Future fit strategy: Transforming Falabella with technology

Transcript

Karen Dumville: [00:00:00] Hello, everyone. I'm Karen Dumville, your host for today's episode, and I'm joined by Ashutosh Dabral, the managing director of Falabella, India. It's an honor to have you here Ashutosh. First and foremost, a massive congratulations are in order for Falabella's remarkable achievement, winning Forrester's 2023 Technology Strategy Impact Award for the Americas.

This recognition is a testament to the outstanding work done by your teams. Today, we're going to deep dive into the pivotal role your tech strategy played in this extraordinary success story. First, I'm sure our listeners would like to know a little bit more about who Falabella is, who you are, and perhaps how long you've been in the role and what you've been doing.

Ashutosh Dabral: Thanks so much, Karen. Thanks for having me here. If I start with Falabella, many people may not know, we've been in existence for over 134 years. Our first retail store started in 1889. At the moment, Falabella operates department stores, home improvement stores, supermarkets, e-commerce, marketplace, bank branches, and regional shopping centers. We are recognized under different brands. Falabella, Sodimac, Tottus, falabella.com, Banco Falabella. There's also Mallplaza. Overall, present in around seven countries right now.

We have operations in seven countries in South America. We also have Procurement Offices in China and India. Then we have a digital center in India, Chile, Mexico, and Argentina. I joined Falabella around three months ago. I'm the managing director for the India office. Falabella, India is innovation hub in Bangalore, which consists of around 450 developers and we work on niche technology and transformation efforts for the group. One of the key areas the team worked on has been our digital retail backbone, the platform, which powers our e-commerce and marketplace.

Then a little bit about me, before joining Falabella, I have a lot of experience in product and tech roles across different companies spread over 20 years. Worked in e-commerce earlier for players like Dell as part of dell.com and then for Target as part of target.com team. Then in my last role, I was the chief technology and product officer for an Indian e-commerce marketplace company called Tata CLiQ.

I also worked in consumer internet across companies like Yahoo, AOL Then I also had a startup exposure of my own, did a couple of startups of my own for four years. That's my background. We are now focusing on how the India team can play a bigger role in the transformation efforts of the company and how we help the company achieve the objectives.

Karen: Great. Thank you for that context. That's very helpful, and congratulations on your recent appointment. I think we'll start just by digging into the tech strategy a little bit to begin with. Can you share how Falabella's end-to-end technology strategy has helped deliver customer value and contributed to Falabella's growth?

Ashutosh: I think for us,we have a belief that we use technology to simplify lives and deliver intuitive solutions. We have had a very customer-centric and tech-centric or tech-lead approach in our retail and financial industry, the industries we operate in. The way we look at it is the whole ecosystem we built is built on robust and scalable platforms, platforms for a marketplace, payments, banking, Omni channel retail, loyalty, home delivery, these are the key areas we work in. What we have ensured is that we build this on top of a microservices-based architecture so that we have flexible technology solutions, scalable, and just safe.

We also have very strong architectural guidelines and panels, which ensures that whatever we develop is in accordance to the principles which we have. We have a very strong SISO org because it's very important for a player like us to be very cautious about security or cognizant about it. We do a lot of work there. Overall, if I look at it, it's a very robust org spread across different geographies, and our overall strategy ties in very closely with what the company wants to achieve.

If I look at the current focus for us, it is around profitability and the customer. These are the two tenants on which we are operating right now. That's how our technology strategy also aligns with that. If you look at the last few quarters, while globally, e-commerce has been a little bit of a challenge from a profitability perspective.

As we look at what happened during cyber, which is a big event in October in South America, or specifically Chile and other countries where we had very good numbers there, our recent Black Friday also numbers are very good. It looks like things are moving in the right direction, and the technology strategy is completely supporting the business needs.

Karen: I guess for anyone who works in the industry, they'll know that there are always challenges with programs of work and strategies. I'm keen to understand what were the key challenges that your teams faced during the implementation of your tech strategy and how did they navigate those challenges.

