Facing the Challenges of Digital Transformation in Retail

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In order to survive constant disruption, retailers must embrace and quickly respond to change. Modern enterprise architecture is a powerful tool for helping business leaders navigate and manage the changes they must make to operate in a fast-paced customer experience-driven digital world.

Digital technologies are having a profound effect on our personal lives, and the disruption to businesses is real. In retail, disruption is coming from changing customer expectations and from competitors who have embraced new digital business models and solutions. Furthermore, since digital disruption is borderless, it brings a global dimension to the challenges faced by retailers.

To remain relevant and successful, retailers must respond and find ways to quickly create new experiences that customers are looking for and will value. This can involve new channels, new service offerings (e.g. fulfillment methods), new products, or a combination of all of these for the greatest impact. From observation of businesses across many industries, it is clear that Digital Transformation1 is key to responding to evolving customers’ needs and wants.

Many leading retailers are using enterprise architecture to begin their digital transformation journey. For instance, Kroger is building off of a headless retail-as-a-service (RaaS) architecture starting with buy online/pickup at a partner location (Walgreens) to offer customers what may be a more convenient option. In another instance, Australia Post introduced mobile line busting for faster checkout and greater engagement with customers by “coming out from the counter”. This experience covers almost 90 percent of in-store transactions, saving the remaining 10 percent complicated transactions for traditional lane checkout. It’s important to note in these examples that owning the customer experience through a modern headless RaaS architecture independent of the backend (legacy) system allows these retailers to quickly develop use cases for any customer service touchpoint.

Unfortunately, there is no standard recipe for digital transformation. Each organization has to design and plan its own path to a new future. The complexity and size of executing digital transformation is a daunting challenge. There are many obstacles that hinder execution of meaningful change and often render teams unable to make effective progress. Plus, how to start is not always obvious.

Organizations must rethink strategy, learn to cope with uncertainty, and adopt new approaches to planning and executing change. Speed of delivery, innovation, fast iteration, continual feedback, adaptability, and an enlightened attitude to both uncertainty and “failure” are key attributes in this new world. Knowing that large-scale change is not easy, how do retailers mobilize their organizations to undertake their Digital Transformation journey?

Enterprise Architecture: Powerful Tool for Planning and Managing Change
Enterprise Architecture (EA) is a business strategy and planning tool that can help organizations transform and manage the changes required to operate in this new fast-paced, customer experience-driven digital world.

Contemporary EA practice focuses on business architecture and ensuring business has the ability to change at a faster pace than ever before, while aligning IT investments and minimizing expensive technical debt. Modern EA methods that support iterative delivery by agile development teams serve as a formidable framework for Digital Transformation. Rather than fully defined in advance of starting a project (as was common in the past), modern EA design lays out an ‘architecture runway’ is laid out for the solution delivery team.

Planning the Journey
Planning and executing a strategy is never smooth sailing, and rarely do businesses have the luxury of a clean slate. Existing systems will continue to operate, with many playing an important role in providing core retail data and functions to new digital channels. Capability gaps must be analyzed, and new IT assets defined and justified.

Budget aside, the obstacles that hinder the execution of meaningful change are plentiful. Enterprise architects can foresee and predict needed outcomes. They can analyze business and IT landscapes and identify critical dependencies or potential blockers, and develop strategies to tackle them. This is especially important for issues with a long lead time to resolve, such as process redesign, reskilling of people, new regulatory obligations, industrial relations restrictions, and readying business partners (e.g. franchisees, suppliers) to support the transformation journey.

Enterprise architects can unpack a complex transformation agenda into smaller, more manageable (and achievable) chunks of change and new solutions that are prioritized and sequenced. They can tackle complex business problems, design innovative solutions, and plan pragmatic roadmaps that enable large-scale programs to move forward.

Digital Transformation is a business change that requires changes in culture, people, processes, and technology, all driven by strong executive leadership. Technology is often the easiest part.

Shortening Delivery of New Digital Business Capabilities
To empower transformation, the organization should develop or acquire digital business skills and technology development capabilities required to quickly and iteratively build new business models, products, and customer experiences. This needs to start well ahead of the launch date for new solutions.

A successful approach is to create a digital delivery team as a separate entity within the organization. This multi-disciplinary team collaborates with business leaders and has a clear line of sight to customers. It is agile, working quickly and iteratively to design and deliver new customer experiences.

This group functions differently than traditional IT operating models that follow a request-in-deliverable-out approach. Modern digital enablement requires anticipating, learning, and adapting to customer expectations. To ensure new front-end experiences connect to functions and data residing in core retail systems, enterprise architects maintain a holistic view of the organization and provide blueprints and design guides that show how various parts of the technology landscape work together to deliver business outcomes.

The New IT Customer
In the traditional IT model, business managers submitted a request, defined requirements, and handed them to IT to design and build a new technical solution. The digital world shifted this power to real customers. Tech giants (Amazon, Google, Uber, et al) embrace digital to respond to and anticipate customer expectations (services and CX), which continue to escalate for sophisticated experiences, rich information, convenience, fast response, and continual innovations.

How do retailers manage these new, dynamic input streams? How do you increase speed to respond before expectations change? How do you manage risk?

Retailers cannot write a watertight contract with customers before they begin to build new digital services. Customers can change their minds at a faster pace than ever before. EA can promote nimbleness to align and track deliverables with customer expectations and empower organizations to build, learn, deploy, or destroy.

Getting on the Road is Key
Environments are becoming more complex, and mapping out an achievable transformation journey is a daunting challenge. Deciding how and where to start is not always clear,

Leveraging enterprise architect expertise helps retail organizations navigate this complexity and chart a course for significant positive business change. It takes business vision, strong leadership and executive buy-in, a customer-responsive culture and the courage to start the journey without a clear endpoint.
With a more adventurous mindset, leaders can rely on enterprise architects to provide strategy, execution plans, and technology vision to deliver results.

1 Digital transformation (DT) is the implementation of a significant change in the way of doing business involving new business models, technology solutions and customer experiences, in response to a significant shift in market context and customer behavior brought about by the widespread adoption and innovative use of digital technologies. By its very nature, DT is a journey requiring a staged approach and a clear roadmap that takes into account end goals will continue to evolve with changing market dynamics and innovations.

About Abhijit Killedar and Mike Baird 2 Articles
Abhijit Killedar is the CIO at OneView Commerce, and Mike Baird is a Digital Transformation Consultant.