestingly, for the most part, it is E-com acquiring or aligning with Traditional DM; the new managers are the proactive initiators while the old managers wait reactively. History proves this fact time and time again; it is Darwinian, evolutionary and inevitable.
Recently, the concepts of E-com alliances have scaled new and heretofore unconceivable heights. The General Motors-Ford-Daimler-Chrysler alliance that creates a massive, cooperative “exchange” for parts and supplies used in automobile manufacturing is, doubtless, one of the most significant E-com partnering events of the era. Similarly, the retail world was consolidated on the supply side in one fell swoop with the announcement by 12 major retail organizations of the creation of an E-com “exchange” bringing together over 10,000 suppliers to the retail giants in the U.S. and Europe. The retail names include Kmart, Safeway, Target, CVS, Tesco, Marks & Spencer, Kingfisher, Auglan, Casino Guichard Perrachon, Royal Ahold, Albertson’s and Cora. The initial $100 million funding to establish the Web-based “exchange” is simply the first round in a massive and ubiquitous business to business operations structure that seeks to maximize revenues while cutting costs dramatically. This observer has been stating for the past 5 years that businesses will have to reduce their operating costs by 50 percent or risk being competitively irrelevant; the proof is now being seen in these massive, new alliance “puddings.”
The use of the word exchange to describe the structure of the new E-com alliances is an interesting use of terminology. An exchange in the classic sense is a place where goods or services are traded. Exchanges are also cooperative societies. And, exchanges are--in the technical sense--a central, physical place where communications are networked and routed. Taken together, then, the E-com exchange can be defined as a cooperative neural and physical construct facilitating and connecting the supply-side efficiencies of commerce; in short: economic efficiency and technology come together for the benefit of the members.
It does not require a great deal of insight to recognize that the skills necessary to negotiate, structure and maintain an elaborate structure such as an E-com exchange are very different from the skills necessary to manage and grow a single, niche-focused catalog or direct marketing organization. The advent of the “practical visionary” has occurred. It is not enough to dream; one must be able to dream and construct cooperative and economically beneficial alliances. Intellectual ability coupled with social ability describes the practical yet catalytic E-com manager of today.
Like their customers, these new managers have little regard for “normal work hours” or “business dress” or the “niceties of business practices.” They don’t have time for that nonsense. They have a window of success to negotiate and they are time-starved for accomplishment, generally defined as “making a lot of money fast.” This is not to say they are unethical; indeed, they may be even more ethical than their buttoned-down predecessors. They are, however, unconventional to the extreme. And that is good. It is an unconventional time. Un-conventions become new conventions; new conventions create redefining change, and business recycles once again.
Reporting Hierarchies. Because so many of the new E-com managers are stakeholders, reporting within the organizations is changing. Hierarchical, vertical structures have disappeared in favor of holistic, circular structures where responsibility and reporting are shared equally because of the common bond of the stakeholders. The detrimental organizational politics of a $70 million 1980s catalog company is simply not found in a dot.com company of 2000. Because they make it up as they go, there is little opportunity for the elaborate controls and territorial protection devices that plagued the direct marketing organizations of the Professional Management Era.
The circularity of reporting is key to understanding the new conventions of the dot.com management structure. Take traditional vertical hierarchies and stretch them horizontally across the management disciplines. No one is “above” or “below.” All of the stakeholders are equal in importance and in their responsibility for contribution. Now, take the two ends and bend them into a circle and connect the hierarchy together. That is the circularity of structure that allows fast ideation, fast implementation and testing, fast redefinition, and fast creation of beneficial alliances. The “fast company” is more than a cliché; it is a functional strategic and tactical structure that streamlines effort and eliminates non-productive reporting conventions such as weekly staff meetings. Collegiality and consensus occur on the fly, not by committee or fiat. Even the very term—reporting—disappears in these new structures and is replaced with thinking. That can be liberating and refreshing; it can also be scary, especially if the stakeholder does not possess the intellectual or social skills to manage the necessary boldness.
The New Board of Directors. For the past decade, I have called for operations and fulfillment professionals to move to the board of directors. The direct marketing and E-com industries—and now, the combined direct-E-com industry—is increasingly dependent on accuracy, speed and convenience; in a word: fulfillment. Until those managers with responsibility for fulfillment are sitting on the boards and influencing decisions about investment, expansion and technology, the boards will be operating at sub-optimal potential. The time has come for CEOs to come from the operations and fulfillment ranks, as well. As the E-com world embraces the necessity of real-world performance, the value of operations and fulfillment talent increases proportionately.
The circularity of management must apply to the reconstituted board of directors of the E-com organization. It is no longer either logical or effective to structure a board with only industry insiders or icons; it is necessary to bring in a diversity of experience and viewpoint, as well as relevant New Economy skills. Traditional board structures are unable to manage the circularity, the boldness, the “Sounds good ... let’s do it!” approach to strategic planning, or the refreshing and scary absence of structure and politics. Those organizations seeking to redefine and recycle their structure for the E-com future will benefit by asking the question, “What type of board member will benefit a fast company?”
The Cluetrain Manifesto
Perhaps the most eloquent expression of the new structure of the E-com Management Era is to be found in The Cluetrain Manifesto. The premise of this thought-provoking and highly provocative dialogue is:
We are not seats or eyeballs or end users or consumers.
We are human beings—and our reach exceeds your grasp.
Deal with it.
The 95 theses of The Cluetrain Manifesto can be found at www.cluetrain.com and it is well worth the time to explore the thoughts and philosophies of the E-com Management Era as expressed there. They represent the potential future structure of E-com companies and direct marketing companies that will survive the dynamic structural change resulting from the most significant revolution of commerce since the Industrial Revolution. This new ethos of management must—by definition—petrify old-guard managers with fear. They do not understand it, and they have no clue how to implement it. In the words of a veteran of a Fortune 500 firm now in free-fall:
The clue train stopped there four times a day for ten years
And they never took delivery.
To understand the coming structure and the necessary management rebirth, listen to the language of the authors and their manifesto:
A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter—and getting smarter faster than most companies.
These markets are conversations. Their members communicate in language that is natural, open, honest, direct, funny and often shocking. Whether explaining or complaining, joking or serious, the human voice is unmistakably genuine. It can’t be faked.
Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do.
Readers are encouraged to review the 95 points of The Cluetrain Manifesto found at the web site: www.cluetrain.com.
Conclusion
The strategy is clear: better technological tools, more new ideas, no rules to slow down change. The core competencies are clear: alliance-building, boldness of concept, speed. The style is clear: circular, collegial, apolitical. The structure is clear: interlinked alliances and economic relationships. The outcome is clear: E-com and Traditional DM evolution. The choice is clear: future relevance or competitive irrelevance.
Biography
Don Libey is a principal of Libey Incorporated, Philadelphia, Pennsylvania, and Haddon Heights, New Jersey, investment bankers to owners, CEOs and boards of catalog, direct marketing and E-commerce organizations. The firm advises on direct marketing and e-commerce industry future trends and specializes in structuring strategic planning, mergers and acquisitions, capital raising and financial advisory services for catalog, direct marketing and E-commerce companies.
Don, a well-known industry advisor and futurist, presents keynote speeches and seminars to major direct marketing conferences, associations and corporations throughout the U.S., the United Kingdom and Europe. He is the author of six books on direct marketing, future change, and technological influences on marketing and is a strategic partner to the leading catalog operating systems software giant, Smith-Gardner, and to the innovative list management and brokerage firm, MeritDirect. Don has operated numerous direct marketing, catalog and publishing companies as owner, CEO or board director.
