Who’s in Charge Here?

Who’s in Charge Here?
 

In our last post, we talked about the need to frame transformation strategy around your customer; understanding who they are, how your offering distinguishes you from your competitors and how you will create lasting relationships. So, you have answered the questions thus completing your exercise of strategy development and market identification. You’re good to go? Maybe not.

The path too many brands and retailers go down first is an ill-fated effort the fit their digital transformation exercise into the existing infrastructure; with process and culture left largely unaltered. This in effect says “Yes, were going to be different; but not change.” The contradiction inherent in this messaging diminishes the chances for success right out of the gate.

Instead, brands and retailers first need to develop an approach that recognizes transformation begins internally before you ever engage a customer. Digital Transformation is about changing how you interact with a customer, moving from pushing information to having a conversation. The Chief Digital Officer must play a pivotal role here – evangelizing, educating and guiding the organization. The Chief Marketing Officer’s primary responsibility is to articulate how the brand or retailer will have that customer conversation. Too many brands and retailers fail to understand and foster this role delineation

The CDO ensures the organization infrastructure, tools and training are all aligned and mutually reinforcing in a culture where collaboration is central to both strategic and tactical planning. This requires deliberate change management efforts to shift away from established patterns and adopt new behaviors and technologies.

An inflection point that illustrates this is the CRM solution, how it is employed and the associated marketing programs that draw on this as a primary information source. Customer Relationship Management software was developed as, and is still viewed, as the primary repository of information about the customer. It does nothing to promote a customer conversation. But instead is often the source of customer irritation as inboxes are flooded with promotional offers, based on past purchases, that are deleted, unread. The communication remains largely one-way, impersonal, and as such not a promising start to any conversation. Internally, updating the database becomes a dispiriting end in and of itself with resources dedicated to monitoring completeness and chasing data rather than the resources engaging in true customer exchanges.

Here is where the CDO and CMO collaboratively drive transformational changes. Starting with the customer and working back through the organization. Relationship management cannot be synonymous with database management. As more sales move from a purely transactional model to a more consultative approach every element of customer relationships need to respond in new ways. Retailers and brands needs to reimagine how they interact with their customers, how they can partner with them to preserve long-term relationships that are sufficiently dynamic to sustain their strength and value through time. This is the first step. It also begins the internal conversation between leaders of organizations. A well-crafted comprehensive digital strategy requires consideration of and input from all corners of the organization.

From here the CDO is pivotal in ensuring the operational and technical infrastructures throughout the organization are aligned to support Marketing’s vision.
The technology strategy, the operational processes, and organization then enjoy a common point of reference from which to build. In our next article we’ll talk about some options and pitfalls of infrastructure transformation.

So, we’ll finish this post as we did the first; with some questions. You’ve defined your customer. Now what do you want to know about them? What do you want to say to them? What do you want them to tell you? What do you need to understand about your competitors? New markets? Trends? How will you want to breakdown the data? What information do you want the data to yield? How will the data be collected? By whom? How often? Answers to these begins the transformation of your digital infrastructure.

Digital Transformation is Having a Moment

Digital Transformation is Having a Moment
 

In this periodic series of articles, we’ll explore how digital transformation is changing every aspect and activity of the retail experience — not just in customer-facing exchanges, but also throughout the back-office operations of your enterprise.

The digital revolution
Many of the challenges associated with digital transformation are not new, but now carry an urgency unique to the pace of change. That it comes a quick 20 years after our last great transformative revolution — one which saw computing power massively scale — makes the pace of the Industrial Revolution look glacial by comparison. This accelerating timeline of change shows no signs of slowing down and smart retailers recognize, in addition to changes in technology, they must anticipate the pace of the change as well.

Digital transformation, widely accepted as revolutionary, differs from earlier technological shifts in one important regard: it is as much about philosophy as it is technology. Implementing transactional solutions — whether ERP, WMS, BI or PLM, alone or in combination — the focus was always on the technology; get it installed, get people trained, then launch. The transactional capabilities set expectations and drove activities in a comparatively linear way. Overtime, like ripples in a pond, the application in use would create opportunity for changes in a variety of areas – productivity, analysis and reporting, collaboration and many others.

The future is now
Companies are faced with a stark choice: adapt or decline. New capabilities, supported by technologies, force a response. The retailer’s challenge is in two parts; first, to understand the new technologies and then to adapt to make full use of it. In doing so, you set the organization on a course without the guidelines familiar to earlier technology initiatives.

Perhaps, most critically, it requires letting go of the past. Organizations need to be simultaneously adept at both implementation and experimentation. Failure to recognize this at the outset has resulted in many retailers struggling to understand why their substantial investment in capital and human resources is not generating the return on investment they, their shareholders and customers expect.

