Business insights from Aman Verjee – CFO, eBay Inc.  
(By Vishal Asthana and Nick Vaidya)

eBay is one of the most popular online shopping  and auction website.  Nick spoke to eBay Inc.’s CFO – Aman Verjee on a variety of strategic topics. Insights provided by Aman are very practical and hence instantly useful.

One of the vital strategic factors for companies irrespective of their size is the analytics strategy they employ. eBay employs a data driven mechanism for measuring the sales and marketing effectiveness  of their website. A key data point for this mechanism is ‘behavioral analysis’ where usage pattern of online users to the site is analyzed.  A different approach is used for offline marketing though.  This is because the data points are not easy to define in an offline scenario. Decision to employ a certain TV campaign for example is driven by projected improvement in eBay’s brand awareness as well brand perception.  As would be obvious, it’s practically impossible for any vendor to guarantee this upfront so there’s a mutual understanding between eBay and the vendor to review the effectiveness at periodic intervals. Results aid eBay in determining continual engagement with the vendor.

Let’s stop and think about this for a moment. Instead of employing a rigid set of metrics, eBay has laid out medium-specific metrics thereby leaving room for fine tuning on a ongoing basis. Net result is an adaptable, scalable and thereby effective analytics strategy – very powerful indeed .  Smaller companies usually ignore the usefulness of having a planned analytics strategy right from the start because of the way they are structured. In their case, resources are limited, sustainability is the immediate concern and therefore perceived benefit of creating an analytics strategy is not seen. What they need to realize is that without such a strategy they would not have a clear vision of where and how to promote themselves. 

 Data driven analytics strategy needs to be taken with a pinch of salt though. It’s good to rely on actual data and conduct analysis on it but what if the analytical process itself is flawed? In late 2008 when banking giant Lehman Brothers filed for bankruptcy, Wall Street was shocked. It triggered the worst recessionary phase since world war – I with signs of recovery now – more than a year later! Is it possible that they did not have an analytics strategy? We doubt. But it is very likely that sub-prime lending data was not given importance in their analysis and by the time they realized it, they had collapsed completely. Many other banking giants followed suit and it goes without saying that none of this was sudden.  The important point to note here is that using data driven analytics strategy is definitely good but the metrics used in the strategy have to be chosen with caution.

Next we discuss the approach companies might want to follow while making both short-term and long-term decisions and Aman’s take on it. 

Decision methodologies can be broadly classified into two. On one end of the spectrum are those decisions that are taken after careful planning and chalking out a clear roadmap while on the other end are the ones that are taken instantly or spur of the moment. Smaller companies most often use the latter approach as they often need to quickly adapt to sudden changes in internal and/or client dynamics. They are like small boats which can be maneuvered with relative ease to head towards a different destination in run time. Big companies on the other hand are akin to a large ship which once on a destination course cannot choose an alternate destination in a completely different direction at will. It has to be a well-planned event for them else the ship will subside in the ocean. In both cases it becomes the responsibility of the ship’s captain to regularly communicate with his/her crew and show them the destination the ship is headed. CEOs need to do the same for the companies they are heading. They have to be consistent in their messaging – quarter to quarter, year to year.  Sometimes it might take a long time to percolate the message to the entire team but that is what ensures that the ship does not lose momentum. Furthermore, if a destination change is needed, it becomes much easier and smoother if the message was relayed by the Captain well in advance thereby giving the team time to mentally prepare for it. If a company’s CEO follows this approach, his team can contribute more effectively towards helping him drive the directional change thereby steering the company in the right direction.

Aman recommended a hybrid approach towards decision making for CxOs of bigger companies. He gave the analogy of  a quarterback who always knows that he need to throw the ball in the direction of the opponent’s end zone.  With that direction in perspective, he takes many instant decisions as the opponent defense tries to prevent his team from achieving the same. He constantly devices innovative strategies to achieve the objective in due consultation with the team coach. So in essence, as long as the long-term vision is clear, ways and means used to achieve them can be spur-of-the-moment. 

Interesting observations comes out of this analogy. In case of CEOs of big companies, they need to take the role of a team coach and identify a reliable quarterback who runs with the big picture they share. In case of small companies, the CEO needs to take on dual responsibility of being a coach and a quarterback at the same time and eventually get to a stage where they have identified a good quarterback. As for the team members, once they see the team’s directional vision they get motivated to achieve the same. Consistent metrics show up in the form of slowly advancing towards the opponent’s end zone yard-by-yard eventually leading to touchdowns. In case of companies, employees see this in the form of improved quarterly results followed by improved yearly results. CEO’s clarity of vision is therefore paramount to decision-making  irrespective of the company’s size.

You might be thinking about why a CEO of a big company should quickly identify a good quarterback to throw the ball even if he himself is capable of executing that role? Let’s revisit the comparison of large companies to large ships stated earlier. If the Captain is always behind the wheel, will he ever get a chance to think about the long-term destination and the way the ship is heading there including contingency planning? Highly unlikely. Same thing applies for a CEO.

How will he get time to plan and fine tune the long-term vision for the company if he is over occupied with day-to-day situations?  Surely he should help his team members do the right thing but if he is the only one taking all spur-of-the-moment decisions for his team, not only would he create a single point of failure, he would not be able to direct the company towards a long-term vision.