Retailers may have the greatest opportunity in the Digital era. In fact, 55 percent of the Internet of Things(IoT) value at stake for retailers went uncaptured in 2013. With a rising tide of technology-driven disruption that has dramatically changed consumer shopping behaviors and the retail business landscape, retailers need to adapt to change and deliver new Digital experiences, both in the store and out.
F&F, a clothing brand sold exclusively by Tesco, wanted to connect shoppers in stores with the full online experience. Using the IoT, F&F now helps in-store customers connect for the personalised experience they get online. They can visit a specialised kiosk called an Online Order Point, ask an employee to look something up on their F&F tablet, or connect over Wi-Fi on their own personal device. When shoppers connect to the in-store Wi-Fi network, F&F uses Cisco® Connected Mobile Experiences (CMX) to deliver style advice and offers tailored to the store. Shoppers can also shop online by scanning barcodes with the cameras on their smartphones, seamlessly blending the Digital and physical stores.
Looking to build better relationships with customers and increase engagement, F&F’s analytics and virtual store prototypes are already showing increased customer satisfaction and loyalty. Today, F&F has deployed over 125 digital order points across the F&F estate, generating incremental online sales and a return on investment within 12 months. To achieve this, the use of a dynamic IT support strategy was essential.
Tesco are a proponent of strategic IT services. The company consistently uses IT to inform management decisions and to enhance its products and services - and being a strategic IT thinker pays off. Harvard Business Review research found that firms with a strategic approach to IT support and strategically led spending have margins 20 percent higher than the industry average. In contrast, firms with less than average IT spending and a poorly defined IT strategy have margins 32 percent lower than the industry average. Just as important, a strategic approach to IT support puts a firm in a good position to take advantage of future business opportunities.
How strategically aware is your IT support team?
IT strategy is reflected in a firm's ability to use IT to consistently drive performance. Like savoir-faire, strategic IT looks effortless from the outside. A quick test will reveal how strategically aware your IT services are. Can you:
- Respond to new customer demands in a timely manner?
- Present a single face to global customers?
- Reproduce business successes in a new market?
- Quickly integrate new acquisitions?
- Ensure that local decision makers simultaneously do what's best for customers and the firm?
Because strategically aware IT provides the business systems to support strategic business priorities, companies that deploy strategically enabled IT more often answer “yes” to these questions. In contrast, firms that are not proponents of strategic IT often have systems that were built to support isolated business needs. To address enterprise wide needs, these businesses spend much of their IT budget attempting to glue their systems together. Over time, management finds that it takes longer to test new systems and integrate them with existing ones. Besides becoming increasingly vulnerable to systems outages, this patchwork of IT services and systems makes it difficult to respond to changing business conditions. As a result, the average firm spends 68 percent of its IT budget operating and maintaining IT - funds that are then not available for introducing new products or services. This is when IT support is a liabilty that starves growth and hinders innovation.
Businesses that are Digitally transformative understand that IT is a strategic asset. In today's digital economy, if IT isn't an asset, it's a liability. To transform IT from a liability into a strategic asset, management must continually pursue three golden rules for deploying strategic IT services:
1. Fixing what's broken
In most businesses, IT support fails to meet business needs because of a broken accountability and decision making model. Without a clear, enterprise wide strategic approach to how IT will support your business strategy, you will continue to focus resources on tactical systems instead of using IT as a basis for doing business in today's Digital economy. Strategically aware IT teams have addressed their legacy problems by providing both a clear vision for how IT will enhance business operations and a well understood funding model focused on delivering that vision.
Over many years, for example, Tesco had built many new systems to support different products. As a result, Tesco entered the 21st century with multiple, redundant processes and systems as well as fragmented customer data. The company had multiple approaches for core activities like opening an account, tracking deliveries, and paying suppliers. Tesco's management structures and decision-making processes reinforced its piecemeal business processes. The result: Tesco had no good way to provide a single view of a customer's account.
To improve its systems and processes, Tesco first had to rethink how to deliver goods and services to customers. In doing so, the company reorganised the business around its major customer segments, redefined its business processes in terms of customer requirements, and reengineered the IT project funding process to focus on enterprise initiatives rather than product silos. These were critical steps in preparing to build a Digitally transformative platform.
2. Building a platform for Digital transformation
Once you've enabled strategic IT support, you're ready to build a Digital platform. A Digital platform is a coherent set of standardised, IT support services that enable transformative business processes along with supporting infrastructure, applications, and data. To build a Digital platform, management must start by identifying what business processes are not changing. A Digital platform standardises and automates these processes, thereby increasing reliability, decreasing operational cost, and ensuring quality. By automating what's not changing, a Digital platform allows management to focus attention on what is changing in the marketplace. Tesco's Digital platform development initially focused on the data that would allow integration of business processes to meet customer needs. After several years of developing data repositories and reengineering business processes to better use that data, Tesco's platform remains a work-in-progress. However, the platform is continuously improving the decision making processes and operations that rely on this data.
At Tesco, the Digital transformation process platform encompasses the daily servicing of customer needs, ranging from opening an account to buying an item of clothing. Tesco has built a solid technology base and layered it with reliable, predictable business processes for daily transactions—but the reliability and predictability of daily transactions are only the beginning. Like all businesses who choose strategically aware IT support services, Aetna uses the data generated from its core transactions to inform and empower decision makers.
3. Exploiting the platform to drive growth and fuel innovation
Fixing what's broken and building a Digital platform are both demanding undertakings, but the bigger challenge is leading organisational change and driving value from the Digital platform. To cash in on your platform, you will be changing individual roles, organisational structures, and the organisational culture. This is a fundamental business change and, thus, a major leadership challenge.
At Tesco, the need for emphasised data driven decision making spearheaded the effort to put consistent, reliable data in the hands of managers. Tesco encouraged employees to leverage the firm's data to develop new products and services for customers. Consequently, F&F grew sales by 50% during the holiday period, and was able to offer personalised advice and deals based on store location and also provided employees with new ways to help customers. This Digitally transformative approach has unlocked innovation.
Leading a Digitally transformative business
Harnessing strategic IT support requires a clear vision, strong leadership, and a significant change management effort. It can be difficult to distinguish the effect of strategic use of IT from outstanding business management. Indeed, a characteristic of strategic IT is the adoption of Managed IT services which are at the heart of highly effective management. Strategic IT support provides the platform and scaffolding for delivering world class operations and strategically focused management decision making. Fewer than one third of the firms studied by Harvard Business Review are strategic IT support users. At Strategic Asset, we know that strategic IT services are a prerequisite for becoming Digitally transformative and businesses that fail to transform can quickly become extinct.