The past is no longer prologue. Retailers whose digital strategy is anchored in leveraging “what’s made us successful in the past” are doomed to failure. That Amazon is regarded as the leader in digital transformation in retailing reinforces this fallacy. Amazon transformed nothing; they formed everything. Amazon started with a philosophy around customer engagement and built from that. This distinction is fundamental to understanding where to begin and how to proceed in transforming your own organization.

Knowing your customers
As we’re forced every day to recognize that our customers must be at the center of all activities of the enterprise, it becomes startlingly clear that doing so requires the adoption of new philosophies and principles.

To begin, we’ll leave you with this challenge: Define your future ideal customer. What are their characteristics? Why is this customer important to you? Why should you be important to them? How do they differ from your customers of today? The answers to these questions begin your digital transformation journey.

In coming articles, we’ll talk more specifically about ways to nurture this transformative philosophy and use it to shape original and competitive customer experiences, operational processes and business models. We hope you’ll find these informative and helpful to your strategic and tactical planning exercises and look forward to hearing from you.

Retail and Technology: How Not to Doom Your Next Implementation to Failure

Retail and Technology:  How Not to Doom Your Next Implementation to Failure
 

If you’ve worked in retail over the last 10+ years, then you’ve been, or know someone who has been, at a company that failed to successfully implement a major computer/information system. Whether it was a point solution (specialized application) or a full-blown Enterprise Resource Planning (ERP), these failures are all too common.

What’s worse, they’re hugely expensive. Projects miss deadlines not by months, but by years. And the cost overruns can quickly run into the millions.

Hard costs can be easily measured, but what about the toll failure takes on an organization? It’s difficult to calculate the lost productivity, the untold number of meetings where no decisions are made, the rehashing of simple issues time after time with little additional value.

Soon, a fog of negativity settles over the company. Finger pointing and assigning blame are common, even accepted. If unchecked, this mindset leads to friction between the functional groups of the company. Every little business challenge becomes a discussion of why “those guys” aren’t doing their job. Add in the urgency to figure out a plan to compete with Amazon, and the reality is that your sense of failure isn’t going to subside any time soon.

No matter if your organization is public or private, mistakes like these are costly. And let’s face it: There’s no reason why technology fails should occur, or ever be tolerated.

Technology: A common retail blindspot

Retailers and manufacturers have historically underinvested in technology for several reasons:

  • Information systems are expensive. Commercially available software is beyond the scope of what most executives can understand, even seasoned CIOs. To complicate matters further, there’s no firm price list, which makes it difficult to determine overall value.This is particularly aggravating to retailers who consider themselves excellent negotiators, and a major contributor to the hesitation to commit to an investment in technology systems or upgrades.
  • Successful implementation requires resources. For any technology project to be successful, three things are required: hardware, software and human resources.The price of hardware has dropped precipitously, driven by the cloud. And with 82% of that cloud belonging to Amazon Web Services, it makes retailers understandably nervous.

    Software has undergone a similar shift in thinking, from a license to purchase model to subscription-based, because it makes revenue forecasts that much more predictable for the software company.

    For end users, neither of these shifts has made the promise of faster, cheaper implementation come to pass. Nor have they eliminated the HR cost component, because it still takes people to implement projects like these.

    Certainly, external resources such as consulting companies and system integrators can be called upon, but history has shown that the more internal resources dedicated to a project, the greater the likelihood of success. This means taking people away from their day jobs and dedicating them to the technology project through completion. Anything short of this increases your risk for time and cost overruns.

    Not convinced? Ask any CIO or CEO, and they’ll tell you the single most consequential decision that made their project a success was using internal resources to drive the project.

  • Leadership plays a significant role in success. Most retail and manufacturing CEOs are merchants. That’s just a fact. In their executive experience, they’re comfortable investing in millions of dollars in product or store locations, but not in technology they really don’t understand.The net impact is that decisions aren’t made on a timely basis, or made without full and complete knowledge of what is entailed. Smart CEOs will rely heavily on a talented CIO, but in too many organizations, IT is still seen as a support organization rather than a key business driver, with the CIO’s primary responsibility to save the company money, not spend it.
  • Legacy budgeting processes stifle innovation. We can all safely agree that the retail and wholesale worlds have changed dramatically over the last few years, yet we’re still using 1984’s budgeting process. Sales planning is benchmarked based on last year, selling expenses as a percentage of sales, and IT spending base on LY or archaic industry benchmarks.This is the fastest way to assure that history will repeat itself. At a time when new concepts like AI, big data and product customization are starting to take hold, legacy budgeting practices will all but extinguish business-building initiatives before they can take hold.
  • Over-reliance on external resources to complete projects. When you take this approach, your knowledge base walks out the door when the project ends, making it less likely that change will be long lasting.What’s more, professional services organizations are driven by billable hours; in essence, there’s no motivation to finish on time. Find a consulting partner who’ll accept a “not to exceed” clause in their agreement to make timeliness more likely.

