7 minute read 7 Sep 2022
Motion blur of walking people in train station

How CIOs can drive retail experience at the speed of expectation

By Ayoub Abielmona

Senior Manager, Business Consulting, Ernst & Young LLP

Strong focus on navigating disruption to inspire innovation and uncover new business models. Passionate about emerging technologies in Web3.0 that define a new era of the internet.

7 minute read 7 Sep 2022

Effectively leading through digital transformation begins not with technology, but with understanding the consumer side of digital.

Three questions to ask

  • What is the “speed of expectation” and why is it a critical component of the retail CIO’s digital strategy?
  • What are the forces behind digital and how do they remove friction from the customer experience?
  • What role are consumers playing in accelerating the digital economy?

Content contributed by Ernst & Young LLP Senior Manager Ayoub Abielmona

Ever wonder why the term “digital” has become one of the biggest technology buzzwords? After all, we’ve had digital technology for over a half century, since the first commercially available computer correctly predicted that Eisenhower would win a landslide victory in the 1952 presidential election. Since then, we’ve been on a digital transformation journey, a digital revolution, that has fueled nearly every advancement in modern history.

So, why the renewed fascination with digital transformation?

To answer this, retail CIOs must look beyond technology and understand the fundamental shift in consumer attitudes and behaviors that have accelerated technology adoption and given rise to a powerful new force — the speed of expectation. Only by understanding the consumer side of digital can retailers truly appreciate the groundbreaking implications of the digital economy and the tools, strategies and mindset required to lead it.

So, what exactly is “digital” anyway and what does it mean for retail CIOs?

Unlike previous advancements when a singular invention, like electricity, brought about radical change, today’s digital revolution is characterized by a fusion of technologies that include social, mobile, cloud, internet of things (IoT), artificial intelligence (AI), machine learning (ML), augmented reality and virtual reality (AR/VR) and a slew of others. By themselves, these technologies are not revolutionary. But together, they have created a powerful set of force multipliers whose combined effect is creating a new reality to which retailers and brands must adapt.

Digital forces

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    Digital forces

    Core digital technologies: social, mobile, cloud, IoT, AI/ML, blockchain

    Frictionless customer experience: pervasive connectivity (consumer facing), extensive mobility (consumer facing), intelligent machines (retailer facing), scale on-demand (retailer facing)

The intersection of these four forces is the essence of present-day digital, where CIOs and retailers can deliver frictionless consumer experiences that are highly relevant, personalized and connected across channels: 

  • Pervasive connectivity

    Through IoT, social media and extended reality technologies, consumers are more connected now to each other and to their devices. Not only connected asynchronously, but also in real-time through fully immersive experiences in the metaverse that can create the illusion of three-dimensional space, physical touch and spatial audio. These technologies allow consumers to conveniently monitor insulin levels, answer the doorbell while on vacation and interactively explore other real or imagined worlds in highly compelling, multi-sensory  experiences.

  • Extensive mobility

    Mobile has put the power of computing in our pockets, giving us the freedom to “plug in” from anywhere at any time. Consumers demand an “always-on” retail experience, unbound by time, geography or channel. They expect a seamlessly connected journey that can dynamically move between the desktop, smartphone and in-store experience.

  • Scale on demand

    An experience-led consumer journey runs on big data, which is essential for personalization, supply chain visibility, demand sensing, and inventory tracking. These data-intensive applications require massive data storage, computing power and scalability. Cloud services provide CIOs with unlimited computing resources and the flexibility to seamlessly scale those resources up or down as needed, reducing cost significantly.

  • Intelligent machines

    Customer-centricity not only requires vast amounts of data, but also the power of AI/ML and robotics that can sift through massive data sets to predict supply chain disruptions and enable automated decision-making in real time. Machine intelligence is evident in the vision-recognition systems of self-driving cars, in warehouse robotics, in chatbots and product recommendation engines. Top retailers leverage these technologies to build a nuanced understanding of the consumer, enabling highly customized experiences that go beyond the transaction and enrich the consumer’s life. 

While digital technology is disrupting the global economy, another more subtle phenomenon is happening behind the scenes with consumers. Every advancement throughout history, from the steam engine to the internet, has taken years to gain mass adoption and establish a lasting impact on society. It's hard to imagine now, but electricity took 46 years before it became the primary source of power. After centuries of technology advancing ahead of human capability, consumers have finally caught up and are now demanding better experiences.

Years to mass adoption

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    Years to mass adoption

    • Year developed: 1872 | Technology: Electricity | Years until mass adoption: 46
    • Year developed: 1876 | Technology: Telephone | Years until mass adoption: 35
    • Year developed: 1897 | Technology: Radio | Years until mass adoption: 31
    • Year developed: 1926 | Technology: TV | Years until mass adoption: 26
    • Year developed: 1975 | Technology: PC | Years until mass adoption: 16
    • Year developed: 1983 | Technology: Mobile phone | Years until mass adoption: 13
    • Year developed: 1991 | Technology: Web | Years until mass adoption: 7
    • Year developed: 2001 | Technology: MP3 Player | Years until mass adoption: 4
    • Year developed: 2006 | Technology: Social Media | Years until mass adoption: 3
    • Year developed: 2007 | Technology: Smartphone | Years until mass adoption: 2.5

    Source: Data provided by RBC Capital Markets, 9 April 2019. EY modified names.

