Digital transformation: 5 principles for the retail industry

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As I learned at the National Retail Federation Conference earlier this year, the retail industry will go through as much transformation in the next five years as it did in the past 50 years. (This intrigues me as a student of digital transformations  – and as someone who has always disliked shopping. I’m glad my customer experiences look poised to improve.) But what principles will retailers have to live by in order to make their digital transformations successful? 

I had four principles in mind as I began moderating an Executive Exchange session at the CDM Media CIO Retail Summit in New York. The session explored the race to retail digital transformation between business and IT – with business eager to transform customer experience and IT eager to enable this. Our discussion involved more than 25 leaders from global enterprises, living the associated challenges across the manufacturing and retail industries.  What about the fifth principle, you ask? I told the attendees the fifth one would emerge through our discussion.  And emerge it did.

Join me as I share what we discovered about making retail digital transformation effective – what matters, and what doesn’t. 

Principle 1: Channel does not matter – to the customer. The retail customer uses various channels to shop for items of interest – whether it be online, via mobile phone, or a casual visit to the store. As current retailer focus on omnichannel programs indicates, customers simply want streamlining of the overall customer experience. However, omnichannel presents other challenges for retailers and demands fresh thinking. The online and mobile channels do not readily support the in-person handshake and emotional interaction that retail staff can have with customers. Customers are more likely to dismiss a pop-up window than negate an offer from one human to another. Also, a representative of a leading manufacturer of construction equipment indicated that omnichannel options were opening up opportunities for other online retailers for their equipment – competition that did not exist before. Thus, even though the channel may not matter to the end customers, it’s forcing the manufacturers and retailers to think differently about the business.

Principle 2: Location should not matter. So what if my spouse is vacationing in Hawaii, gearing up for school at home, or just walking the Magnificent Mile shopping district in Chicago? If she finds an item to her taste, she should be able to order it and have it shipped to a location of her choice, to be received by the person of her choice. The recipient might be a close family member or friend located thousands of miles away. Retailers must understand and act upon this dynamic.

Automation done right is all about increasing the overall efficiency of the retail process end-to-end, while redirecting the human brainpower to more innovative applications

Principle 3: Automation – and people – both matter. Let us not lose sight of the human element. The greeter at the front of the retail store, the store clerk wishing you a nice day or a fantastic weekend – they matter for sure! Automation done right is all about increasing the overall efficiency of the retail process end-to-end, while redirecting the human brainpower to more innovative applications. Next-generation technologies open up options for new business models and newer ways of enhanced customer experience.

Principle 4: Innovation matters. However, such enablement requires an ecosystem that wholeheartedly embraces innovation across the community, with passionate members collaborating to bring together diverse perspectives. Collaboration is the most effective mechanism to sustain innovation – whether it be collaboration between retail enterprises or individuals with expertise in the business of retail or its enabling technology. 

I applauded Gartner fellow Darryl Plummer’s advice from the Gartner Symposium last year: Connect – don’t collect. Plummer called out the need to connect to various data sources and synthesize the information rather than collect data into multiple, individual repositories that are often replicated.  When I brought up this point, Boeing fellow Brian Laughlin chimed in with a different take on Plummer’s advice.  Laughlin says beware “collect” – meaning siloed teams that do not collaborate with each other – and strive for “connect” meaning a unified team, driven by collaboration and information exchange. 

On a similar note, cognitive diversity is fundamental to collaboration and innovation. As I have written previously, having a diverse team brings not only diverse perspectives, but diverse ways of thinking – and new ways of thinking are crucial to innovation. This brings me to the fifth principle.

Principle 5: Context is queen.

Laughlin explained that decades back, retail used to be about Location, Location, Location. It was all about where the store was located.  With retail’s online presence, this mantra evolved to be Content, Content, Content – what is presented to the customer online. Remember the cliche, “Content is King?” Well, now it is about Context, Context, Context!  

When the customer is at the store looking for a product, the retailer must have all the relevant information about the customer’s purchasing patterns and tastes within easy reach, in order to make appropriate suggestions. But this is true for all retail channels. Just-in-time context with relevant information defines the business moment for the customer. It is not just about the data itself, but about the combination of staff perspectives applied to the synthesized data. Diversity of thought results from the diversity in gender, ethnicity, nationality etc. The manner in which a male sales associate processes the data about a customer in the same situation could be very different from his female counterpart. The retailer wants a diverse array of perspectives serving the customer, to ensure the right context is provided. Context, augmented by diverse perspectives, is the new mantra! Thus, if Content was King yesterday, Context is Queen today!

And thus, I gleaned the fifth principle from this distinguished set of leaders from the retail industry.

How is your enterprise doing in the race to digital transformation?  What other principles matter to your company for retail digital transformation? Please let us know.

E.G. Nadhan is the Chief Architect and Strategist for North America at Red Hat. He provides thought leadership on various concepts including Cloud, Blockchain, Analytics, and the Internet of Things (IoT) through multiple channels including industry conferences, executive roundtables as well as customer-specific executive briefing sessions.