Recently we hosted the third webinar in our series, dedicated to making important technology decisions that influence your business strategy and its outcomes. This article is focused on the key takeaways from the session.
If you want to watch the recording of the full webinar "Making technology decisions in e-commerce", find it here.
Contents:
1. Technology Across the Five Company Growth Phases
2. The Anatomy of a Technology Stack
3. When to Buy, Customise, and Build Systems for Your Tech Stack
4. Choosing the Ideal Tech Infrastructure for Your Business
Technology Across the Five Company Growth Phases
In the consumer and retail sectors, the role of technology in business strategy is frequently underestimated.
While product quality, operational efficiency, and brand reputation seem vital, they are deeply influenced by the underlying technical infrastructure. Decisions in technology are very costly and should not be impulsive or solely based on intuition. Such an approach can limit business growth and pose risks to its future. As businesses evolve, the integration of technology becomes even more critical, serving as a linchpin that not only supports but also accelerates each phase of business growth.
Business growth stages and the key limitations
Before delving into the role of technology in business growth, let's go through the key business expansion stages, outlined by a legendary Harvard Business Review article "The Five Stages of Small-Business Growth".
The proposed model identifies five distinct stages of business growth, each with its unique challenges:
1. Creativity Stage: Innovation is central but often culminates in a leadership crisis.
2. Direction Stage: Focus on strategic navigation, yet faces an autonomy crisis.
3. Delegation Stage: Emphasizes delegation but is marred by control issues.
4. Coordination Stage: Coordination is key, yet bureaucratic red tape becomes a challenge.
5. Collaboration Stage: Collaboration peaks, marking organizational maturity.
Source: Harvard Business Review
Transitioning to the next stage is increasingly difficult as the company grows. In fact, as Verne Harnish writes in "Scaling up", only 96% of companies remain in the initial stage. Only 4% of companies move to the second stage and only 0.4% move to the third stage. So, what are the main blockers for growth?
According to the research, there are three fundamental barriers that impede the transition between growth stages:
1. Capable Leadership: Is there a diverse team with necessary skills and the ability to delegate efficiently?
2. Predictable Marketing Funnel: Is the company able to acquire and retain customers and found the product-market fit?
3. Scalable Infrastructure: Are there resources, systems, and infrastructure to handle the increasing complexity of business operations?
As we clearly see in our experience and the context of modern consumer and retail companies, the scalable infrastructure is the technology stack.
Scalable infrastructure is not just about having a digital presence or automated processes; it’s about integrating technology into the very fabric of the business strategy. It ensures that the infrastructure is agile, adaptable, and scalable, qualities essential for a business aiming to transcend the initial stages of existence and survival.
This is what the following sections will focus on. How to make technology decisions that are strategically supported and long-term oriented?
The Anatomy of a Technology Stack
A technology stack is more than a collection of tools and software; it's the engine that powers your business operations and customer interactions. It’s a combination of integrated systems, each meticulously designed to optimize performance and enhance the customer journey.
It's helpful to understand a technology stack as composition of multiple layers. Each of them is serving a distinct purpose yet operating in unison to drive customer value and business revenue. We dissect a technology stack into 01 Layers, 02 Systems, 03 Tools:
Each layer of the technology stack, from marketing and sales channels to commerce and service, is equipped with specific tools and systems. It’s not just about selecting the right pieces but ensuring they fit together seamlessly.
Key Elements to Consider
- Integration: The magic lies in the seamless communication between systems, ensuring a fluid, uninterrupted operation.
- Simplicity: It’s about adopting technology that adds value, streamlining processes rather than complicating them.
- Team Adaptability: The stack should be a natural extension of your team, aligning with their skills and digital maturity.
When to Buy, Customise, and Build Systems for Your Tech Stack
A golden rule that has proven its weight in gold is to buy systems when you’re starting off and to transition to building them as you scale up.
The essence of this lies in the art of mastering technology utilization without falling into the trap of seeking uniqueness in every aspect of your operation.
For example, do you want to be unique in your fulfilment operations? Most likely, no.
