Perficient has been covering broad digital transformation trends for a while, and the Consumer Markets team here at Perficient wanted to highlight how the principles of digital transformation apply specifically to brands and retailers. In the last entry in our “Digital Transformation in Retail” series, we outlined the underlying drivers to explain why digital transformation is important for all brands and retailers.
In this third edition, we outline what parts of the retail business need to be considered for the right level of transformation.
Move that Bus!
The very word “transformation” invokes a lot of thoughts: Disruption, discomfort, hard work, and most of all change. Conventional wisdom tells us that we fear change because we’re not sure how that disruption, discomfort and hard work is going to affect us personally. As a serial do-it-yourselfer and home remodeler, I am a big fan of the home makeover genre: Extreme Makeover, Love it or List It, Rehab Addict, and a series of fill-in-the-blank Crashers. It turns out that change and transformation actually make for good entertainment!
At its core, these shows make us feel excited for the homeowner and the new experiences created by their transformation. They can cook a better meal, throw a better party, and get more out of their weekends playing in the backyard. When we talk about digital transformation in retail, we are also talking about creating great experiences for our shoppers. But like the decorator, real estate agent, and contractor, we need take stock of what we have, what needs attention, and what we want to create.
What: The Customer Experience
In a consumer-centered world, transformation begins with the customer experience itself: The total of all interactions and touchpoints throughout your relationship with a customer. That relationship is typically defined as the shopper’s journey, and each of the interactions and touchpoints along the way is a target for transformation. The shopper’s journey describes the paths a customer follows from the time a need is formed, to researching, selecting, purchasing, and ultimately using and advocating the products and services. The interactions and touchpoints may be through advertising and social media, in a store, online, or on a mobile device, or old-fashioned word of mouth.
We can translate the shopper’s journey into the retailer’s perspective by describing how we acquire, engage, and retain customers. Digitally-transformed acquisition may encompass paid and organic search, richer digital product content, or community-driven ratings and reviews. Digitally-transformed engagement may include smarter product recommendations, mobile shopping tools, or a cleaner checkout process. Digitally-transformed retention may include targeted promotions and remarketing, in-store clienteling and concierge services, or cultivating online and offline communities. Inventing new and better customer experiences is fun work, but realizing and delivering them depends on sometimes difficult and complex changes in the backshop.
What: The Retail Operation
If a great customer experience is about moving the customer to the retailer, a great retail operation is about moving the product to the customer. For decades, traditional retail has been a game of product, price, promotion, and place. Put succinctly, it’s getting the right products into stores, pricing them right, and then promoting them off the shelves. And like the journey that customers take, products also follow a journey that is familiar to all retailers and open for transformation: make/buy, move and sell.
To enable great customer experiences, the retail operation must also look inward for these transformational opportunities. Digitally-transformed buying can speed up vendor onboarding, open up two-way inventory sharing with suppliers and enable just-in-time ordering. Digital-transformation can enable omni-channel fulfillment and returns to move products with end-to-end supply chain transparency. And a sell-side transformation may include infrastructure for self-checkout and mobile payments and the ability to collect, sort, and analyze the entire customer journey to make continuous improvements. The elephant in the room is that enabling digital operations and customer experiences requires more access to data and information, sooner, and with finer-grained detail. And that almost always translates into some degree of technology modernization to add agility, changeability, and extensibility to the technology stack. Digital transformation will require technology investment, but it’s not all about the technology
What: The Organization
Every IT department I’ve encountered has its share of great technologies that have been reduced to shelfware or footnotes in project horror stories, often the result of an over-dependency on the promise of the shiny new object. Being digital (thank you, Nicholas Negroponte) itself is not enough. Successful digital transformations also include a healthy analog transformation that re-thinks how the organization is structured (or, in some cases, unstructured), the roles and skill sets, and the fundamental processes and methods of doing business. Traditional corporate structures set up IT as an order-taking cost-center, and many enterprises persist this model today. With the emergence of eCommerce, many retailers spun out an online operation separate from store ops.
Today we’re seeing more innovative retailers merging traditional business and IT teams into blended teams with shared responsibility for end-to-end customer experiences. Buyers can be found mining data sets and heads-down coders can be found on the store observing consumers navigating the aisles. Resistance to these transformations is often rooted in a perceived struggle between store stability and disruptive innovation. Enter the Chief Digital Officer. The number of people in the CDO role doubled from 2013 to 2014 and is expected to double again this year (Karl Greenberg, mediapost.com.) But the CDO is merely a change agent, not a white knight. Pushing real change requires top leadership to evolve behaviors and processes across the organization for agility, innovation and customer-centricity.
What: The Product
So far, all of the whats that I’ve laid out are really methods for how you deliver to and serve your customers. The literal what undergoing digital transformation are the products and services you actually sell. Many categories have already been transformed – some for good. Books and music come to mind immediately (although vinyl LPs seem to be making a serious comeback.) The so-called Internet of Things (IoT) describes a variety of products that are both “smart” and connected. Smart products use digital technology to sense and interact with their surroundings, store all kinds of data, and process it into usable information or react to the owner. Connected products are sending this information to other experiences, interacting with other devices, or phoning home to their manufacturer.
For example, the Fitbit senses physical movements on your wrist and converts into metrics and trends to track your physical fitness on your phone. The Nest thermostat learns how to keep your comfortable in your own home. Connected cars are quickly going from merely transmitting engine and performance details to just replacing your job behind the wheel as self-driving cars. Smart, connected products are also changing how manufacturers and retailers work to design deeper customer experiences, including what to do with all of the data being generated by these devices. The IoT is a playground for the boundless creativity and customer intimacy needed to build even better customer experiences.
I hope this triggers a few thoughts on what you should consider for your own digital transformation. In the next couple of entries we will highlight steps you can take to progress your digital transformation and take an inside look at how a few retailers have done the same.
Jim Hertzfeld is Principal and Chief Strategist for Perficient Digital, and works with clients to make their customers and shareholders happy through insanely great digital experiences.