Markus Lorenz: [00:00:00] Welcome everybody to today's episode of the CTO to CTO podcast. I'm totally thrilled today to announce you and Matthias Patzak, Former CDO of HSE24, CTO of Autoscout24. Matthias has had many more awesome stations within his CV, but Matthias, the stage is yours, please introduce yourself.
Matthias Patzak: [00:00:59] Hi, thank you very much. Yeah, I'm Matthias. I'm the father of two teenage kids. I'm a super lazy runner. But I'm a very passionate PlayStation player. Right now I'm learning to glide. So this is flying planes without an engine. Despite all this I'm 20 years in the industry. Now, most of the time I spend as the CTO of Autoscout24.
I learned a lot there about agile lean, lean startup and cloud transformation. Recently I've been CEO and managing director of Home Shopping Europe. I did cloud transformation there too. And with this cloud transformation I also relaunched the e-commerce platform. Now for a year I'm with AWS based out of Munich. I'm part of the solution I take organization and I'm helping customers with their cloud strategy. It strategy most of the time with retail e-commerce customers.
Markus Lorenz: [00:01:50] Nice. Thanks for the introduction and I’ll jump directly into our topic because today's episode is about the C-level guide for e-commerce organizations and as our audience can assume, Matthias has a cool and bold track record here in this topic. And according to the actual data from the Germany e-commerce association, we see that we have a growing e-commerce market within the DACH region. And the consolidated revenue is more than 100 billion euros on the PTC business from 2020. And we see that everybody is challenging that e-commerce sales perspective and e-commerce tech in the DACH region. But mostly the organizations are struggling by adapting to e-commerce. So e-commerce from our perspective is not only a webshop, which you put in place to have categories in front of your customer, but also about people, processes and technologies.
And today we like to focus on the people and processes and the e-commerce organizations. And talk a little bit more about. What we see are challenges on the client side, in general, and also on the companies by building e-commerce teams. And may I ask you directly, what challenges do you see in general?
Matthias Patzak: [00:03:13] Surprisingly many companies don't want to build teams at all. So for them it's not an issue because they just want to buy a tool that complies with a list of features. And from my point of view, this is the biggest challenge because it's not about technology. It's about people. And it's about processes and the others that want to build real teams and want to set up an e-commerce organization. They want to have teams that just build features. That comply was a wishlist, the wishlist of the owner or of the CEO, and they just want to follow a plan. And so from my point of view, the biggest challenge is the shift of mindset.
And it's the shift from mindset from features to business value then from planning to it's an endeavor. Yeah, basically, these are the two biggest changes. And this is a change where a lot of companies really struggle. So what you need is you need to have cross-functional e-commerce teams and they should not deliver features as we mentioned. And we will talk a lot about it later. They should really focus on the customer needs. And the customer needs, they need to be measured with the standard e-commerce KPIs. And then these teams, they need to work hard and smart to change these KPIs. And you cannot plan this. It's really a plan, build, experiment.
Markus Lorenz: [00:04:40] Yeah, I totally agree. Mathias. And I'm totally with you. Also, my observation on the market is that most of the people or the companies are trying to define those features you mentioned, because they are pretty much used to it. So they evolve in the technology industry or in the e-commerce industry by defining features and the underlying aim was to mitigate the risks from my observations, because if they are mitigating risks, they are able to control their business and investments and so on. But basically they are using the output for the customer and from our observation, it's more about increasing the outcome and reducing the output in case of features.
Matthias Patzak: [00:05:23] Yes, you're right. And so another big challenge I observe, and I talk to customers and people out of the community, is that they are totally not aware that they need business intelligence and analytics skills. As a core competency in these teams, most of the companies have this, they have business intelligence or data people, but they are sitting in a different department and they are just providing infrastructure or standard reports.
It's super crucial that the teams, the teams that build the products, that they have, not only data but then have insights and these insights leading to actions and then to results. And the last issue I observe is that attracting these talents to building the teams is the biggest issue. And the question is why should an e-commerce talent work at an ordinary mid-size German/ European company?
