Building a customer-centric organizational culture is even more important than technology.
The winners in today’s tumultuous retail industry range from mammoth platforms offering everything under the sun to quirky specialty emporiums with tightly focused selections. But they have one thing in common: they understand that their business begins and ends with the customer.
And today’s customers have high expectations. They expect to have instant access to whatever they desire — they can dial up a movie with a touch of their screen; spend a week at a theme park without once reaching for their wallet, thanks to the “magic band” on their wrist; or receive automatic software updates to extend their car’s battery life in the midst of a hurricane. Instant access and gratification are the new norm.
With this comes elevated expectations of ease, seamlessness and the feeling of being “known” by the merchants with whom they interact. Organizations that fail to clear this bar are quickly bypassed for others ready to fulfill their needs. The days of loyalty and limited options are dead.
Culture transformation: a fundamental shift
Large, established retailers often struggle to deliver in the face of customers’ changing expectations, because they cling to the organizational cultures that served them so well through most of the 20th century. What characterizes these cultures is the belief that the merchandisers — historically at the top rungs of the retail hierarchy — know through experience and intuition what customers really want.
These organizations focus obsessively on the next quarter’s results — if not next week’s — and rely on hefty bonuses to keep a lid on employee churn. They use outmoded metrics of success such as store profitability and sales per square foot, and the bulk of capital spending is allocated to gradual store expansion and refurbishment.
Their call centers operate on a 9-to-5 schedule unsuited for a world where work, life and play occur around the clock. Their e-commerce divisions are usually removed from the rest of the business, and their brick-and-mortar stores, potentially a source of competitive advantage, are often starved of funding as retailers build up their digital capabilities. And, preoccupied as they are with fending off challenges from both incumbent rivals and new entrants (not to mention internal turf wars), they fall into the trap of matching the competition’s moves rather than creating customer desire, the life force of retail.
If incumbent retailers are going to do better than simply hold their own against the tide of new, digital-native entrants, they need to reorient their businesses to put the customer at the center of their activities. Succeeding in the retail business of today and tomorrow, in other words, depends on culture as the ultimate competitive weapon.
The key task for incumbent retailers, then, is to build a customer-centric organizational culture, starting with clear top-down guidance that this culture change is the only path to long-term survival. It’s not just a matter of integrating new technologies. Certainly, retailers that don’t adapt to new technologies, including artificial intelligence, will be doomed. But cultural transformation entails much more than implementing new technologies and is essential to long-term relevance.
Cultural transformation demands a fundamental shift in focus. Rather than devote the bulk of their energy to managing and integrating disparate sales channels, retailers need to design organizations that can work across functions to deliver seamless, end-to-end experiences that put the customer first.
They need to reorganize themselves to operate holistically, with their front, middle and back offices working in concert and taking an outside-in approach to the customer experience. And none of this can happen without a radical change in culture.