RSR Study: Retail IT Behind the Consumer Tech Curve
By Tom Ryan
A new study from RSR Research finds that retail IT is not involved
in retailers’ efforts
to keep up with consumers’ demands for the latest in social or mobile innovations.
And to some degree, it’s the marketing department’s fault.
Indeed, the study
found line of business departments led by marketing are working around IT
to bring these consumer-facing technologies to market. Unfortunately, failure
to align IT with corporate strategy in its early stages tends to create
the self-fulfilling prophecy of IT being too slow to respond when its expertise
is most needed later on.
“The problem is not that business users don’t understand what’s
happening in IT’s backyard, it’s that they simply can’t wait,” the
authors state in the report, Pandora’s Box? The Impact of New Technologies
on Retail IT.
“Business conditions and cycles have sped up dramatically,
the consumer is stunningly technologically savvy, and business departments,
most especially marketing, must respond.”
In many ways, it’s a case of
déjà vu.
During the late 90’s,
IT was busy setting up bunkers to prevent a Y2K catastrophe and websites came
to be managed by marketing departments to capitalize on the internet boom.
The early, simplistic, “eye candy” websites eventually
roped in IT when adding e-commerce functionality landed way over marketing’s
head, the study states.
Today, business users are once again largely forgoing
IT to catch up with the world of Facebook/Twitter, mobile shopping, and augmented
reality applications. Outside agencies are being used to design and enhance
the new applications while marketing interns are hired to inspect and review
tweets and Facebook posts, the study finds.
But the technical complexities
promise to become more challenging as some retailers are already starting
to sell directly on Facebook. The authors state, “Clearly by the end of
2010 consumer expectation of full data and order integration across any and
all selling channels has put the data ‘problem’ squarely
in the hands of IT, where it shall forever remain.”
Moreover, an accompanying
survey of retailers shows that the fact that business users can make
decisions around these new technologies without IT’s help ranks as the perceived
greatest organizational business inhibitor to
IT’s effectiveness and responsiveness. (More than 80 percent of respondents
came from IT departments.) The second biggest inhibitor was seen as perceived
user intransience to change their own processes to support new capabilities
that have been brought in house.
The IT-biased respondents did admit to their
own department problems. Asked to list the top three “technical” inhibitors
to becoming faster and better, coming in third was an IT development methodology
that is “rigid and takes
too long,” particularly given the rapid pace of change in the marketplace.
Overall,
RSR’s top recommendation for retailers is to establish a strong IT governance
model. RSR wrote in the report, “Keeping track of outstanding
projects and discriminating between wish lists items and nice-to-have from
need-to-haves is virtually impossible without true IT business governace.”
Discussion Questions: How, if at all, do you see retail organizational
roles changing with the arrival of more technologically-driven shopping options?
Does marketing have to cede some clout to IT in order for retailers to fully
capitalize on the emerging social and mobile technologies? What primarily hurdles
do to see affecting change?
This is just one more manifestation of the mechanistic Newtonian model that we insist on keeping alive for lord knows what reason. Everyone has their own little territorial silo assuming they have some exclusive domain over a particular stream of skill and knowledge. Organizations have been muttering and whining about this for a hundred years and can’t seem to find the way to break up the fight.
Ironically, technology–and the internet specifically–is the perfect metaphor for what needs to happen. On the internet everything is connected to everything at all times. Circumstances determine what rises to the surface. Basically “it’s all one thing.” That’s the way all of nature works too. Some day maybe we who build and run organizations will get a clue.
The answer is NOT more governance and controls. That’s the problem, not the solution.
The problem lies in the fact that the technology and marketing are no longer mutually exclusive. Marketing doesn’t just make pretty pictures and hand them off to IT to post to a website. Tech and Marketing are now intertwined throughout the consumer experience.
What we’re already seeing is the birth of a new organizational leader–that being the Chief Marketing Technologist–someone that understands both aspects of the new marketing platform.
IT simply reflects the realities of the retail business where the underlying economics and operational strategies make staying near the front end of the technology curve challenging.
For the large traditional players it is about creating efficiencies through scale which can be difficult to change quickly. Additionally the real estate and labor cost structures also constrain investment. Pure plays have a more favorable situation with their business models and not surprisingly much of the industry innovation comes from this sector.
For retailers that want to be closer to the front of the technology curve (and it is not the case that they all should want this) new IT strategies that allow more focus on innovation are required but this is only one element. Overall retailers also have to address how they are managing the innovation process to be more agile in test and deployment including figuring out how to try and fail (which is a key piece of any successful innovation program).
I find the recommendation a bit “dated” and at odds with where the industry is headed. Here is why. “Information” and “Technology” have been decoupled in the service age. IT departments are no longer self-contained and self-sufficient. They increasingly rely on Software as a Service vendors to host mission critical applications (productivity software, groupware and in our case retail audits and KPI). What the IT department is really expected to support in this day and age is guidance and support for the organization’s strategy. Of course, as soon as you outsource the technical complexity involved, you also change the skill-mix required to think through and manage the solution.