And I think it's doable. To attract talents even talents with, with great experience in one of the leading e-commerce companies. But you need to provide not just a new e-commerce technology. You need to provide a broad, digital vision. You need to have the right culture and mindset. You need to give these people autonomy. What is also important for sure is nice and skilled colleagues. You need to be at the right location. So maybe the middle of nowhere is not as attractive as the Berlin Mitte and yes. Good salary and right tooling helps too.
Markus Lorenz: [00:06:57] Yeah, I totally agree, and what I learn is also that maybe the location of the office isn't as important as it was before the COVID pandemic, because nowadays we're actually working remotely. But as you said, this bold digital vision you mentioned is like a north star and the teams have to follow this. If you don't have, as a company, the digital vision, you won't attract the talent that you need to fulfill your digital agenda. Definitely agree. Yes.
Matthias Patzak: [00:07:29] And what's, what's missing too is alot of companies miss mobile and social skills. So they are, they are just thinking on desktop, web. This might be appropriate for the B2B set up for, but especially for B2C the, the largest part of the traffic and also the orders are now on mobile channels. And so you still need to sync mobile first. And this is a mantra that we came up in 2011 and we had the impression we would be late. But when I talk now to the late majority coming to a digital business they need to understand this mission too.
Markus Lorenz: [00:08:08] Absolutely agree. So from what I see on the numbers, we have an increasing mobile shift, which is yeah. Depending on the industry, about 60% of the traffic share and mobile is definitely a must have and not a nice to have.
And as you also pointed out as see this social selling components, which rise also from other countries into the DACH region, which are getting more and more important to sell your goods online. But Mattias, may have asked you the following question. If you have the chance to build this e-commerce team, which we mentioned, and the capabilities you need from scratch, which roles and capabilities you would like to hire and add to the team most people would expect that engineer's or a digital agency who can actually build.
Matthias Patzak: [00:08:48] The e-commerce shop or the e-commerce platform would be the most important capability or talent. You need to hire that to the team. From my point of view, this is not the most important talent and capability of the team. The most important capabilities there around product management, design, usability, and creating insights.
You need great product managers who really understand the customer and your business model. You need great usability people who can drive the ease of use and can drive the conversion rate of your conversion funnel. And you need to have a compelling look, compelling look of any every device. So your mobile devices on your social channels, and it must be a seamless experience.
And this is why designers a crucial tool. The last important thing is a data and insights people, because you can be great features and you can have a great design and awesome usability, but you really need to measure with a B test if the new, new idea, your new design and your new feature really works out. And this is why the most important capabilities and the most underestimated from my point of view is data and KPI. People.
Markus Lorenz: [00:10:17] Yeah, totally agree. And I can absolutely underline this prioritization. You mentioned because in the end, if you have the right product manager and the right product, people on the product itself, you have it's like, yeah, like a handwriting for the product. If you don't have this product managers and the gospel, the usability and the design in the end, it looks like a heart mess up because the people are going to copy some functionalities from different platforms and just put it together with engineers. But there's not this handwritten signature within your product which you mentioned which has covered actually by KPIs and data and so on. Yeah, totally agree. But. What would happen? Mathias, if you step into a more mature company where the key growth until now was not related to tech and it was not seen as an enabler, how would you transform such a company towards an e-com approach we actually discussed. And how would you like to tackle it?
Matthias Patzak: [00:11:14]
So I think it all starts with people and it starts with people's mindset. So at first I would assume the people that are still in the company are the right people. They understand the business, they understand the products, the assortment and the customers. But I would check on the mindset and I will check.
Are they sinking in projects or in products? So it's, do we observe they're their initiatives that we do as a one-time effort, or is it a product that needs to improve over time? I would check if they want to deliver value and not just features. I will check if they have the lean startup thinking and lean startup thinking basically means you don't really know what your customer wants. You need to test it. You need to build something very quick. Very cheap and then test and test and optimize. And I will check if they have a data driven mindset. And if I see weaknesses in these areas, I would start working with them to improve this. And unfortunately, sometimes not everyone can make this journey. And then this is the time that you need to bring in new people.
Markus Lorenz: [00:12:23] So based on our initial conversation, I like to explain that lean startup concept from Eric Reese a little bit more because the basic underlying concept of the lean startup method is breaking down things into hypotheses and validating them. So basically we're not really knowing what's working and what's not, and which metrics are okay, and which not, and lean startup as a kind of framework where you, which you can use by innovating products or innovating markets compared with a competitive market. That means if you are in a competitive market, you always have to.
