In-Store Transformation Series: Embracing Digital Disruption

In order to survive the retail industry's continual disruption, there is little choice but to embrace change and transform business quickly. While there is no standard recipe, there are practical steps that businesses can take to accelerate their transformation journey. A partnership between strong executive leadership, modern enterprise architecture, and business leaders enables organizations to effectively plan, navigate, and manage changes for operating in a fast-paced, customer experience-driven world.

PART 1 - EMBRACING DIGITAL DISRUPTION

Digital technologies have a profound effect across our personal and professional lives and within societal interactions. As the pace of change and innovation continues to accelerate, the nature of business interactions continues to evolve as organizations seek to get 'closer to the customer' via new technologies and to leverage opportunities presented by customers living in an increasingly digital world.

All retailers face disruption of their traditional markets, often led by changing customer expectations and the actions of new and incumbent competitors who embrace new digital business models and solutions. Amazon, Alibaba, Walmart, Target, and others have changed retail with borderless disruption that adds a global dimension to the retailers' challenges.

To remain relevant and successful, retailers must respond by finding ways to quickly create new experiences that respond to customer preferences and provide value that drive engagement and loyalty. Josh Bernoff of Forrester Research described it this way:

"More than any other factor, customer experiences determine whether companies thrive and profit or struggle and fade."

Today, new customer experiences often involve new channels, new service offerings (e.g. fulfillment methods), new products, adapting existing systems - or, for the greatest impact, a combination of all of these.

Businesses across many industries have made it clear that digital transformation is the prime vehicle for responding to their customers' evolving needs and wants. And this is certainly true for large retailers. Many find embracing digital disruption can also open up new market opportunities for retailers who have the vision and ability to move quickly to capitalize on them.

CREATING A CUSTOMER-CENTRIC VISION

A significant aspect of digital disruption is the shift in power to the customer. The aggressive embrace of digital by tech giants such as Amazon, Google, Uber, and Netflix has driven an escalation of customer expectations and trained customers to expect more sophisticated experiences involving rich information, convenience, fast response, innovations, and continual evolution. Today, customers not only expect their shopping experience to be easy and convenient, but they also expect a 'wow factor'.

In evolving experiences, requirements are now largely determined by fast-moving customer expectations instead of business managers who used to define requirements and hand them to IT to design and build a solution. How do you manage the new and varied input streams? How do you increase speed to respond before expectations change? How do you reduce risk?

The fact is, it is impossible to have a watertight contract with customers before beginning to build new digital services. Market shifts, expectations, and technology continue to change at a faster pace than ever before. The answer is for retailers to become far more agile to keep pace and, more importantly, get ahead.

IGNORING THE NEED FOR DIGITAL TRANSFORMATION COMES AT A COST.

Retailers have a strategic choice. When thinking of merely continuing on their current trajectory, they should consider:

• How long will customers remain loyal? And what drives loyalty?
• Will they be attracted by innovative offers and services from other retailers?
• Will out of market retailers swoop in and snag market share across verticals and geographies?
• How they can maximize the benefits by channel to increase overall brand ownership - leveraging the ease of online with the power of in-store engagement.

In reality, digital transformation is essential to remain relevant and retain customers, to combat competitive moves, and, in the end, increase market share and revenue. These factors drive the growth of margins and profitability through business process improvements and operational efficiencies. At its very core, digital transformation is a matter of survival in a highly competitive and increasingly global marketplace.

DIGITAL TRANSFORMATION: COMPLEX BUT HIGH-VALUE WHEN DONE RIGHT

There is no question that changes driven by high-value digital transformation can be complex and further complicated by having to execute them while maintaining current operations, systems, and programs. For many retailers, already under pressure, this can represent a daunting challenge. Obstacles to executing meaningful change are plentiful and can keep teams from making effective progress - or at least not at the pace they need to. Even how to start is not always obvious.

Organizations should choose a direction and pace of change aligned with their goals and circumstances. Organizational appetite to invest and capacity to execute changes are big factors. A good strategy is to start small and proceed via a test-and-learn approach, driven by technologies that support agile iteration, continuous delivery, and rapid time to market. This is what allows retailers to discover what scores with customers, what kind of return can be attained, and key challenges to execute.

CASE IN POINT: AUSTRALIA POST

Goal:

Consolidate eight different transaction systems of a 30-year-old legacy POS into a single, modern system to streamline the introduction of and reduce the cost of introducing new services for 220 million customers across the continent.