I am not surprised the marketing department is playing a bigger role. Indeed, we find the operations team to be our primary interface and champion when working with retail customers on outsourcing their retail audit software. While I think an organization should have an overarching strategy to deal with outsourcing and SaaS in general, I don’t think IT should necessarily own and control it. SaaS has caused the pendulum to swing and put “business” back in charge. Folks, I am not disparaging IT departments when I say this: it’s a good thing!
Retail IT truly works the way it’s supposed to when business needs drive IT decisions, rather than simply grabbing the next shiny new tech toy that hits the market. However, too often in retail, business (i.e., marketing) needs overshadow IT decisions, with a mentality that as long as the right strategy is in place, IT tools are secondary. Marketing does not need to cede to IT as much as give IT its rightful place at the table and recognize IT should be an equal component of a holistic marketing/business strategy, not an afterthought or necessary evil.
With the increasing technical savvy of the consumer and new technologies and applications arriving by the second, companies need to remove the silos and expand an integrated philosophy beyond the c-suite. No longer is marketing alone responsible for the customer relationship and IT responsible for just operations. The two teams must align and recognize when each area needs to take the lead or follow, and also when an outside organization can help to assess an opportunity and act on it.
Lastly, further consideration and perspective needs to be made from the shopper/consumer perspective and the technologies and applications that they use and relate to the brand. Every retail brand is unique and as such customers want to utilize technology in different ways to define their relationship with a brand. Marketing and IT must align to support the consumers desire.
I’ve seen this myself when working with IT people. I ask them questions about their company’s efforts in social and mobile and they are completely unaware. In fact, in some cases I end up teaching them some of the cool things their company is doing. That’s fine for speed-to-market, but eventually there will be yet another stovepipe that will be expensive to maintain.
It could be a case of the blind leading the blind, whoever is in the driver’s seat, IT or marketing. In my presentation on the Amazonification of Walmart (both as types, not necessarily those specific businesses) I note that Amazon is the premier selling organization in the world, while Walmart is the premier logistics organization. SELLING is the missing piece in the IT vis-a-vis marketing department.
Retail sellers are more focused on the products that they sell than on the people they sell to, and IT people are enabling tool people. I keep calling attention to Amazon’s selling skills, which keeps them from being the brain-dead online arms of many bricks-and-mortar retailers. It isn’t their technology that is driving their business, but great selling skills. The technology is superb, beyond world-class. But that isn’t what puts them at the leading edge of retailing.
Selling is about something in the mind of the shopper, not creating a massive offer for the shopper to work out for themselves. Selling is about the seller working out a simple process FOR the shopper, having a massive offer backing the seller up. But this is way too simple for the brilliant minds in marketing or IT to figure out. 🙂
Always hard to change the “working” model in real time. As the social media are explored and embraced by CPGs, virtual marketers,and online retailers, the critical connection to the core shopper is getting further away.
With tremendous information, insights, and loyalty data, retailers are not leveraging the potential of many resources at a time when competitive advantage requires continuing vigilance.
I look forward to reading the full report, but after reviewing the summary I agree with many of the respondents’ comments.
I believe there are valid reasons for both in-house (custom) and purchased (generic) applications. The trick is figuring out how to integrate these two approaches. The Line of Business users and retail IT providers can make integration a whole lot easier by adopting a set of industry standards to which everyone can address their solutions. Standards like ARTS (Association for Retail Technology Standards), VICS (Voluntary Interindustry Commerce Solutions), and the various GS1 standards all work together to provide a common foundation that facilitates integration. But too often, their committees are dominated by technical representatives and not enough retail business representatives. I don’t know why more retailers are not able to take the longer perspective good standards would support. Maybe technical companies could do a better job of “cosponsoring” retailer representation on these boards.
With standard business models in place, services can be chosen for either external or internal development. Fundamentally, the trade off is technical simplicity verses training and change management. Technically, it is much easier to buy something off the shelf and install it or pay a subscription fee for hosted support but this generally means you (or your users) have to adapt to the applications. This makes sense for many of the web based applications that are consumer facing. It may be necessary to present these applications on a variety of platforms that each have their own technical requirements. The retailer is better off handing this effort over to a technology company. On the other hand, there are many applications that are used within the organization which are better presented as custom solutions that match existing business processes. This can either be done by putting a “fa ade” on a purchased application or developing the whole thing internally. Just as many bakery departments now start with “par-baked” inputs, I believe many “custom solutions” can be best provided by a fa ade placed over a generic solution’s input and reporting capabilities.
I am not sure that this is a problem for either IT or sales and marketing to own and solve. I see it as an opportunity for redesigning the “ORG” chart with WEB design moving in with and fully integrating with sales and marketing. IT execs will no doubt be concerned about their budgets being sapped by the designers or the stabilities and speeds of the “system” being hampered. With sales and marketing paying for these programs, the shotgunning of new ideas would soon stop and an organized plan would take place in an orderly fashion with real-time success measurement in place.
We saw this before, when retailers wanted Web commerce sites immediately (one huge company was given six weeks to go live) and turned to outsiders. This works fine until the new effort has to be integrated with other corporate systems. People, involve your IT people NOW and save heartache later!