Uncertainty of the environments and we can't execute a plan yeah. And be better with our competitor. But this competing scenarios make perfect sense and are treated in traditional industries. But when you want to lower your risks in the future which are almost not predictable, it might not be the right approach for this.
So if the future is not predictable, like, and e-commerce also under. Backed by the COVID situation, you have to validate your business ideas and your business models. So that's basically the key concept behind that lean startup thing. And Mathias, why is it so important for you because you pointed it out so many times and which experience did you associate with its framework in the past?
Matthias Patzak: [00:13:41] So basically I had a magic moment and I'm going to explain it a bit right now. When we started out we were releasing once a month and that release took us seven days. So the five days of the week and the two days of the weekend, and we really delivered poor quality. And after a lot of hard work with introducing unit tests, continuous integration and pair programming.
So everything you can imagine what was fancy at this point of time we were able to release both times a day in our, on premise data center. So on the Oracle database with monolithic architecture and. It took us then several months. And then the VP sales, he came to me and he said, Mathias, you guys, they are too fast.
We cannot sell the stuff you read. And you can imagine how proud I was. I was super proud because when I started, we were really the bad guys. But after a while we realized that we were now able to build features at a high velocity. But the KPIs of our business, they did not change. So we did not acquire more customers. We did not increase the conversion rates, or we did not deliver more leads to the, to the car dealers. And despite of all the planning and despite of all the business plans and business cases we had, and this was the time when Eric Reese released his famous book and it really hit a nerve in our company. And we adopted it originally. And after introducing SCRUM and dev ops in it, this was the next transformation we have done in this company. So at first we transformed it and we needed to learn how to deliver, how to deliver on time in budget and in a high quality, and then product management use ability together with it. We, as a large family in the team we needed to learn how to deliver business value. And we started also thinking about features as a bet something that has a value and an uncertainty attached. And this is also one of my favorite ways to prioritize features make a two by two metrics with on one side estimated business value.
And on the other side, probability of success or probability of adoption and map all your features, your ideas and your initiatives in it. And depending on where this feature is in the metrics, you need to apply different procedures. If you have low probability, but high business value, for example, Then it's all about understanding the customer better and drive adoption rate.
But if probability is high, it's just about execution and it's about scalability. And it's also a great way to map all your ideas in the overall portfolio. And usually teams that do this the first time and counter that they have a lot of high probability, but low value stuff in their portfolio. And this is bad.
Markus Lorenz: [00:16:39]
Yeah, that makes perfect sense for me. And I also liked that approach by prioritizing those features, because if you compare it to a classical organization, they are normally judged in the classical metrics, which means they judge on ease of implementation and the risks. So they think they know what a customer wants, but in the end, or in reality, they don't know because the markets that are changing in the end and exactly what you say that this kind of new approach would be much more customer centric to judge on that. And I have a good prioritization on that.
Matthias Patzak: [00:17:12] Yeah. What kind of pitfalls do you see by using lean startup?
Markus Lorenz: [00:17:17] Good question. So. I guess that most of the companies are wasting much too much time and thinking, planning, doing business planning and risk judgments and so on. So when we are in that uncertain environment, which we discussed right now It's basically about wasting time over planning. So you should definitely validate the idea as quickly as possible and not fall in love with the idea.
So you should start the execution before you validate your idea too often. And also the second point will be getting advice from experts because, you know. Everyone's an expert today, but the true expert is in the customer and he's, he's the one who's giving you the right feedback and you should definitely take it serious if you would want be customer centric.
And if you don't know who your customers are and you can't touch on the perfect product or the perfect solution. And yeah, that's what I see on the pitfall side. And even maybe. The last thing, delaying a launch date because perfection is the enemy of entrepreneurship. In my point of view, those who are able to learn fast to overtake those who were first or to rephrase this slow runners, make fast runners look good.
Principal Advisor at Amazon Web Services. Matthias has been working in Tech for the last 20 years, since 2001, inspired by Kent Becks book „Extreme Programming“, the agile way. His passion is to make things happen, deliver value for the company, and make customers happy. I love tech, especially cloud, lean, agile, and eCommerce.