This cycle of continuous disruption is reminiscent of a classic scene from an episode of I Love Lucy in which Lucy and Ethel were tasked with wrapping candy on a fast-moving conveyor belt. At first, the pace was manageable. But as the belt sped up, the women became overwhelmed and resorted to hiding the candy in their mouths. Fortunately for Lucy and Ethel, the factory foreman intervened to turn off the belt. The cycle of digital innovation, however, has no such safety valve. Retailers not only have to contend with developing better user experiences, but they must do it at the speed of expectation.

Cycle of digital innovation

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    Cycle of digital innovation

    Frictionless customer experience: pervasive connectivity, extensive mobility, scale on-demand, intelligent machines -> Advancing -> Ease of use and access -> Accelerating -> User adoption -> Elevating -> User expectation -> Fueling -> Frictionless customer experience…

Today, the technology is vastly different — smarter, faster, more accessible and connected. But more disruptive than the technology itself is the unrelenting pace of innovation and the consumer adoption and empowerment accompanying it. Viewing digital transformation through this customer-focused lens, perhaps the essence of digital is more appropriately reduced to just one sentence: your company is becoming digital if it is able to continuously deliver better customer experiences – at the speed of expectation.

Notice there’s no mention of technology. Instead, the focus is on creating value continuously at a pace that aligns with consumer expectations. Technology plays an important role, but to be effective it must be matched with adjustments in organizational mindset, competency and agility.

Consider each component of this definition:

  • Continuous delivery can’t be achieved without an iterative development model with short deployment cycles measured in weeks — not months and years. This requires revamping organizational skills and adopting new processes for resource allocation and funding.
  • Better customer experience can’t be delivered using only the narrow lens of point-in-time surveys and focus groups to gather insights. Retailers must build an intimate understanding of consumer needs and preferences at every point along the customer journey and be able to use this knowledge to cultivate trust and deliver the right experience, in the right channel, at the right time. This too requires unique competencies and a connected technology ecosystem powered by real-time data and powerful analytics.
  • Operating at the speed of expectation requires an agile computing environment that can scale and pivot quickly. It also requires a flatter organization to expedite decision-making and push it closer to where value is created and captured.

In all these examples, it’s clear that digital’s disruptive forces present more of a challenge in adapting mindset than adopting new tools. Using digital-age tools with an industrial-age mindset may provide short-term gains but won’t lead to better customer experiences that endure. Technology will always come and go. What is here to stay is the giant leap in speed and agility required to succeed in a customer-centric economy.

The difficulty lies not so much in developing new ideas as in escaping from old ones.
- John Maynard Keynes

Balanced transformation

Now we stand at the threshold of an economy where longstanding business norms are becoming increasingly ineffective. The advantages once attributed to a retailer’s size and assets are no longer the best indicators of growth. Speed, agility, responsiveness, and customer obsession are the new keys to the kingdom.

While the rules of the game have changed, it’s the speed of the game — driven by the accelerating pace of technology adoption —that is the primary source of disruption. Winning in this new era will require retail CIOs to be hyper focused on building technical and organizational capabilities to enable the continuous delivery of value at the speed of expectation.

Digital transformation strategy

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    Digital transformation strategy

    1. Systems agility

    • Agile development
    • Monolithic ERP to micro services
    • Cloud/ serverless computing
    • Intelligent automation
    • DevSecOps
    • API-based integration

    2. Digital mindset

    • Customer obsession
    • Continuous delivery
    • Product to platform
    • Experiment and learn
    • Social IQ/ co-creation
    • Expedited decision-making

    3. Advanced data and analytics platform

Transforming the retail enterprise to meet these demands requires a balanced, three-pronged strategy:

  1. Modernizing back-office systems to achieve agility and scale on demand.
  2. Shifting the collective organizational mindset and skill set from the industrial past to the digital future.
  3. Anchoring both on a solid foundation of data and advanced analytics to anticipate rapidly changing consumer expectations.

Focusing on any one of these components alone will not lead to success. The front of store is only as seamless as the back office allows, and both must be guided by data-driven decisions and strategies.

Summary

The challenges that lie ahead for retail CIOs in this era are significant. But with a balanced digital transformation strategy, the opportunities for growth and profitability are equally enormous. If you approach digital transformation as only a means to automating routine front office work, you will run out of places to “hide the candy.” Time is of the essence. As you read this, a retail competitor is quietly preparing to steal your market share. Will you be ready?

This article was contributed by Ernst & Young LLP Senior Manager Ayoub Abielmona and originally published by Entrepreneur Media Inc. 

About this article

By Ayoub Abielmona

Senior Manager, Business Consulting, Ernst & Young LLP

Strong focus on navigating disruption to inspire innovation and uncover new business models. Passionate about emerging technologies in Web3.0 that define a new era of the internet.