The retail industry, perhaps more than any other, has borne the full brunt of digital

Transcription

1 An article from the Economist Intelligence Unit Retail IT departments have adapted more than most to the digital era, but there is demand for even deeper collaboration with the business The retail industry, perhaps more than any other, has borne the full brunt of digital disruption. The success of e-commerce giant Amazon.com has affected almost every category of retail, and online competition has been on every retail executive s mind for at least a decade. This explains why executives in the retail sector place more importance on their organisation s digital initiatives than their peers in other sectors, as revealed by a crossindustry survey of 812 senior IT and non-it executives, conducted by The Economist Intelligence Unit (EIU) and sponsored by SAP, which included 102 respondents from the retail sector. The survey found that 82% of retail respondents say their organisation s digital initiatives are either its highest priority or a relatively high one, compared with 72% of respondents from other industries. It also means that IT departments in the retail sector have had a head-start in adapting their practices, processes and culture in order to support digital transformation. Six out of ten retail executives surveyed say that in the last three years their IT function has completely or significantly changed the way it operates to support digital initiatives, compared with an average of 43% in other sectors. And they are pleased with the results: 58% of retail executives are happy with their IT department s contribution to digital initiatives, compared with just 45% of respondents in other sectors. However, as in all industries, there are still discrepancies between the role that retail IT departments play today and their ideal role in the eyes of both IT and non-it executives. 1 The Economist Intelligence Unit Limited 2016

2 Specifically, many retail executives included in the survey would like to see their IT function take a leadership role in understanding customer needs, driving innovation and improving organisational agility. Retail IT executives will know by now that the success they have had so far in adopting digital practices does not mean an end to the need to evolve. Instead, they will recognise that in the current era of digital transformation, the only stable state is one of constant transformation. Take Rentalcars.com, for example, the world s largest online car-rental service. According to CIO Graham Benson, the company is always looking for opportunities to differentiate itself to maintain its market lead. It is being different that s made us successful, and in order to retain that competitive position, we need to continue to innovate and differentiate ourselves from the competition, he says. Customer focus The primary focus of this continual innovation is the customer experience, according to Mr Benson. Our customer journey is key to our differentiation, he explains. So anything that improves our customer engagement is where we try to innovate. The same goes for Otto.de, the largest online fashion and lifestyle retailer in Germany. Otto.de s digital transformation strategy is led by consumer needs, explains CIO Michael Müller-Wünsch. It is led by the ambition to be a company with a very personalised approach to interacting with consumers, and to individually fulfil their needs and desires in the market of apparel and fashion items. This also applies to traditional bricks-and-mortar retailers, which, in an online marketplace, cannot rely on traditional differentiators such as the number or location of their outlets. Our customers want to have a more personal and intimate experience, and a lot of the technologies and strategies we are implementing are to understand them better and improve that experience, says Anthony Roberts, global CIO of Walgreens Boots Alliance (WBA), the US-based pharmacy group. Improving the customer (and partner) experience is the most common objective of retailers digital initiatives, with 42% of respondents identifying it as their primary objective. And 36% see the ability to identify with and respond quickly to customer needs as the most important capability influencing the success of these initiatives, the most common response alongside improving our organisational agility. However, despite their overall satisfaction with their IT department s contribution to digital transformation, on this last point retail executives would like to see more leadership from IT. While just 19% of respondents say the IT department plays a leadership role in understanding and reacting to customer needs, 43% believe that it should. 2 The Economist Intelligence Unit Limited 2016