Ashutosh [00:07:00] : I think one of the key challenges for the team was for a company which has been operating for so long, there are a lot of legacy technology stacks which you need to understand and replace, and you make sure that you build new systems which are completely seamless. One is multiple systems, but also when you're looking at revamping or building something new, it is not only about whether it will work today.

You have to look at the future and look at the scale which you will be operating at a few years down the line. You have to build a future-ready tech stack at some level. I think that is very challenging when you are looking at replacing older systems, doing a move to the cloud in a lot of places. Just as an example, we moved away from legacy stack to build our own e-commerce, to building our own marketplace. Then if I look at from our home delivery logistics platform, we built a cloud-based platform there which has improved the inventory tracking, availability, order orchestration, and helped in delivering to customers much faster in the key markets.

Again, for a lot of these different businesses, we have, or different areas touchpoints where customers can interact with us. There were legacy tech stacks, and we have been in this journey of building the new platform, making sure that all the previous [00:07:30] systems work with each other as we replace and build a new system. Having said that, it's a continuous improvement.

I cannot say that a tech stack is forever at any point of time complete, in a sense that the way we operate, or the way a tech organization should operate, is to keep on doing continuous improvements. You look at data on how customers are interacting with you, you keep on doing multiple changes. While we have a very strong backbone, I would say in terms of the platform, the teams are working in sprints every two weeks, releasing new features, new improvements.

I think that also remains a challenge because there is a lot of things to do, but limited time or limited bandwidth at any given point of time. A lot of focus also in terms of doing the right prioritization, prioritization which works for the business, which works for our customers and our internal stakeholders. I think that is a challenging thing, but I think we've been doing a good job of it.

Karen: Yes, the challenge of time. I think everybody faces that in everything they do. You mentioned before how your tech strategy aligns to this idea of customer obsession so that's one of the key tenets of your company strategy. I'm interested to hear a little bit about how Falabella maintains that customer-obsessed approach in its tech strategy and ensure that balance between customer needs and business requirements.

Ashutosh: I think one of the biggest things we look at is the whole organization operates with customer-oriented metrics that help us guide and design the priorities which we have in each of the cells we are operating in. Also, as I mentioned earlier, profitability and customer experience are the two key areas we are focusing on at the moment. We are ensuring that the whole company, the whole organization aligns with it.

I think we went through a little bit of a transformation a few years ago where we did something which we call business agility, where the whole company was divided into portfolios which are around tech development and these are aligned again by the business objectives. Focusing on this overall strategy has helped us focus on operational efficiency, innovation, and also customer centricity. Again, as I said, we're a very data-driven organization.

Anything which is being developed for the customer, even if there's a hypothesis, we do a lot of testing around that hypothesis to figure out whether that really works or doesn't work. A lot of research goes into it. While we have a very strong tech team, which can develop top-of-the-line platforms, we ensure that the focus is on the customer by doing a lot of research, looking at data. Data is, I think, at the center of everything we do, and that is how we are able to give the customer a seamless experience no matter where they interact with us.

They can buy online data in a store, they can be multiple things they can do. There are multiple touch points they have with the group. We are trying to tie all of it in cohesively having a very robust customer 360, trying to understand the customer when they're interacting with us, what level of personalization we need to do. I think these are some of the ways in which we've been able to do this.

Karen: I'm going to move now to a few questions around the platform itself. You mentioned your platform strategy before. I'm interested, can you share a bit on how Falabella's platform model provided a seamless experience for customers across physical and digital touchpoints?

Ashutosh: Since we are now aligned around platforms, this helps us to give a very seamless omni-channel experience. Now, you can visit in person to one of our stores. You can ask a sales associate for advice or you can buy online and also, of course, do the returns. We have this wide network now of collection points which are available to the customer when they're doing a return. As I said, we look a lot at data, and with data we've been able to figure out how does everything tie in together.

What to focus on, what to build. In fact, I was talking a little bit earlier about business agiliity. This also helps us act quickly. Allows us to make decisions around the portfolio, on what needs to be done, what's the best course of action right now.. There's a lot of real-time KPI monitoring, which is happening. Teams are using things like large language models to do improvements in some areas.

