What is your ecommerce business worth?

Ecommerce business models remain a fascination of mine - see my previous post and paper on eCommerce Business Models. They represent both a very visible forefront of innovation, as well as a rich graveyard of hubris triumphing over good strategy. And that is why I am featuring an infographic from Digital Exits today. Although the sale prices of businesses are not always a guarantee of how good their strategies are, on average, they do give a fairly good indication of how good the market thinks they are.

In my opinion, the relatively low average price/earnings multiples suggest that whilst value can be created relatively quickly in ecommerce, the markets recognise that it can be very hard to hold on to.

Paul Garcia provides the following introductory text to the infographic which appears below:

Have you ever thought about how much your ecommerce business is worth? If you have, you aren't the only one. Everyone will eventually think about whether they should just sell the business for a massive payday or continue to grow it. When thinking about these things, it is important to get an accurate figure to ensure you can make the right decisions.

You can easily get the most accurate figure by simply using professionals, such as Digital Exits, to get a free valuation. They are also the people who created this helpful infographic. If you aren't ready to get a professional valuation, the using this tool will help to give you a better idea of where your business stands.

In this infographic, you will be seeing 150 different ecommerce businesses that were sold from 2010 to 2013. By using these statistics, you can easily measure your business and see exactly where it stands to figure out how much it is potentially worth. The statistics came from bizbuysell.com and the businesses were all U.S. based... although not all of the buyers were within the U.S. Of course, each sale is different, so you may be able to get less or even more than what this infographic says, but it is a great way to easily get an approximate value.

The secret and subtle art of strategy

I am personally not a huge fan of strategies that are announced with a fanfare. Rather I much prefer strategies where competitors and customers look back years later and say "we never saw that coming" or "we can't believe we ever lived without that".

Indeed, Sun Tzu wrote that "All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved."

Of course, strategies can seldom be executed without the participation of many people. And communication with those people is almost always essential to the successful execution of that strategy. But the communication should focus on the work to be done and on the success that has been achieved. It should not announce the strategy before it is executed, or its success before it is achieved.

Some amount of secrecy is invariably required where strategy is concerned. However, this secrecy is often misplaced and overstated - for most businesses (but not all, of course), industrial espionage is not a real and present threat. Competitors often know quite a lot about your strategy anyway, as they hire staff away from you, to whom you have communicated it. But knowing what you've said your strategy is, and having the insight and means to execute it are two different things.

Is interest in "strategy" declining? [Updated August 2023]

I first started monitoring interest in the terms "strategy" and "business strategy" in 2014, and have just now (August 2023) reviewed and updated it.

I use a simple metric: Google Trends.

If you're not familiar with it, Google Trends shows how frequently a given search term is entered into Google’s search engine relative to the site’s total search volume over a given period of time.

As of August 2023, Google Trends shows that searches for the terms "strategy" have reduced, relatively, by more than 50% since they started tracking in 2004:

There is some evidence that this decline may have levelled off in the last few years.

What is perhaps more interesting is the anomalous spike in March 2022 when the lines just reaches 50 again for the first time since January of 2011. It is difficult to know what might have caused this. A sudden interest in strategy as a way out of COVID seems too simplistic an explanation. And whilst the interest since that spike appears marginally better than that immediately before, I am not sure it is strong enough to indicate a trend break.

The relative decline in searches for the term "business strategy" over the same period is almost as severe:

In this case, the decline was initially even steeper and definitely seems to have levelled off since about 2006. The spike in March 2022 is even more pronounced, reaching 80.

It is interesting to note how much more cyclical the trend in searches for "business strategy" is. This could suggest that interest in business strategy remains tightly coupled to annual business planning cycles, despite all the evidence suggesting that a more continuous attention to business strategy is better. Another reader has also suggested that it could also suggest an interest from students at the beginning of their business studies courses.

I did a little more digging around. I won't bore you with the charts each time, but in summary:

• relative search interest in "business" itself has also declined by about 50% but with greater signs of levelling off or even rebounding. The March 2022 spike is again evident. Perhaps web-searches have broadened out into more non-commercial topics over the period.
• relative searches for "SWOT" have also declined, but by much less, whilst relative searches for "PESTEL" have more than doubled. Perhaps people are increasingly aware that strategy is a complex an multi-faceted challenge, and so are resorting to more specific rather than more generic searches.
• following on that theme, I expected to see that relative searches for "business model" would also have increased, owing to the recent popularity of talking about firms competing on this basis. Interestingly, relative searches for "business model" actually declined by nearly 30% from 2004 to a low in 2008. The recovered to their 2004 levels by about 2017 and have held that level ever since. The only exception is that same spike in March 2022, this time extending to April 2022.
• relative searches for "operating model", another recently popular term, also declined from 2004 to 2007. Thereafter, it has gained in popularity at a steady but modest rate. For "operating model", the anomalous peak occurs a month earlier in February 2022.
• relative searches for "Target Operating Model" have shown a steady increase from almost nothing in 2004 to a high in 2019. Thereafter there was a slightly decline in interest which then seemed to recover for another peak in March 2022.

Has business strategy as a pursuit really declined by more than 50% in the last 15 years compared to other interests? This seems to be a worrying trend.

I'd be interested in hearing your thoughts on what it might mean and/or on what other terms I should look at as part of my review. Please feel to let me know in the comments below.

