The Trade Secret for Tomorrow’s Retailers

By Matt Harris, Director – Retail and Consumer Goods Practice Lead at ISG (Information Services Group)

The retail leaders of tomorrow are working hard to construct a new baseline: increased transparency, focus on the customer rather than the product, and decision-making that is data-driven as opposed to instinct-driven. All of these depend on the same thing: technology.

If this is true, then why do only a small number of retailers define technology as an integral part of retail operations? We regularly hear the phrase “the business and IT,” as if IT is an innocent bystander watching the business evolve and grow of its own accord. We rarely hear “the business and marketing” or “the business and merchandising,” so why is it that IT is set apart from its peers in retail organizations?

In today’s retail market, technology is critically important to practically every business process – from buying and merchandising, to supplying goods, pricing, running promotions and making decisions on stock placement and order routing. Technology has underpinned nearly every customer and employee interaction, and almost every success story in the retail industry since the turn of the century. It can transform an enterprise’s ability to get products and services to market quickly and meet the rapidly changing needs of customers. However, it is still often seen as a blocker – as a set of legacy assets that inhibit business agility, and even as an excuse for why things can’t happen.

So what is the solution? The days of three years and $100 million to implement an enterprise resource software package are far behind us. Customers will no longer wait that long when competition in the retail market is so fierce. Understanding technology – and its power to differentiate a brand – is the hallmark of the successful retail leader of the future. Technology can keep a retailer closely aligned to its customers and will help it adapt quickly to changing expectations.

For example, a grocer that starts shipping groceries online can use technology to overcome significant obstacles in the industry, including new regulations, changing commerce policy, scalability challenges and even volatility in its share price. In the UK, the online grocer, Ocado, has done just this with immense success. When the company initially launched at the turn of the century, it defined a business mission to use technology and automation to create an online grocery business – and to do so with scalability, sustainability and profitability. One of the key reasons that Ocado remains a leading grocer in the UK today is that it reinvests profits from the business back into building its technology platform for the longer term.

Thinking of technology as “the IT department” and failing to align it to business objectives is a surefire way to inhibit the speed of change and miss the grand opportunity of the digital age. On the other hand, thinking of IT as a facilitator of sustainable innovation can open the doors to a host of new possibilities – both in terms of competitive advantage and internal culture.

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