3 Another area for improvement is collaboration. Just under half of retail executives surveyed say that the best way to help their IT department make the ideal contribution to their organisation s digital initiatives would be improving the collaboration between IT and other departments. Collaboration is easy to talk about and difficult to deliver, says Mr Benson at Rentalcars.com. Technologists and marketing people work in different ways. The company has therefore made a concerted effort to overcome the structural hierarchies and silos within the organisation, he explains. We ve created crossfunctional product groups to allow us to be more agile in reacting and delivering innovation. This move has already proved its value, he adds. The transition is still under way, but agile working pretty much delivers from day one. At Otto.de, Mr Müller-Wünsch argues that the digital development requires staff with a range of skills, so organisational structures that divide employees by function must be overcome. We strongly believe that interdisciplinary working approaches will help us to become more agile and more flexible, and also to deal with new innovative trends and technology. We are changing from a siloed and function-oriented organisation to a more interdisciplinary, project-oriented setup. Centres of excellence More than any other industry included in the study, retailers are likely to have established digital centres of excellence within their organisation: 62% of retail respondents report having done so in the last three years, compared with 56% of firms in other sectors (see chart 1). And their digital initiatives are more likely to be led by a specialist digital unit (30%, versus 24% in other sectors). It is easy to see why retailers might favour this approach: when companies acknowledge that digital transformation is strategically critical, they want to concentrate their resources to develop their expertise and best practices. WBA, for example, is building a digital centre of excellence in Chicago. However, Mr Roberts of WBA warns companies against creating a digital silo within the organisation. You can look at digital as a silo, and that can be good from an incubation point of view for testing things out, he says. But sooner or later you run into a road block, because you re looking at end-to-end processes and customer journeys, which inevitably will touch different parts of the organisation, and certainly different parts of your technology estate. WBA s digital centre of excellence is instead part of a wider reorganisation of the group s IT resources to operate a single entity, called One IT team. The digital centre of excellence uses capabilities of a number of different locations globally, organised 3 The Economist Intelligence Unit Limited 2016

4 Chart 1 Which of the following initiatives has your organisation undertaken in the last three years? (% of respondents) Retail Other industries Established a digital centre of excellence 56% 62% Promoted digital collaboration among employees Launched new customer-facing digital channels, e.g. mobile apps, portals Prioritised digital marketing over traditional forms 58% 60% 57% 58% 55% 50% Launched new products or services made possible by digital technology Applied digital technology to improve internal operations 48% 45% 52% 60% Appointed a chief digital officer Source: The Economist Intelligence Unit. 36% 41% around a common strategy and set of platforms that we can deliver across the organisation, Mr Roberts says. The interpretation and delivery of that, and even the way it might look to customers in a market, may be different, but under the covers we are organised to build technologies and deliver solutions in a common way. This is already helping the company to reuse digital expertise and experience across its various brands. For example, before the merger with Boots in 2014 Walgreens had built an app that turns the traditional idea of having a camera film developed at your local chemist into a platform for sharing photos on social media. It has grown the category tremendously, says Mr Roberts. We decided it is so good that it would work for Boots too, which we ve done using exactly the same technology. It looks like Boots on the front end, but it s actually exactly the same technology underneath. Similarly, WBA is building on highly popular mobile apps at Walgreens for services such as Pharmacy Chat and Refill by Scan, which lets people refill their prescriptions by scanning a barcode on their bottle label with their mobile phone. There s no point in reinventing all that across the globe, notes Mr Roberts. What we re doing is aligning the teams, the organisation and the technologies, so that we can take advantage of that capability and bring the digital assets to a wider group. We call it cook once, serve many times. Companies in all sectors are hungry for digital innovation, eager as they are to be the source of disruption in their markets, not the victim. And while only 10% of retail executives say their IT department has a leadership role in identifying opportunities to innovate today, 36% believe that it should. 4 The Economist Intelligence Unit Limited 2016

5 Mr Roberts advises retail CIOs not to neglect their traditional responsibilities, however. In addition to being the digital guru and the company policeman, you also have to keep IT systems running. It s no good just focusing on innovation or digital. He also warns against mindlessly pursuing the latest digital trends without considering what they mean in the organisation s specific context. It s a mistake just to go chasing technology and the latest, greatest thing. While there will be some directional signposts, this is all so new that you can t just lift and shift from other examples. You have to find ways of making that digital strategy right for your company. As a reflection of this, WBA does not describe digital transformation per se as one of its priorities. Instead, it has defined a number of transformational priorities that are supported by digital technology: What we have is priorities around the evolution of the business, the delivery of our plans and the change of engagement with our customers. Retail CIOs seeking to support their organisation s ongoing transformation might consider a similar approach. About this article: Digitising IT is a research programme by The Economist Intelligence Unit (EIU), sponsored by SAP. This article draws on a multinational survey of 812 senior executives, conducted in March Just under half of respondents (49%) are senior IT executives, while the remainder represent a range of other functions, including HR, marketing, finance and operations. Respondents are drawn from a range of industries, including 102 in the retail sector, and from countries in Europe, Asia, North America and Latin America. 5 The Economist Intelligence Unit Limited 2016