Don’t fall victim to rookie implementation mistakes

There’s really no mystery why so many large-scale retail technology projects fail. Fundamental guidelines and best practices are rarely followed, for reasons like these:

  • Technology is misused as an agent of change. Companies don’t typically spend money on technology to make themselves feel better, but rather to fix a problem. A classic example is the retailer challenged with hitting its inventory plan. The CEO or CFO instructs the CIO to implement a merchandise planning system that supports an Open To Buy (OTB) process. Though the real goal is to bring accountability to the merchants, nobody factors in that this is a business problem rather than a technology issue. The project gets mired in implementation because technology is being used as a change agent, and now the company has two problems on their hands: the original issue, and a complex systems implementation that‘s doomed to failure.
  • Implementation of new technology is deemed solely an IT project. As discussed earlier, most functional leaders don’t have a sufficient tech background to really engage in the detailed conversations. Most importantly, there’s generally no mandate from the top that requires these leaders to own the success or failure of the project.
  • Bad data. Frequently, CIOs take the position that “we have all the data we need”. But as progress is made, critical data gaps are uncovered more often than not. The industry needs to recognize that data has gotten complicated, and it exists in multiple disparate systems. Pulling it all together into a cohesive data model must be considered in setting expectations for a reasonable completion data.

Shared accountability: A critical success factor

When it comes to a successful retail technology initiative, the stakes higher than they’ve ever been. Legacy retailers are playing catch-up with emerging competitors born into the digital world, which means you really can’t afford the expense of delays.

Without looping in all the players — IT, the business team, finance, training — as well as the C-suite, you’ll continue to find yourself at a strategic disadvantage to every one of your competitors.

Digital Transformation: Ushering in a New Era of Retail Relevance

Digital Transformation: Ushering in a New Era of Retail Relevance
 

The term “digital transformation” is a bit of a misnomer. We are not going to transform the digital world; it is transforming us — everything from our smartphone-centric activity to the huge influence of social media on almost everything we do. We can complain about the technology tsunami all we want (and we do) but it is NOT going to slow down. If anything, there is every indication that it will continue to accelerate.

Digital Transformation 101

1. Customer Experience
Let’s face it, the customer experience at most retailers is below poor. Retailers have cut deeply into sales help and tend to hire the least costly options, not the best. When business gets tough, store operations teams are further pressured into cutting associate payroll to fit into a budget parameter. Additionally, retail sales associates have little product knowledge and little to no training in the selling process. At best, a good experience in a retail store amounts to not having to wait in a long line, and being able to complete a sales transaction quickly. It’s a pretty low bar.

2. Culture & Leadership
Leadership must recognize and react to a fundamental shift in retailing: the customer is setting the new rules of engagement. They must commit to adapting to a changing world, or perish as we’ve seen occurring at record rates.

A siloed organization is an uncompetitive organization. Everyone in the sustainable retail organization must work together, not just pay lip service to it. Goals and incentives for senior leaders must be revamped to reflect this new thinking, because organizational goals (delighted customers) must trump divisional results.

3. Operational Agility
Operational agility isn’t simply about merchandise. It’s about rethinking our expectations regarding how fundamental processes get done. For example, many retailers don’t have a readily accessible 360-degree view of the customer.

4. Workforce Enablement
For retailers, typically the largest group of employees is frontline sales associates (this also includes customer service reps in call centers). As a result, ongoing training and education is an expensive proposition — meaning that employees tasked with the majority of customer interaction are typically unprepared and unsupported.

5. Digital Technology Integration
Legacy retail organizations have legacy information systems, typically function-specific — core merchandising, POS, finance, loyalty, webstore, warehouse management — and connected by structured, highly controlled, interfaces.

Today, customers demand the ability to look up product information, make a purchase, track an order/delivery or pick up at the local store, make a return, and see the credit — all from their smartphone. Legacy retailers have been slow to respond, mostly because of their clunky, unintegrated application infrastructure.

Digital transformation 201: All paths intersect
Each of these digital transformation components is complex unto itself. What further complicates the issue is that they’re all interrelated. As an example, simply having a 360-degree view of the customer, necessitates tackling these issues:

  • Accessing all customer data from a single location (technology integration)
  • Having leadership that understands the urgency of the project (leadership & culture)
  • Identifying a customer-focused champion to facilitate the project (customer experience)
  • Allowing the customer data to be used by associates to enhance customer interaction (workforce empowerment)

Many challenges have multiple dimensions. What is needed here is a strategy to consider them all together, and the tactical plan to execute. There is no magic wand that will miraculously make addressing these challenges fall together perfectly. If tackling these issues are challenging with a current management team, leadership should consider outside assistance to act as a Sherpa on the transformation journey.