Commerce

Digital Commerce: Federated Model vs Centralized Model

digital commerce

Becoming a digitally mature company is a vital piece to success. But what does your company need to look like today and what should it look like in the future to align toward that goal? What skills and resources do you need to build an organizational model that supports digital maturity? These are often questions that we hear from forward-thinking organizations who see the importance of investing in a digital commerce strategy. Often, we see two different organizational structures used in setting up a commerce experience, federated model and centralized model.

Federated Model

In a federated model, you have a digital core team that is supported by other departments that aren’t part of the digital team’s core business group. A lot of organizations that have physical sales channels may already be set up with this model with their product teams siloed in different departments. The challenge, therefore, becomes who owns digital and whose responsibility it is to prioritize digital commerce within the organization.

Centralized Model

Often as companies mature digitally, they move to a centralized model. In this model, the digital team is at the core. External to that, as an example, is IT, customer service, sales, traditional marketing, and pricing. If your brand is taking the steps to mature, it might be that a centralized model starts with a small team with a plan to secure additional resources over time.

First and Next Steps

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Whichever way your company structures, a great place to start is with an evaluation for digital readiness. Evaluating your company allows you to understand what your current structure and what your internal skillset is and where those skillsets live. By understanding your internal resources, you set yourself up to then begin to figure out where the gaps are and if you need to outsource any skills. From there, as you continue to grow, you can establish a plan that helps you identify when those missing skillsets should be hired, where you roll those skills off of an outsource model, and if you have internal resources interested in becoming a part of your digital team.

In helping companies establish commerce strategies and head toward a maturity curve, we have seen some create separate businesses for digital commerce. This is often because the new digital commerce strategy can be disruptive to people that have relied on a physical sales channel. A big part of this is thinking about change management because you have to shift your mindset to be more digital. Another reason a lot of companies move to creating a separate business for digital is then pricing isn’t a barrier.

Case Study

In a recent webinar, Personalizing the B2B Commerce Experience Through Data, we reviewed the commerce journey of Honeywell. Honeywell has focused on creating a centralized model that they refer to as their Center of Excellence. Rather than each division of their business hiring an SEO, analytics, or digital experience team member, they have created a core group of shared resources to support their digital marketing efforts. That group is responsible for governance and compliance for the entire company. For instance, they are now focused on utilizing Magento Commerce as their primary commerce platform rather than having disparate systems across the organization. At the same time, the model is still slightly federated because their product teams and the marketing for those product teams is still separated into their different business units.

It is important to note and understand that every company must create a model that works for them. For anybody, nothing is going to be 100%, unless you have a new digital business unit. The concept of a centralized model is that your core digital knowledge resides in that core team, rather than being spread out across business units. When creating a Center of Excellence, like Honeywell, you may need to hire resources that support digital across your organization so your skillset and resources are always working together. Prior to the Center of Excellence, Honeywell used to support hundreds of partners and technologies and now they have governance to control that. This leads to a more efficient and cost-effective structure.

Partnering for Success

Partners play a key role in helping establish digitally mature companies. Partners can be leveraged when you are building your organization model and identify and fill holes where you need skills. They can also help you to hire for those missing skills in the process. Even more, partners are there to help you support the technology. For example, Perficient can provide a commerce platform assessment and then help build onto that platform, go-live, and provide support to continue to expand. In essence, your partner can fill a lot of gaps and voids that can help you build a business model that you can act on for success.

About the Author

Senior Commerce Consultant for Perficient Digital, a leading digital transformation consulting firm. Experience includes more than two decades in digital commerce, product management, business development and marketing for manufacturing and distribution organizations. Has provided strategic leadership for global suppliers and brands resulting in innovative techniques for improving the customer experience overall, reducing cost of sales and accelerating efficiencies within complex buying and selling scenarios. Authored articles for leading publications in the manufacturing, distribution and ecommerce industries.

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