Iterative Approach:

A multi-year, enterprise process with OneView's headless Unified Commerce Platform's ability to leverage composable commerce gave AusPost control over the speed of innovation and eliminated the traditional constraints retailers face due to dependency on the software vendor. Within months of identifying their first use case-mobile checkout-hundreds of AusPost stores were using the first iteration to do linebusting, enabling servicing customers with greater speed and efficiency. The "build-it-once, use-it-anywhere" strategy kept the transformation journey on a proven track as each use case could be used to build out the next one by leveraging the re-usable business capabilities of the platform and the single codebase. Each use case (mobile line busting, counter-based point of sale, kiosk, self-service terminals) was rapidly planned and transformed to meet unique business requirements of the Australia Post business to achieve objectives tied to sustained business growth.

LEANING ON ENTERPRISE ARCHITECTURE EXPERTISE

Related to transformation, Enterprise Architecture (EA) can be the deciding factor in achieving goals and objectives. EA principles help organizations navigate increasingly complex business and technical environments, as well as the rapidly changing markets and customer expectations that now demand new strategic planning and IT delivery methods. Modern EA bridges business and IT, enabling better alignment in order to execute strategy and achieve business objectives. It offers techniques to logically tackle complex business problems, design innovative solutions, and plan pragmatic roadmaps that enable large-scale programs to move forward with confidence and purpose.

Experienced enterprise architects are critical resources in planning and executing meaningful and valuable digital transformation. They bring broad expertise, a strategic outlook, technology knowledge, analytical skills, and an ability to deal with ambiguity. They also have the expertise to describe a desired target state and a logical roadmap of projects to get there.

ARCHITECTING THE CHANGE JOURNEY

Research describes EA as "a modern approach to business and IT alignment". More practically, EA² can be described as a logical and pragmatic approach to architecting change in organizations, especially where significant technology assets and new investments are involved.³

1. BCG, How to Drive a Digital Transformation: Culture Is Key https://www.bcg.com/digital-bcg/digital-transformation/how-to-drive digital-transformation-culture.aspx
2. Svyatoslav Kotusev, The Practice of Enterprise Architecture - A Modern Approach to Business and IT Alignment, 2018
3. The author's simple definition, especially when explaining enterprise architecture to business executives

EA uses a conceptual framework for describing how a business is constructed and how the various parts work together to deliver value to customers. These parts are generally grouped into the following domains:

• Business strategy, structure and processes
• Data and Information
• Applications
• Technical platforms and infrastructure

This framework helps to describe, analyze, map, and communicate how a business needs to change and transform over time in order to meet its goals.

Enterprise Architects perform a range of functions in architecting the change journey, including:

• Understanding the needs of business, short and long term
• Logically analyzing the business problems and opportunities
• Bringing insights and identifying opportunities for change
• Working with business leaders to formulate strategy and paint a picture of the proposed future state
• Advising on new technologies and the opportunities they offer
• Identifying obstacles and mapping how to navigate a path forward
• Creating a pragmatic roadmap, recommending priorities, and defining initiatives (projects)
• Helping to mobilize the transformation program and commence projects
• Designing innovative solutions that consider multiple factors such as current assets, customer needs, processes, people, culture, and technologies.

In other words, your EA team has the expertise to:

• assess the current status of your organization
• identify gaps impeding a successful future
• build an achievable pathway that demonstrates value at every step to continue securing essential cultural and financial support
• advise on practical ways to progress that will help you start sooner and more rapidly
• achieve real success throughout your digital transformation journey

A NEW DIGITAL CULTURE IS REQUIRED

EA alone does not make transformation successful. Strong business leadership, from the executive suite down, and ideally backed by the Board, is essential. For success, at every step and in a joint effort, enterprise architects must be in lockstep with senior business leaders.

In addition to articulating the vision for digital transformation and a new future, the CEO and senior leadership team (SLT) must create the right climate within the organization and establish a new "digital culture.". Speed of delivery, innovation, fast iteration, continual feedback, adaptability, and an enlightened ¹ attitude to both uncertainty and "failure" are key attributes of this new world.

Coming Soon: PART 2

BUSINESS AND ENTERPRISE ARCHITECTS: TRANSFORMATION PARTNERSHIP ROLES

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