If there’s any vertical sector that has been experiencing constant and massive transformation in the ages of the Internet and social media, it’s the retail sector. From the ability to buy goods whenever and however you’d like (in store, online and now, through mobile devices) to customers taking to social media to express their opinions about brands and service, retailers have a lot to deal with.
Glue Reply is a UK-based consulting firm that has worked with some of Europe’s largest retailers to help them plan their Enterprise Architectures and deal with the onslaught of constant technological change. Glue Reply Partner Daren Ward and Senior Consultant Richard Veryard sat down recently to answer our questions about how the challenges of building architectures for the retail sector, the difficulties of seasonal business and the need to keep things simple and agile. Ward spoke at The Open Group London 2014 on October 20.
What are some of the biggest challenges facing the retail industry right now?
There are a number of well-documented challenges facing the retail sector. Retailers are facing new competitors, especially from discount chains, as well as online-only retailers such as Amazon. Retailers are also experiencing an increasing fragmentation of spend—for example, grocery customers buying smaller quantities more frequently.
At the same time, the customer expectations are higher, especially across multiple channels. There is an increased intolerance of poor customer service, and people’s expectations of prompt response is increasing rapidly, especially via social media.
There is also an increasing concern regarding cost. Many retailers have huge amounts invested in physical space and human resources. They can’t just keep increasing these costs, they must understand how to become more efficient and create new ways to make use of these resources.
What role is technology playing in those changes, and which technologies are forcing the most change?
New technologies are allowing us to provide shoppers with a personalized customer experience more akin to an old school type service like when the store manager knew my name, my collar size, etc. Combining technologies such as mobile and iBeacons is allowing us to not only reach out to our customers, but to also provide a context and increase relevance.
Some retailers are becoming extremely adept in using social media. The challenge here is to link the social media with the business process, so that the customer service agent can quickly check the relevant stock position and reserve the stock before posting a response on Facebook.
Big data is becoming one of the key technology drivers. Large retailers are able to mobilize large amounts of data, both from their own operations as well as external sources. Some retailers have become highly data-driven enterprises, with the ability to make rapid adjustments to marketing campaigns and physical supply chains. As we gather more data from more devices all plugged into the Internet of Things (IoT), technology can help us make sense of this data and spot trends we didn’t realize existed.
What role can Enterprise Architecture play in helping retailers, and what can retailers gain from taking an architectural approach to their business?
One of the key themes of the digital transformation is the ability to personalize the service, to really better understand our customers and to hold a conversation with them that is meaningful. We believe there are four key foundation blocks to achieving this seamless digital transformation: the ability to change, to integrate, to drive value from data and to understand the customer journey. Core to the ability to change is a business-driven roadmap. It provides all involved with a common language, a common set of goals and a target vision. This roadmap is not a series of hurdles that must be delivered, but rather a direction of travel towards the target allowing us to assess the impact of course corrections as we go and ensure we are still capable of arriving at our destination. This is how we create an agile environment, where tactical changes are still simple course corrections continuing on the right direction of travel.
Glue Reply provides a range of architecture services to our retail clients, from capability led planning to practical development of integration solutions. For example, we produced a five-year roadmap for Sainsbury’s, which allows IT investment to combine longer-term foundation projects with short-term initiatives that can respond rapidly to customer demand.
Are there issues specific to the retail sector that are particularly challenging to deal with in creating an architecture and why?
Retail is a very seasonal business—sometimes this leaves a very small window for business improvements. This also exaggerates the differences in the business and IT lifecycles. The business strategy can change at a pace often driven by external factors, whilst elements of IT have a lifespan of many years. This is why we need a roadmap—to assess the impact of these changes and re-plan and prioritize our activities.
Are there some retailers that you think are doing a good job of handling these technology challenges? Which ones are getting it right?
Our client John Lewis has just been named ‘Omnichannel Retailer of the Year’ at the World Retail Awards 2014. They have a vision, and they can assess the impact of change. We have seen similar success at Sainsbury’s, where initiatives such as brand match are brought to market with real pace and quality.
How can industry standards help to support the retail industry?
Where appropriate, we have used industry standards such as the ARTS (Association for Retail Standards) data model to assist our clients in creating a version that is good enough. But mostly, we use our own business reference models, which we have built up over many years of experience working with a range of different retail businesses.
What can other industries learn from how retailers are incorporating architecture into their operations?
The principle of omnichannel has a lot of relevance for other consumer-facing organizations, but also retail’s focus on loyalty. It’s not about creating a sale stampede, it’s about the brand. Apple is clearly an excellent example—when people queue for hours to be the first to buy the new product, at a price that will only reduce over time. Some retailers are making great use of customer data and profiling. And above, all successful retailers understand three key architectural principles that will drive success in any other sector—keep it simple, drive value and execute well.
What can retailers do to continue to best meet customer expectations into the future?
It’s no longer about the channel, it’s about the conversation. We have worked with the biggest brands in Europe, helping them deliver multichannel solutions that consider the conversation. The retailer that enables this conversation will better understand their customers’ needs and build long-term relationships.
Daren Ward is a Partner at Reply in the UK. As well as being a practicing Enterprise Architecture, Daren is responsible for the development of the Strategy and Architecture business as well as playing a key role in driving growth of Reply in the UK. He is committed to helping organizations drive genuine business value from IT investments, working with both commercial focused business units and IT professionals. Daren has helped establish Architecture practices at many organizations. Be it enterprise, solutions, integration or information architecture, he has helped these practices delivery real business value through capability led architecture and business-driven roadmaps.
Richard Veryard is a Business Architect and author, specializing in capability-led planning, systems thinking and organizational intelligence. Last year, Richard joined Glue Reply as a senior consultant in the retail sector.