It’s the brand, the product, the content that should set you apart. In the initial stages, it’s about aligning your processes with existing systems. As you expand, the narrative shifts - it becomes about tailoring systems to the rhythm of your evolved processes
Decoding the Categories of Tech Stack Systems
The landscape of tech stack systems can be divided into strategic value, core value, and utility value components. Let’s unravel this with Uber as a case study.
1. Strategic Value Systems: These are the pillars, the non-negotiables. You build these from scratch because, without them, your business is a ship without a sail.
For Uber, the technology that bridges riders and drivers is not an off-the-shelf purchase; it’s a custom-built platform.
2. Core Value Systems: These are integral but not foundational. You can buy and then weave in extensions to tailor them to your needs.
Uber’s seamless in-app payment system exemplifies this. It’s not built from the ground up; it’s an existing system, like Stripe or Adyen, customized to Uber's varying needs in the multitude of markets.
3. Utility Value Systems: These are the systems that, while essential, don’t warrant a custom build. Even tech giants with thousands of software engineers opt to buy these.
For Uber, think of the HR software - it’s a purchase, not a build.
When you’re a small entity, utility value systems dominate your tech landscape. They are the low-hanging fruits, accessible and efficient. But as you ascend the ladder of growth, the shift towards strategic value becomes inevitable.
The decision to buy, extend, or build isn’t static; it’s an evolving narrative. It’s about understanding that in the initial stages, the focus should be on adopting and adapting.
Choosing the Ideal Tech Infrastructure for Your Business
Navigating the transition from one tech architecture to another is a hard and long journey, intricately linked not just to the technology itself but the evolving structure of your organization.
Here, we simplify and enhance the understanding of three predominant tech architectures, aligning them with different stages of business growth and organizational complexity.
1. Monolithic Architecture
- Scale: Ideal for startups and small businesses
- Structure: Single, unified system
- Highlight: Best suited for co-located teams
In the world of startups and small businesses, monolithic architecture often emerges as the best choice. It’s a single, unified system, streamlined and efficient, making it a perfect match for co-located teams. Gone are the days when monolithic systems were limited. For example today, a commerce platform is not just equipped to handle commerce-driven functions but may also incorporate rich content creation features like blogs. It’s a fast, low-complexity solution that’s evolved to meet a diverse range of needs.
2. Experience-Led Structure
- Scale: Tailored for growing, diversifying businesses
- Structure: Composable, adaptable architecture
- Highlight: Customized customer journeys
As a business blossoms, the need for a more intricate, adaptable tech structure becomes evident. The composable, experience-led structure suitable for serving unique business needs. It’s the go-to for businesses that have outgrown the standard product catalog, stepping into the world of made-to-order products and customized services.
3. Full Modular Architecture
- Scale: Essential for technology-centric companies with substantial revenues
- Structure: API-first strategy, managing visual complexity
- Highlight: Essential when technology becomes a strategic value
When technology is the heartbeat of your business, especially for companies with revenues soaring over 150 million, full modular architecture isn’t a choice - it’s a necessity. It’s the epitome of flexibility, designed to manage visual complexity and diverse customer interactions with ease. Here, the focus shifts from core functions to strategic value, marking a transformation not just in tech but in business orientation.
Navigating Your Choice
Headless infrastructure, where the front-end is decoupled from the back-end, is often hailed as the future - but it’s a future intricately woven into the fabric of enterprise-level businesses. It’s about expansive possibilities and customization, a level of freedom that’s not always aligned with the needs of smaller entities.
The choice between monolithic, experience-led, and full modular isn’t linear. It’s a journey influenced by your business’s unique needs, growth trajectory, and organizational structure. In the dynamic world of e-commerce, understanding these architectures isn’t just about staying current - it’s about being ready to evolve, ensuring your tech infrastructure is not just robust but adaptable, poised to navigate the ever-changing landscape with agility and precision.
Final words
In today's commerce, technology must be an active participant in business strategy and the boardroom as it directly shapes and defines the business trajectory. Whether you will make it or break it, can strongly depend on the shape and fit of your technology stack and the team that manages it. Make the decisions carefully and stay strategic: take into account the current and impeding complexity, specific growth ambitions (entering new markets or sales channels?) as well as your internal resources for maintaining and managing this powerful engine.
