American Century's E-Commerce Evolution Explained
December 3, 2001
MFMN: In your estimation, what is the state of e-commerce in the fund industry today vs. what people three or even four years ago expected it to be?
McCalley: That's a good question. When I think back to when e-commerce really started to evolve in the mid-nineties there was a lot of discussion as to Is this a new distribution channel? Is it a new business unit?' All of the conversation tended to cycle in and around e-commerce being a separate business. And I think, clearly, we're at the point now where electronic commerce is part and parcel of the business. I mean, to think that you can have an e-business strategy and a business strategy is really not appropriate. You have a business strategy, which has elements of an e-business strategy. That's part of the fabric of what we're doing.
So, I think that's the key shift. I think early on people thought, I can own a customer in the electronic channel.' But at that point, which is obvious to us today, it wasn't clear that people were going to be multichannel. When I talk about channel, I'm talking about content channel. People are sometimes going to call us on the phone, sometimes they will e-mail, sometimes they will use the interactive voice response, other times they are going to walk into one of our investment centers. To think that you can own a customer in a particular channel or set up a separate business for them like a dot-com, although it seemed feasible at the time, seems very ridiculous today... The key shift, again, has been that e-commerce has really become everybody's business.
And if e-business is everybody's business I think what a lot of organizations are struggling with is where to put this organization within their business: Is it a separate unit or is it fully integrated into the fabric of the company?
MFMN: Within American Century, how did that transformation take place?
McCalley: From an organizational perspective e-commerce was a global, centralized group within the organization. But then as e-commerce became a more valuable component of each one of the distribution channels' strategy, to have that in a centralized organization that maybe didn't fully understand their business needs didn't make sense.
So you saw a lot of vacillation in the late nineties... It went back and forth. Now we're in the decentralized mode throughout the organization so that each distribution channel has the opportunity to drive the strategy.
Maybe another way to state it is this: If you were responsible for a particular business channel five or six years ago, this was not a big part of your business strategy. Now I think it has shifted to become a key component.
That creates tension between a decentralized or centralized organization. Yet at the same time it's important from a global perspective to gain efficiencies that you need to have across the business by having centralized services, because you don't want to build three separate Web platforms.
MFMN: Since American Century began charging clients with accounts smaller than $10,000 a maintenance fee unless they agree to conduct business online, how many of those investors have switched over to that format?
McCalley: It's been along the lines of what we were projecting.
MFMN: And what were your projections?
McCalley: I knew you would want to know that. I'm not sure I'm really at liberty to go there now, but we're tracking along what we had hoped we would do.
MFMN: Have you recovered your costs of setting up an online customer service and e-delivery platform?
McCalley: Not yet because we are really very new into the program. But we are charting those and we are on our trend line for where we want to be as far as recouping our costs on the investment.
MFMN: Can you tell me about some online initiatives you have in the pipeline?
McCalley: Where we're really going next is to continue to integrate the ability for customers to do our straight-through processing for us. It's something that has been out there for a long time and has been a goal of ours, but we're getting more aggressive on moving toward that next year. What that allows us to do is create a more efficient back office.
MFMN: When you say more aggressive,' what does that entail? Will it include some sort of marketing program to sell the service to your clients?