Ecommerce business life cycle technology requirements
What stage of growth is your business in?
Each stage has unique technology requirements to help it reach the next level. Where does your company fit within this picture? This post will give you a quick glance into your technology future!
The 4 life stages according to Gartner
In a report titled Identify Small Business Opportunities by Understanding Business Life Stage Requirement, Gartner, the world’s leading research and advisory company, finds that “small business IT investments, and hence product needs, are driven by pragmatic strategies aligned to business life stage, including startup, expansion, established and business maturity.”1 According to Gartner, “There are four life stages that influence IT investment requirements, as follows:
- Startup — Less than two years of operation
- Expansion — Two to four years of operation
- Establish — Five to nine years of operation
- Business Maturity — 10 and more years of operation”1
Technology requirements for each stage
It’s clear to me that each stage has unique technology requirements to help businesses reach the next level. As the technological landscape evolves, platform limitations and business strategies drive this necessity for change. The graphic below, taken from the Gartner report, shows the top 3 business strategies driving IT investment based on its research into SMBs with 5-99 employees.
Source: Gartner, Identify Small Business Opportunities by Understanding Business Life Stage Requirement, Mikako Kitagawa, Monica Zlotogorski, 29 November 2018.
We believe this shows that a lot of investment is focused on elements largely concerning the business's overall commerce architecture. From our own research and experience, it’s not until somewhere within the established or mature stages that companies typically have their commerce architecture figured out and running optimally. But even then, there are always improvements that can be made.
See the following table from the Gartner report:
Table 1: Motivation and Requirement of IT Investment by Business Life Cycle
|Life Cycle||Business Tenures||IT Requirements||IT Budget to Revenue|
|Startup||Less than two years||Basic IT infrastructure
No complication and prefer easy installation
Conservative buyer to avoid disruption
Price-conscious due to limited funding
|Expansion||Two to four years||Scalability
Value for money
Evaluation/pilot of new technology
|Establish||Five to nine years||Operation efficiency and cost optimization
Enhancement of current IT
Quality over price
|Maturity||10-plus years||Operation efficiency and cost optimization
Active tech adoption for new business stage versus conservative behaviour for keeping current operation
Source: Gartner (November 2018)1
My thoughts on the "Startup" life cycle stage
Garner states, “Companies in this stage are in survival mode.”1 I believe SaaS can be a great way to save money and limit IT requirements. After all, with little to no internal IT budget, letting someone else look after the software side of your business can get your product to market quickly and give your business important stability in these first few years.
However, know that fees for SaaS tend to creep up as you add more accounts and do more business through the service. Ideally, these costs will be offset as money flows in, but high fees can be a motivator for replatforming later on.
Example: Canada’s online cannabis retailers are a good example of this. These shops run on a mix of SaaS and open source ecommerce platforms and some shops are much better positioned than the others to counter potentially massive licensing fees. This blog post gives you an example of this, showing how some provincial Government stores could run into some significant fees as the industry, and their own businesses mature over the coming years.
Furthermore, platform limitations with SaaS can be difficult to overcome once a business starts to grow rapidly. These limitations might not be felt initially, but become much more noticeable as the expansion stage takes hold and growth occur. This is another motivator for replatforming which tends to happen roughly every 3-5 years.
Example: The Shopify/ReCharge combination for subscription recurring billing comes to mind. These services work great together, but they become questionable as massive growth occurs. This is mainly due to the two components not being able to pass data back and forth in real-time, making manual data entry and reporting a bottleneck for scaling. This on-demand webinar shows you these issues and discusses ways to overcome it.
My thoughts on the "Expansion" life cycle stage
As a business starts to experience significant growth, I believe a major piece of the puzzle becomes scalability. Scalability is whether business processes can continue as-is when growth occurs or do bottlenecks and resource issues increase operating expenses at the same rate. This is where we see SaaS platform limitations start to take effect, when it becomes more difficult or resource-intensive to perform manual tasks that were manageable when the business was smaller. This blog post goes into Scalability vs. Growth in much more detail, should you be interested.
A focus on scalability means investing in the business's overall commerce architecture, the ecosystem of software components that are used to operate the business. This includes the ecommerce platform, CMSs ERPs, CRMs, OMSs, PIMs, marketing suites, analytics and reporting, etc. If you’re new to commerce architecture, check out this ebook on understanding the basics.
Did you know? According to the Gartner report:
“By 2022, companies in the expansion business stage will spend an average of 25% of their annual revenue for IT investments, up from the current 18%.”1
I believe part of this investment is in integrations and automation. Technology that has the ability to “talk” to other technology in your architecture through APIs is a growth enabler. This is because data can pass through these systems automatically in order to automate tasks that would otherwise be manual and time-consuming. Automation is the key to successful scalability.
Tip: If you identify with this life cycle stage and are looking to gain an understanding of your overall commerce architecture, take a look at our Ideal Architecture Analysis and Digital Commerce Assessment tools. These tools have been designed to help business owners better understand their requirements at this stage and beyond.
My thoughts on the "Establish" life cycle stage
An established business has proven itself in terms of being able to survive in a competitive marketplace, but that competition doesn’t go away as a business evolves. I believe companies need to innovate further to remain competitive. As long as a company is running efficiently, there should be capital available for strategic technology investments. What that investment is could be internal operational tools or external tools for influencing the target market.
Example: USI Laminate, a lamination hardware and materials supplier based in the USA, recently completed an important integration between their ecommerce platform (Drupal) and a legacy ERP that was irreplaceable to their business operations. The result of this strategic investment opened up new revenue streams, created a better customer experience and automated many previously manual tasks. Post-project stats indicated a significant positive boost in a number of key business metrics. Read the USI Laminate case study for further details.
By this point, an established business should have a solid commerce architecture in place and be actively investing in the automation and the efficiency of their technology. This technology stack refinement can also continue as a way of enhancing the business's operational capabilities and the customer experience.
Example: Businesses here may still swap out components and possibly replatform, but now quality and integration become a top priority. An example of this can be seen in our TELUS Mobility case study. TELUS Mobility is the second-largest telecommunications company in Canada. They’re continuously innovating their online sales platform and wanted to further refine their architecture to better handle the extreme high-traffic swings of big sales events like Black Friday and iPhone launches. This objective and more were solidified with the help of proper planning end execution by Acro Media and TELUS Mobility's combined project teams.
My thoughts on the "Maturity" life cycle stage
Mature ecommerce businesses don’t stop refining their operations, but, in my opinion, this process has slowed significantly. At this stage, the business’s commerce architecture and operational efficiency are always considered in business decisions.
However, just because a business has reached this stage and is a smooth-running (hopefully) operation, new tools and better methods are always on the horizon. It’s important to stay on top of your technology and technology suppliers in order to remain competitive in the marketplace.
Keeping on top of technology can be an internal process or something that is partially outsourced to consultants and professionals in specific areas. Staying informed and innovative will help a mature business stay ahead of the curve and remain a leader within its market.
About Acro Media
Acro Media is a digital commerce consulting company specializing in open source architecture that develops tailored commerce infrastructure for effective operations and scalable growth. We help SMBs understand their commerce architecture through focused discovery and strategy exercises. Our solutions empower SMBs with a continuous integration framework allowing them to adopt or create innovative technology that gives them the freedom to build ideal customer experiences and streamlined backend operations.
Editor’s Note: This article was originally published on October 7, 2019, and has been updated for freshness, accuracy and comprehensiveness.
1 - Source: Gartner, Identify Small Business Opportunities by Understanding Business Life Stage Requirement, Mikako Kitagawa, Monica Zlotogorski, 29 November 2018.