Strategic goals versus operational objectives

I recently received an email from a Strategic Coffee reader asking for help in understanding the difference between strategic goals and operational objectives.

I think it is easy to get so wrapped up in the definitions of words that we lose sight of our real objective: designing and implementing better strategies! However, I think there are a couple of interesting ideas behind this question which are worth exploring.

I think of goals as broad statements of direction, and of objectives as being Specific, Measurable, Achievable, Relevant and Timebound (that is, SMART). Goals bring a vision alive, whilst objectives translate the goals into actionable units. In an ideal world, I would translate my vision into goals, then break my goals down into more specific SMART objectives, and then design actions and activities to achieve my objectives. That way I can clearly measure progress towards my vision and make adjustments to my activities if I need to.

I think of operational objectives as describing the desired internal state and/or performance of an organisation. Typically, they might relate to the efficiency and/or effectiveness of the business, or some other performance criteria. Strategic objectives, on the other hand relate to progress towards the organisation's goals. They may overlap: for example your strategy may require a certain standard of operational performance. This could lead to goals and objectives which are both strategic and operational. In the Balanced Scorecard framework, the internal business process perspective would typically contain objectives which are both strategic and operational.

photo credit: anieto2k via photopin cc

Can you simply buy talent?

Shortly after Marissa Mayer stepped into the breach at Yahoo, she stoked controversy by cancelling the company's  'work from home' policy. At the time many predicted that this clamp-down would result in a mass exodus of talent to competitors such as Facebook and Google or any of the many startups it shared Silicon Valley with.

Last week, Ken Goldman, Yahoo's chief financial officer declared that Yahoo had won the war for talent (speaking at a Morgan Stanley investor conference in San Francisco).

However, tellingly, they had done so by simply buying talent. Yahoo bought 37 companies, and their staff, since Mayer took over. And although Yahoo received an impressive 340,000 job applications in 2013, career site Glassdoor reported that it had to pay the 3rd highest wages in Silicon Valley in order to do so.

However, it is not clear to me that simply buying talent is a sustainable strategy. Despite its proclaimed victory, Yahoo failed to join the 15 other Silicon Valley firms on Glassdoor's 50 best places to work list. Most of the companies acquired were early stage startups whose engineers might be more interested in moving on to their next projects as soon as their earn-out periods expire. And whilst high salaries might attract large numbers of job applicants research suggests pay is a hygiene factor which is seldom able to overcome more fundamental dissatisfaction with working conditions and culture.

My personal view is that attracting and retaining top talent requires more than deep pockets - it requires visionary leadership and a strategy that people can get behind. As Yahoo's revenues continue to decline, it remains far from clear that Mayer has delivered that yet.

Implementing strategy is hard work - but you can get out of it

I've been involved in strategy for long enough to know that formulating and implementing it is almost always hard work. (Although hard work which is so rewarding never seems quite that onerous!)

Over the years I've seen a large number of people avoid the hard work of strategy implementation by employing a simple little trick. When presented with a new strategy and asked to commit to delivering it, They simply say:

That's a really great strategy and I'm totally behind it. Even better, what I'm already doing is already totally aligned with the new strategy.

It's a great get out because you get to appear to be enthusiastic, part of the team and forward-looking. But you don't actually have to do or change anything.

The catch is, of course, that it's a dangerous fallacy. Albeit an extremely seductive and perversely comforting one.

There are three ways in which it could be true:

1. What you do is not impacted by the strategy, nor does it impact the strategy. That may be true, but it's probably not a good omen for your continued job security!
2. Previously, you were actually doing something which did not support the old strategy, but which by some extraordinary coincidence actually completely supports the new strategy. I guess such an extreme coincidence is at least theoretically possible. But you've just admitted you hadn't been a supporter of the previous strategy. And you've just attributed the fact that you are supporting this one to blind luck. That's probably not the impression you thought you were creating.
3. You don't really understand the new strategy and how it is different from the old one. (Or perhaps it isn't - but that's a problem for another day.) Sooner or later, you will be found out!

No. The only way to deliver strategy is to take a long hard look at everything you currently do, and consider how at least some of it should change. Hard work that may be, but it's also what make strategy so exciting.

photo credit: One Way Stock via photopin cc

Which social media post is your favorite?

I really enjoyed this Google+ post from Nespresso:

Which sip is your favourite: the first or the last?

Why? you may ask. Well, for a number of reasons:

1. Its simple and direct. No airs and graces.
2. It contains a neat little NLP auto-suggestion. It sets in motion a thought pattern in which it is assumed that you already like Nespresso. It gets you thinking about another question before you've had a chance to question: "Hang on, who says I even like Nespresso at all?" Clearly, someone who consciously strongly dislikes Nespresso may be able to override this suggestion, but then they are almost certainly not the target of this little promotion.
3. There is clearly no right or wrong answer, and no sense that anyone is any more or less qualified to answer it than anyone else is. As a result, everyone feels equally entitle to express a view and become engaged. But whatever view you express, even if your view is to challenge the question itself (see the comment below the post itself), you're still most likely doing so within the overall context of liking Nespresso.
4. Anyone who reads the question will immediately and subconsciously start to think about enjoying Nespresso, whether they've ever done so before or not - that's the only way to engage with the question! Perfect marketing.

And, as a coffee lover (the clue is in the title of my blog!) and an owner of a Nespresso machine, that last reason alone was enough. Time for a cuppa, I think...