Also, our agile teams, they have a lot of analytics tools available through which they can figure out what works, what doesn't work, what we need to develop next. I think that has a big role to play. Then overall the platform we built, as I said, is future-ready. Today, we can launch anything we need from a marketplace perspective on top of that platform. The platform has become something which can support a lot of future use cases.

In fact, I would go as far to as to say that any conceivable future use case we can think of right now, the platform supports with maybe minor changes on top of it.

Karen: Okay. Digging into the platform a little bit further, we'd like to hear a bit more about your core platform, digital retail backbone, how you leveraged it along with Google Cloud's hosting capabilities to modernize your stores and create a unified digital point of sale system.

Ashutosh: The digital retail backbone or the DRB, it's the core technology platform across channel segments and countries. As you mentioned, it's hosted on the cloud. It's multi-tenented. It's completely micro-services architecture. This has helped us modernize our stores, our point of sale and we now have a very unified search catalog card and checkout experience. I think one of the biggest things the platform has done is it substantially reduces the time to launch a new feature.

Also, there's a lot of testing which can be done. Anything goes wrong, there are alerts built in, and it can be very quickly fixed. If I go a little deeper, I think if I look at the architecture, it's a headless architecture, multitent, so that multiple platform instances can be created at any given point of time. Cloud-native for e-commerce. but also the way the platform is built, it integrates with multiple different back office systems, the different business-specific logic, which is built in.

There's also a lot of management tools for for business teams to configure things. I think this is how the whole platform has come together and has become the backbone of all our experiences and touchpoint. Of course I said, there's a lot more to do. We keep on continuously improving and doing different things in different markets, but at a high level, it is really the backbone for us.

Karen: You mentioned before how the platform was built with a microservices-based architecture. What would you say are the benefits of this approach?

Ashutosh: It helps teams deploy different applications or features without affecting other things or other services in the architecture. You can as part of the team, develop a new module and you don't have to redesign the complete system. It's very plug-and-play. Also, an architecture like this can be a lot more flexible, scalable, and also a lot safer from a lot of perspectives.

If I look at our transition, we had a externally powered e-commerce solution, and from there we moved to this platform, which now allows us to run our own marketplace. Also, we have built custom functionalities on top of it. A lot of personalization, a lot of new digital experiences, and I think this platform or microservice platform is, which allows us to be so nimble for different teams to do things, have the capability to do small improvements without affecting anything else in the system, so we can consistently keep on improving the areas like research.

Makes it much easier for us to launch new things and each team to keep on doing continuous improvement in their area, so overall benefiting the company.

Karen: We were talking before, you mentioned how The whole business is aligned around the customer metrics. Can you give some examples of how Falabella leverages data and technology to deliver insights for both business and customer levels?

Ashutosh: I think we look at or focus on various customer-oriented metrics like net promoter score or business metrics like the GMV or the gross margin return on investment. We are also very focused on tech metrics around all our cost of running the platform, the speed at which the platform runs. I think all of these metrics are a key focus area for us, and these insights helps us ensure that we do what is right for the business and what is right for the customer.

I said at the core of it, we are a strong data-driven organization, so even any minute change  we do take a look at how is it impacting EBITDA profitability or the customer experience, and in cases where a tradeoff needs to be made, the tradeoff is made based on data and not based on someone's opinion. I think that is, I would say, one of the best parts of how we operate. 

Karen: Just related to that, what specific performance metrics have been crucial in guiding priorities for Falabella's business platforms?

Ashutosh: If I look at a very high level, as I already mentioned, it could be things like net promoter score, but as I go deeper into each of these teams, it would be based on whether it's a perfect order, whether it's a perfect return. Some teams would be focusing on just moving the conversion. If a team is working on search and recommendations, they would be again, looking at conversion, would also be looking at how easy it is for a customer to find what they're looking for.

Teams are focused on increasing the average order value Recommendation team would probably be trying to add more items to cart. There are different metrics which the teams are focused on, which again, ties up into some higher level metrics, which the whole organization is looking at.

