Every industry faces the challenge of responding to a changing digital ecosystem, but the retail sector is undergoing disruption at an unprecedented scale. Retailers must identify and prioritize the elements of a digital strategy, but choosing the right execution model in the face of rapidly-moving trends is even more critical. A systematic approach is essential to embracing the right technologies, especially when it’s not easy for retail brands to set the right pace at which to initiate each step in their digital transformation. When a company’s digital strategy is built on a quantitative playbook, the inherent risks of instituting change become manageable, and the right competencies are developed in the right order.
Effective change management requires an understanding of the optimum intervals between the roll-out of each digital strategy initiative. Speed of execution is driven by several factors, including the rate of technological innovation, the pace of adoption in the given industry, and the level of competition. Joe Jensen, Intel VP and General Manager of the Retails Solutions Division comments, “Technology can help transform retail, making stores more responsive to customer needs by connecting physical and digital retail environments.” However, establishing a cadence of implementation demands that the people steering the transformation be aware of the way various elements of a strategy interconnect. Introducing new elements of a digital transformation is not like rolling individual marbles down a chute; instead, the implementation of true innovation is more like building a whole new living ecosystem, with many organic parts that grow interdependently.
Possible Technological Solutions
Retailers can benefit from an array of technologies driven by the internet of things (IoT), such as sensors, processors, barcode scanners and RFID cards. These business owners have the dual needs of satisfying customer expectations and managing their inventory, and new IoT solutions help save money on both fronts. Tracking and monitoring inventory throughout the supply chain yields substantial value, and 75 percent of executives in a recent survey stated that digital supply chain transformation is important to them. Even solutions that reveal location of items at brick-and-mortar stores can save money by better matching available supply to anticipated demand.
However, these behind-the-scene benefits can also assure that customers are able to access the items they are interested in, and can shop in a delightful, unstressed manner. For this reason, the elements that make up a digital transformation may have to be carefully timed and woven together, and the order of implementation can make a big difference.
Mode of Acquisition
Once a company has decided to access external resources or new technologies, there are usually a variety of acquisition options available to choose among. These options may include outright purchase of a specific solution or initiating a subscription to a service. The company may opt to leverage their internal human resources and expertise, or to hire new in-house IT managers or designers. Any of these options may be combined with taking advantage of the unique playbook approach of objective professional digital transformation experts. Here’s an overview of the main option categories, although hybrids of these categories are also continually being formed.
Hiring Independent Contractors
One alternative to hiring new IT employees or using existing staff to complete a digital upgrade is to outsource it. The big advantage to outsourcing is that the company maintains editorial control over how the project is executed, but they don’t have to undergo the delay and expense of the whole recruiting / hiring process. They can instead seek out someone with a highly specific skillset — in app development, for example — and then make use of that person in an employee-type relationship for only as long as the project demands. While an outside consultant may have an hourly rate that is higher than that of an employee, they generally end up costing less than an ongoing employee when the full price tag of employment is taken into account. They are especially valuable for companies that lack staff people with a specific skillset, or that anticipate their tech needs to be short-term.
Within outsourcing, it is further possible to choose developers who work locally or those who work overseas. While the initial cost of outsourcing development work overseas appears to be low, a survey published in Kissmetrics found that 62% of businesses ended up paying more than they expected for their offshore IT contracts. The challenges of managing remote contractors can rapidly multiply, complicating what may have initially seemed an easy, inexpensive choice.
Hiring In-House Developers
If an organization’s need is projected to last for some time, there are notable benefits in hiring developers as regular full-time employees. Once associated in a meaningful long term relationship with the brand, the employee will feel a personal commitment to the outcome of their work. Furthermore, it’s far easier to involve developers in decision-making and course correction on a casual basis when they’re working on site. Furthermore, they will have an intimate awareness of the mission and direction of the company, and of numerous details that have a bearing on the completion of the job.
IDC research director Shawn Fitzgerald recommends looking for partners “who understand the particulars of your industry and regulatory environment and offer clear scopes, goals and objectives for what success looks like, with a proven record of success.” One example of such partnerships is demonstrated by retailer Rebecca Minkoff, who partners with Quotidian Ventures to “create the first domestic fashion tech VC fund focused on investments in technology with applications in fashion, e-commerce and retail,” according to a paper presented at the 2017 convention of the National Retail Federation. Together, Minkoff and Quotidian founder Pedro Torres-Mackie envision a “rebirth of retail” as a result of their partnership.
Regardless of which access route a retailer chooses in order to acquire the technology called for in their digital strategy, they must fully understand the cost. Integrating a clear read on the cost-benefit relationship of each approach is essential to sustaining the needed innovations over the long term.
In-House Technology Incubation
It is also crucial that organizations thoroughly explore new technologies before rolling them out. Many companies are now making use of a risk-free method of experimentation by setting up in-house incubator labs, and they are finding that this process takes the high-stakes nervousness out of implementing their digital strategy.
CVS Health provides an example of how such a lab can function like a startup within a larger company. In 2015, CVS Health opened its Digital Innovation Lab, aimed at giving customers a “connected health experience,” according to the company’s press release. The Digital Innovation Lab team’s mission is to operate with much the same process as a startup, imagining new programs and rapidly testing, fine-tuning and deploying them. The lab’s focus is on health care solutions, which range from mobile phone apps that aid in diagnosing diseases to in-store beacons that offer pharmacy reminders.
Disruptive Organizational Structure
Retailers struggling in the face of the ecommerce revolution need a truly transformative digital strategy in order to survive, and this sometimes involves disrupting the traditional way that their company is organized. One example of this type of restructuring can be seen in Walmart’s move to merge two functionally different tech teams, with the goal of “offering customers a seamless shopping experience and getting more mileage out of its thousands of stores.” One team, in Arkansas, had been responsible for digital innovations related to the operations of its stores, while the other Silicon-Valley-based team had focused solely on ecommerce. Already this combined group has created a valuable innovation from its collaboration: a mobile payment service called “Walmart Pay.”
Another highly effective way to drive digital transformation is to merge IT teams with retail teams: The IT members are able to grasp the digital-technology landscape, while the retail members understand the customer base and the operational challenges of market readiness. House of Frasier put its customer insight team “at the heart of the business,” according to Retail Week — a move aimed at “future-proofing” the business as well as making decisions based on shopper insights.
Information Architecture in Digital Strategy
In the words of a recent Forbes Insights report, it is essential to evaluate digital transformation through the lens of customer engagement. That lens offers insight from two separate viewpoints, both of which are essential to digital maturity.
Direct customer experience
Many solutions and innovations streamline the direct touchpoints through which customers interact with the brand. There are numerous ways to decrease user effort and increase a sense of delight, from providing effortless payment options and more personalization to faster or more transparent access to the products. The overall trend of customer experience continues to move in the direction of eliminating barriers between online and in-person shopping, so that increased connectedness offers people access to the items that are most meaningful to them at any given moment.
High quality customer data
Every new solution contemplated as part of a retailer’s digital strategy should also be evaluated in terms of the customer data it can provide. By rolling out more in-store and online digital capabilities, retailers gain access to valuable customer data in the behavioral and transactional realms. If this data is of high quality, and is subjected to targeted analytics, it can add personalization that further refines customer experience, drives loyalty, and enhances operational efficiency.