Eugene Grigul is the Co-Founder & VP of Virto Commerce, a next-gen B2B-first eCommerce platform.
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As I've discussed previously, driving digital transformation inside established companies can be challenging, but it doesn't have to be a painful process. With the right goals and guidance, the process can progress smoothly and without significant headaches.
However, if a company has a solid multinational or multiregional presence, the digital transformation process must consider additional complexities.
Regionalization is a powerful force in today's economy, but executing in this environment isn't easy. Each region carries with it specialized taste, legislative issues and competitive landscapes. Developing IT solutions under this umbrella forces companies to contend with these issues and varying levels of digital maturity, a zoo of legacy systems and innumerable integrations.
Speed to market is essential for any organization, but these factors make it difficult for multiregional organizations to act quickly.
The slower deployment pace that results from these challenges puts organizations at a distinct disadvantage relative to smaller, more agile teams. Companies that can solve this challenge and avoid common digital transformation traps can reap rewards that more than pay for the associated investments they make.
Here are the two most common digital transformation challenges that multiregional companies face and how to solve them.
Digital Trap No. 1: Too Much Centralization
The question of centralization vs. decentralization is one that every multiregional company must eventually address. More often than not, teams tend to skew toward one extreme or another.
On one end of the spectrum, you have teams that embrace total centralization. On the other end is a more laissez-faire approach that allows for widespread decentralization. Both of these extremes are, of course, problematic.
First, when teams are overly focused on centralization, local units are forced to act as customers of the centralized digital commerce transformation super-service. In this scenario, the centralized super-service essentially dictates decisions and experiences to the regional divisions. For this approach to be financially viable and relatively quick to develop, certain sacrifices must be made.
Specifically, any quick-deploy approach will almost certainly lack the flexibility that local branches require, resulting in serious pushback from regional offices. Of course, a complete centralized solution that works for all regions would be too expensive and too time-consuming to develop.
Digital Trap No. 2: Too Much Decentralization
Organizations seeking to avoid the pitfalls of too much centralization may be tempted to swing toward the other extreme and embrace a fully decentralized approach. Unfortunately, this tactic also has its drawbacks.
While decentralization may satisfy the individual needs of each business unit in theory, having to replicate everything in each region is by no means easy. This approach requires regional teams to recruit talent, recreate digital commerce competencies and duplicate technological solutions. Moreover, they cannot reuse the assets that already exist in the company, resulting in a much slower speed to market.
Most importantly, however, is the loss of economies of scale. Without a coordinated approach, regional teams lose size advantage and, as a result, require a considerable budget.
The Solution: A Two-Level System
As with most things in life, balance is critical. The best approach to avoiding these digital transformation traps and settling on a sustainable solution is to adopt a two-level system.
The main goal in this scenario is to reuse best practices, competencies and technologies throughout the organization while providing flexibility for local branches to adapt to the specific needs of local regions.
Companies today must act both locally and globally. From a local perspective, it's essential to allow regionally vested interests to share structured knowledge, best practices and tangible examples. Organizations need to serve as a clearinghouse to collect, analyze and disseminate that knowledge globally.
While this strategy avoids some significant drawbacks of complete centralization and decentralization, it isn't without its challenges.
First of all, it is required to shift toward agility — which, according to McKinsey, has been shown to have many different advantages. One key advantage of this strategy is that it enables traditional companies to ratchet up performance and effectively compete with born-agile businesses.
Of course, agility and the proper software go hand in hand. They are, in many ways, equally important. Any critical business software should be designed to serve the various needs of your regional teams. Gartner, Inc. calls this strategy "composable commerce," but I prefer to refer to it as "Atomic Commerce Architecture."
When evaluating software, you should ask providers questions designed to ensure this cross-applicability, including:
• How would my EU-based regions take advantage of technology developed by our U.S. counterparts while still retaining their unique business logic?
• How can my Australian subsidiary reuse the solution without sacrificing its regional preferences?
During my long experience as an e-commerce executive, I've seen how companies can use widely available resources to design and implement multiregional solutions properly. With clear goals and solid leadership, this can be accomplished quickly while keeping risks to a minimum.
As usual, the best way to avoid the challenges I've outlined is to use an expert guide to develop a balanced strategy that applies technology with proper coordination, understanding and depth.
Multiregional digital transformation isn't always easy, but that doesn't mean it's impossible. The right strategy and broad market understanding can help organizations thrive in an increasingly competitive and global environment.
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