Karen: For enterprises that are looking to adopt a platform-based business model, do you have any advice?

Ashutosh: Yes. Many people have this belief that platforms came in when the internet came in, or when technology started taking bigger leaps. The fact is that platforms have been around for decades. If you look at it, even a shopping mall is a platform, maybe not that scalable as an online marketplace but a shopping mall also is a platform. Credit cards are a platform.

Platforms have been around forever, but I think a company going down this journey, they have to make sure that platform thinking becomes one of the key ways how they make any technology decisions because they have to focus on simplifying their ecosystem. How can this platform stimulate innovation and even accelerate delivery at some level. At a very high level, if I look at it a platform should make it easier to launch new products and features.

Once you have developed a platform, it should be enabling that. In fact, if you look at different companies around the world, the different definitions of platform. How do they look at platform and how do they organize their businesses around platforms? One company, which is very popular, many people know about it. If you look at Peloton, which basically sells indoor exercise bikes, but it calls itself an interactive fitness platform.

Not so interesting that they do that because then that enables them to build so much more beyond that, just for building an indoor bike. I think platform thinking has to evolve in the company going down this path. At the leadership level, people have to be aligned. They have to believe in the value of the platform. Then, of course, we have many examples of companies which are very strong platforms like Uber and a lot of Airbnb. They become very successful over the years. We know building a platform culture works, but a company has to be clear how they're going to do it.

Karen: [00:22:00] Good advice. Thank you. Just switching gears a little bit to ask a couple of questions around culture and innovation. You mentioned the word innovation before in talking about the platforms. Falabella does place a strong emphasis on co-innovation with partners. Can you share any successful examples of how this has driven ecosystem value?

Ashutosh: Yes. See, we work very closely with partners. Even when we are doing the whole DRB platform, we worked with partners including Thoughtworks. At some level, Thoughtworks allow us to co-create. Also if I look at from a partner perspective, we have thousands of sellers. Those are also partners for us. We have a seller center where we work closely with partners, getting them on board, helping them sell. If I look at it from a partner perspective, Thoughtworks partnered with us to help us define the whole business agility model.

Then a blueprint for our whole e-commerce platform that slowly has now evolved into this cloud-native digital retail backbone. I think partners have played a strong role in our success. I would especially like to call out Thoughtworks. They've been great partners for us. One of the key approaches for our success has been building platforms, improving our practices, and working with good partners and our own people and empowering them. This has enabled us to build great platforms and grow

Karen: Internally, how does Falabella promote a culture of connection and collaboration among its employees? What impact would you say that's had on the company's success?

Ashutosh: I think we are a company which focus a lot on talent development and diversity. We have teams spread across different continents and working very closely together. Also Falabella invests a lot into training the employees. There are a lot of events like hackathons and other things which are held very regularly, which helps employees showcase their ideas, develop a new idea.

We also have something called Falabella Academy through which they can learn about technology, logistics, BI, data analytics. We also have some initiatives like a connected women network which are the female leaders in the company are connected, helping other females in the company. Overall, I think it's a company which focuses a lot on the employees and enables them to operate to the best of their ability through a lot of training, through a lot of interaction between different teams. I think that has been very crucial to our success. Through the challenging times which everyone saw through COVID, we came out through that largely okay. Currently, if you look at the current business environment all over the world, capital is no longer that cheap anymore. The whole model is they changed away from a GMV-based valuation to more around profitability.

I think people at the center of this, our employees understand  how we need to change our focus or how do we need to change now in this circumstances. The company also does a lot to motivate them, help them, and upskill them. I think that's been very crucial, but of course, I said people are the cornerstone of the entire transformation and what we're building.

Karen: Great. Well, I wish you all the luck in your new role.Thank you so much for spending time with us today, Ashutosh to share the Falabella story. Thank you to our listeners for joining us for this episode of Pragmatism in Practice. If you enjoyed the show, help spread the word by rating us on your preferred podcast platform. Thank you.

Ashutosh: Thank you so much, Karen. Thanks a lot.