"There will be an explosion in e-commerce oriented around the buying and selling of digital content"
Madanmohan Rao interviews Andrew Zolli, Web business consultant
Andrew Zolli is Senior Vice President of Interactive Media at New York-based Web consultancy firm Siegel & Gale. He has consulted for a wide variety of clients, including American Express, the Weather Channel, Citibank, Netscape Communications, Silicon Graphics, Lucent Technologies, IBM, Toys R Us, Reciprocal, and Kodak, among many others.
He is a frequent speaker at conferences and institutes like Internet World, Seybold Seminars, the American Institute of Graphic Arts, the American Center for Design, The Conference Board, Columbia, Yale, Harvard, and New York University. He also currently serves on the faculty of the Graduate School of Design at Carnegie Mellon University, where he regularly lectures about design strategy and interactive media.
He has a background in cognitive science and interface design, and has published articles in journals like Cognition, Communication Arts, I.D., Critique, WebTechniques, Eye, the New Media Review, AdWeek, InternetWeek, The Industry Standard, Business 2.0, and Fast Company magazine. His first book, on new media theory and practice, will be published in early 2000.
Andrew is a speaker at the upcoming India Internet World '99 conference (www.iworldindia.com) in New Delhi, September 22-24.
Q: What was the original vision which led to the founding of your organisation?
Siegel & Gale was founded 30 years ago as a strategic communications consultancy, helping large, multi-national organizations and emerging start-ups create and manage global brands. The company has help build and extend the brands of such leading companies as Dell, Harley Davidson, Hewlett Packard, American Express, Citibank, Kodak, MasterCard, Acura, Caterpillar, Toys R Us, The Olympics, Apple Computer, Netscape, and hundreds of others.
Q: How has your company grown over the years since founding?
While originally focused on creating and implementing market-leading brands, the company expanded in the mid 1970s into the realms of information architecture and relationship media - helping companies clarify and simplify complex communications like documents, statements, contracts and the like, and turning them into platforms for 1-to-1 marketing.
In the 1980s the firm again expanded into areas of multi-cultural, international and multi-lingual communications, advertising, training and research. And in the early 1990s, the company began one of the top Internet-consultancies in the United States, with clients such as Citibank, Kodak, The Weather Channel, Toys R Us, Ernst & Young, American Express, and dozens of others.
Q: What do you see as the top trends in e-commerce in the years 1996, 1997 and 1998?
In the early years of business-to-consumer electronic commerce, much of the focus was on selling basic "low touch" commodity products online - such as books, compact discs and computer equipment that did not have to be 'handled' prior to purchase. These products were sold by companies who did away with "bricks and mortar" infrastructure (such as retail stores, customer service staff, etc.) and passed along the savings to the customer.
As customers used these online stores, the companies would use customers' data to make it easier and easier to use the service. (This is Amazon's business model, though it has yet to show that it can do this profitably.)
In the early years of business-to-business e-commerce, there was an initial focus on using the Web to shorten supply chains and to develop automated online markets. In this arena, the early efforts were all around efficiency - making it easier for companies in selected markets to share information and transactions.
For example, Dell Computer, the well-known computer manufacturer, offered their large corporate clients such as Ford Motor Company a custom "Extranet", so that IT staff at Ford could purchase pre-configured computers directly from the manufacturers without going through complex requisitioning processes. This shortened the sales cycle and helped Dell create intense customer loyalty, in addition to increased sales.
Q: As a discipline, how is the design, development and deployment of e-commerce sites evolving?
The fundamental shift that is occurring, particularly in the U.S., is that basic e-commerce services (such as an online catalog) are becoming commodities themselves, and companies are struggling more to identify and build "value added" services that will differentiate their sites and provide real customer value.
So, while parts of the process are getting more simple, others are becoming much more complex. I also think that U.S. companies are learning the painful lesson that they really need to invest in building their brands first and foremost. After all, if nobody knows you, nobody will buy from you.
Q: What trends do you see emerging in Web project management, in terms of in-house versus outsourcing e-commerce projects?
Most companies need help at the outset of their e-commerce projects - understanding what's possible, understanding what they can and should do, and how to achieve this vision technically, operationally, and in terms of branding and marketing. That's where a company like ours comes in - we help companies identify what they can and should do, and help them get going and build the service.
However, in the long term, we believe that if a company's core business is to be conducted over the Web, if their core business *is* the Web - then they shouldn't rely on outsourcing too much. When the Web is mission-critical, it needs to be understood and "owned" internally. That's why we work to help clients become self-sufficient, help them to hire and train internal staff to run the e-business.
In the long term, this will help the company master the Web. This will help the company remain competitive and responsive to the market.
Q: What are some likely directions that e-commerce may take in the next year or two?
