Many attendees believed “Digital Transformation” to be a misnomer. It’s a term that has too many meanings and causes confusion.
Digital Transformation is often seen as a bolt-on ‘quick fix’ in a world where pressure mounts on retailers to create quick shareholder value. The scope is often too narrowly defined; seen as merely a ‘technology or agile thing’ or the mission of an innovation lab rather than an enterprise change program.
The reality is far more complex; the transformation mission extends far beyond IT, digital and innovation teams. Technology needs to widen its scope. It impacts key areas of the business from budgeting, to strategy, to people. It belongs at the top of a board’s agenda. It should help businesses focus on flow efficiency, not just cost efficiency to drive responsiveness. Success should be measured in outcomes - value delivered to your customers.
Executive teams need to focus on making the reasons for transformation clear, embracing its complexity and taking advantage of the opportunity to shift your organizational paradigm and build for the future.
The operating cycle for retailers has long been “Plan, Buy, Move, Sell” - in that order. The cycle coincides with fashion seasons and key events like Christmas and back-to-school.
This operating cycle was defined predominantly by-product lead times which were the same for every Retailer within trading categories. Winners won on price, quality, and location. While these are as important as ever, new channels, touchpoints, and behaviors provide new ways to deliver on these promises.
Product discoverability is now in the hands of the customer, retailers no longer own the full customer journey, so how do they pivot strategically to embed into this new paradigm. How do they reinvent everything from annual capex cycles, lengthy technology projects, and how things are approved?
Crossing the divide requires a mind shift. From shelf stackers to supply chain experts, from product centric to customer centric. This means investing in new skills, taking control of technology, and embedding new processes and culture. Ask yourself honestly; how far am I from industry leaders? Can I add new product lines and release changes in hours, not weeks or months? Do I still have periods of change freeze? If I made all my investments visible would they be aligned to the company’s strategy?
Barriers to entry are declining steeply for new market entrants. It’s significantly easier for smaller, indie brands to compete on search visibility on Google and Amazon. Organisations who traditionally couldn’t have been in the competitive set are chewing market share.
Technology enabled this shift in power and allowed these brands to go direct to consumers at a fraction of the cost. Traditional retailers need to think about their market proposition, it’s no longer good enough to be the largest and compete on buying power and scale - retailers must be able to respond quickly and develop products that matter to customers. Zara is the gold standard when it comes to responsiveness - notoriously pushing product from concept to stores in 14 days. The responsiveness fuels frequent visits and leaves them less reliant on markdowns. This masterful command of supply chain has left many apparel competitors playing catch ups.
What is your organization’s relationship with IT? Do they simply take orders in a far-off department? Or is technology embedded into teams to help them move quickly and effectively? If it’s the former, there is a real risk you will be left behind. Companies with technology at their core often don’t have an IT department at all.
Gone are the days of requesting something from IT, then waiting 12 months for it to be delivered. Retailers appreciate this speed doesn’t mesh with modern expectations, so are restructuring their companies to focus on outcomes and responsiveness - this involves cross-functional teams that blend IT, design, finance, marketing and more.
To meet modern expectations, they’re also rethinking their ecosystem of partners. It’s impossible to do everything in-house, so retailers are taking advantage of the startup market, leveraging specialist partners that hone in on curation, product management, and artificial intelligence.
There used to be the concept of systems of record, and systems of engagement – this is no longer the case. All technology needs to be considered in the realm of how it impacts business processes but ultimately the end customer, and how flexible the technology is to change. Does your technology limit or expand your businesses possibilities?
Companies are increasingly competing on how well they can use data to differentiate their experience. The looming GDPR requires companies to rethink how they operate and process data. Many see this as a problem for the IT department, but savvy retailers view this as an opportunity to transform how they see product, inventory, customer, trading and financial data.
Many expressed there’s no shortage of data. The problem is that it exists in silos, unable to be turned into insight. This drains resources and buoys cost. But silver bullet tools or building a lake without addressing and understanding controls and lineage is a surefire way to sink your investment.
Data in a retail environment is extensive, and growing exponentially. It’s no secret that this data holds the key to many operational and opportunistic decisions, but many feel hamstrung by legacy technology – those without restraints are set to take an early lead.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.