Expect to see an increased effort in three areas: first the advent of "e-services" - that is, the ability to purchase not only commodity goods, but actual professional services over the Internet. A great example of an e-service is Ernie, Ernst & Young's online consulting service for small businesses. This online service (http://ernie.ey.com) lets small companies get advice on a number of tax, consulting and IT questions answered directly over the Web.
Second, there will be an explosion in e-commerce oriented around
the buying and selling of digital content, in addition to commodity products.
So, rather than buying compact-discs, you may be purchasing the music
itself, in a specially encrypted format. There are a number of companies
working on this, including Reciprocal, (www.reciprocal.com), a New York-based
company that offers "digital rights management" solutions for digital
Q: What are your organisational forecasts: do you see e-commerce
being more widely adopted by large corporates, SMEs, or the consumer sector?
That said, there will probably be the largest growth in e-commerce among small and medium sized businesses in the next 12-24 months, simply because there are many more of them, and because, finally, some sophisticated services are being developed that allow such companies to conduct e-commerce.
My favorite example of such small-business e-commerce enabling services
is Big Step (www.bigstep.com), a California-based company that allows
small companies to build complete e-businesses online, for a minor fee.
Such companies are taking the complexity out of e-business for small organizations,
and we expect to see a blossoming in this category as a result.
What are the three most successful e-commerce sites you've come across,
in your opinion? What sets them apart from other e-commerce sites?
I'd have to say the three most successful e-commerce sites I've seen are:
- Amazon (www.amazon.com), which continues to impress analysts with the way in which it offers "value added" services, such as one-click buying, back to its customers
- Dell (www.dell.com), which is outstanding for the way in which it allows customers to configure their own machines online
- PetSmart (www.petsmart.com), which integrates content, commerce, and community services perfectly.
Q: What's the average cost of a full-blown e-commerce site? How big is the Web solutions market in the U.S.?
The answer depends on scale. For large organizations, e-commerce initiatives (including staffing, training, maintenance, design, technology, etc.) averages about $1.5 million a year. In the Fortune 500, this number increases to roughly $12 million a year. For small organizations, the total cost can run anywhere from $15,000 to $60,000 a year. Today, the average cost for a full-blown ecommerce site across all market segments is about $900,000.
The market is growing rapidly, from roughly $7 billion today to more than $43 billion by 2004, according to IDG. Forrester Research has predicted that e-commerce initiative will rise from 3% of all IT expenditures this year to more than 11% in the same time period. That's just domestically - the global market is going to run into the trillions of dollars, and in the long term, is going to be indistinguishable from traditional market metrics.
Q: What are the three most common misperceptions you notice in the way companies are approaching e-commerce?
First off, companies tend to underestimate the amount of support they will need for their e-commerce site. I think a lot of executives thought early on that they could just fire their customer service departments and do everything over the Web. The reality is the opposite - we're seeing market-leading companies hiring additional staff to manage the Web, and bulking up their staff.
Second, we see a lot of companies that do not create a dedicated, empowered team to manage their e-commerce initiatives. Their initiatives get bogged down in corporate politics and prevent the companies from being nimble, which is the most important trait of successful Internet companies.
Third, a lot of these companies get their engineers to develop their front-end user experience. This tends to lead to sites that are ugly, confusing and difficult to use. Successful companies hire the right teams to do the right jobs, and rigorously test their services to make sure they are meeting the needs of their users and customers.
Q: How does Asia compare with the rest of the world in terms of adoption of e-commerce tools and frameworks?
Currently, Asia is a mixture of good and bad. There are pockets of radical innovation and aggressive adoption of e-commerce, particularly in places like Bangalore. The region has a powerful educational system and a bounty of human resources. And in some metrics of technology adoption, such as cell-phone penetration, parts of Asia are actually ahead of the West.
However, the region as a whole suffers from fundamental infrastructure problems that keep it from being a dominant player. Our feeling is that if Asia awakes to its potential in this regard, information technology and the Internet can transform it into the dominant force in the next century.
Global capital for such an initiative is certainly liquid and fast-moving enough to support this - it will take a major entrepreneurial initiative, backed by regional governments, to get things off the ground.
Q: What kind of current/upcoming competition do you face, and how does your company stack up against it?
We see some companies who come from technology being aggressive competitors in the future, and some traditional management-consulting firms as well, but today, as the leading builder of brands and businesses on the Web, we don't have any direct competitors.
Q: If you had a chance to go back in time and start everything afresh, what would you do differently with your e-commerce approach the second time around?
We probably would have added a staff-training component earlier. Other than this, the market has really validated our approach - to combine best-of-class branding, strategy, design, and marketing.
Q: What are your plans for the Asian market? Any parting words of advice/recommendation for Internet professionals in India?
We will continue to play in the global e-business market, and will increasingly focus on Asia in the coming years. As for parting advice to Internet professionals, it's this: we're very, very early in this game, and there's lots of opportunity to innovate and win. This is going to be a huge market, and whoever can get ahead of it will reap huge rewards.
The writer can be reached at email@example.com
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