Digital Transformation and the Impact on Business Operations

Introduction - The Impact on Retail of the Global Pandemic

Retail in 2020 was fundamentally shaped by the coronavirus pandemic, which caused disruption to consumer demand norms and a shift in focus to digital channels.

In 2020, 23.3% of all UK retail sales were online, with a year-on-year online retail sales growth of 36%. Retailers with the strongest online capabilities, or those who were swift to respond to the changes in consumer buying behaviour, benefitted from this seismic shift, typically at the expense of any retailers who were unable – or slower – to respond.

At this Leading Resolutions and PMC Round Table, retail Global Transformation and IT Director discussed how the Digital Transformation at a well-known foot ware retailer, in advance of and during the Pandemic, enabled the omnichannel retailer not only to survive 2020 but also to emerge stronger.

The Challenge

Joining the business four and a half years ago, my primary objective was of implementing the digital transformation project. The move to a new web platform and the implementation of SAP was a big move forward for the business, which at the time was primarily a distribution and wholesale business.

Committing to the digital platform and changing the look and feel of the business was obviously a significant investment for the retailer. The big challenge was how to get our brand online for both existing and new customers. Of course, we had physical footfall into the department store concessions globally, but it’s not quite the same as having your own brand on .com, that customers can come to at any time.

We also had legacy IT systems that were really restricting the business. We had a 2009 ERP system approaching end of life and it was essential that we continued to have real-time information available to each business area at the touch of a button.

Legacy IT and the Critical Path for New Products

Each organisation has its own unique IT landscape, where some elements are legacy systems, some are end of life, or sunsetting. Others will be brand new or just implemented. Our vision when we implemented the new SAP Hybris platform was for a ‘single data view’ platform that provided us with information across all our sales channels, available to anybody within the business. It’s taken time to build that data, but it really wasn’t available to the business in the past, so we didn’t have real visibility of sales, inventory or margin across the business.

Then there’s the critical path of a new product in development through to transaction, with the product available online for customers to purchase. Knowing how to manage this critical path, how to handle complex projects and to move things forward fast, is the complex skill-set required of IT leaders today. We’ve been able to shorten the timescales for new footwear products to under 12 months to market. This was particularly important as we faced the additional challenges presented by the pandemic.

The Single Data View a new Web Platform

We now have a solution that is used across our inventory management team, the supply chain team, the teams looking at our customer base. We can see our most loyal customers and our new customers, who are buying the product for the first time. That’s something we didn’t have before. Even our finance department is now using the data lake and the dashboards for auditing purposes. Previously this would have been impossible.

Our new web platform enabled us to increase our top and bottom-line growth from day one. We decided that the new system was to be more than a minimum viable product; it would be something much better than we had before. We successfully introduced a new .com platform that gave us the ability to really drive sales. For example, when we had older products coming in from India, we were easily able to direct it to an online outlet channel and sell the product at a profit, not a loss. This was a great example of the new art of the possible for our business, that we were able to embrace companywide.

Taking Customers with you on the Journey

Whilst we found that the multiple, new online channels did draw some revenue away from existing, traditional channels, the online channels give us far more control over what product we sell to whom, at what time. We’re now able to align our sales periods across territories, be that Black Friday, Summer sales or Peak. We, therefore, ensured that our existing channels and customers didn’t feel disadvantaged in any way.

Additionally, having full visibility of our sales data enabled us to bring our customers in the B2B world on this transformation journey with us. We’ve been able to show them the sales of new designs and new products, which these customers hadn’t taken in the past, and generate more sales for them as a result. Overall, we’ve been able to make sure that we are better aligned with customers and show them that we are not taking away sales, but are working with them to drive additional sales.

Using Data to get closer to the Customer

Data and getting close to your customer are absolutely key. We recently created a waiting list for a key product. This is an original product first sold as a sandal. At one point, we had 14,000 people on the waiting list, wanting to have this sandal in our range again, and we knew whether each of them was a new or existing customer. When they bought the product, we could see immediately if they had used a discount code or any kind of offer.

We would never have seen the results we achieved, without the new digital platform and the product has been commercially very successful for us. It has enabled us to make much more informed decisions about new products and bring them swiftly through the supply chain. As a business, we have full information relating to sales, margin and stockturn for all our products, available to all teams across the business.

This level of data helps with the speed of change within the business. We no longer require lots of spreadsheets to compile all the information we need. The accurate data is at our fingertips, and we can confidently make decisions.

The Benefit of Omnichannel

The onset of the Coronavirus pandemic had created almost a perfect storm. We’d just placed all our orders on our factories and some of our B2B customers started to cancel their orders that they would normally place at that point in the season. However, we were well-positioned with our .com business, as that allowed us to continue trading and bringing cash into the business.

We also saw some of our existing B2B customers directly transfer to our online platform to purchase product. So online was an amazing channel for us. Even just a few years ago we wouldn’t have had that to drive our sales. It enabled us to survive the lockdown and emerge even stronger than before.

With stores open once again, we also know that when our customers shop online with us, they will then go on to shop in stores with our partners – and we want to be in a position to drive that.

You’re only limited by your own Imagination!

If you can adopt an agile way of working across your whole business, not just IT, there really is no limit to what you can achieve. For example, moving from the limited reports previously available to the business to end-to-end supply chain visibility for the entire business, even working with 3PL partners. All these possibilities are readily and rapidly achievable.

We now have one version of the truth for the whole of the business. It has taken quite some work and time to get to that point. We’ve had to build the transaction history at the same time as building the confidence of our teams. However, we’re now at the point where all our teams, including Finance, are using the available BI tools, and that’s a massive step forward!

Round Table Q&A

How much of the legacy system are still running? Was they replaced entirely, or did you create a supplementary layer?

Our 2009 ERP system is the biggest legacy system we currently have within the business. When we implemented the .com business it couldn’t cope. It was never designed to do the number of transactions we saw coming through on a daily basis for our first Black Friday. It’s been difficult, but using our single data view we’ve managed to extract that data from the ERP, where the processing power is very limited, and drive the data into different channels. We’ve reached end of life with the system, without a doubt, so the next stage of our digital transformation is to replace the current system with Infor.

Did you build the data lake incrementally and where did you start?

From the old web platform, we could only extract data for a finite number of months and build that into the single data view. Over the last 2 -3 years, we have built that historical information across the different channels. We have prioritised some of the inventory and product information, so we could drive where the stock was and needed to be.

Some areas have taken more time, for example, Finance. Today the Finance team is fully behind the new platform and the changes we have made, which means that our single data view is now used by the entire business. It has been important for us to work with each of our business functions to understand where the real value of the data is for them.

In the past, our business constantly used spreadsheets, with multiple versions of the data, making it difficult to know which version was correct. Now, instead, we have one, unified version of the truth.

How do you ensure that the whole organisation is onboard with the Transformation Programme?

IT projects used to be measured in months and years; it’s now about days and weeks, if not hours and minutes. So it’s about a change of mindset across the whole business. For us, a good example is that product previously took far too long to bring into the business. We previously ran two seasons per year: Spring/Summer and Autumn/Winter. This may have been acceptable for wholesale customers, but it does not meet online customer expectations.

Our brand-loyal customers want new products as often as we can offer it to them. So we now have a brand new product coming into the business every single month, which our customers can see and purchase. That would have been inconceivable just 3 or 4 years ago. This agile way of thinking is fundamental to how we now run the business. During the most challenging times of the Coronavirus pandemic, we had the Board on daily stand-ups to understand the business priorities, and the HR team has a Kanban on the wall tracking priorities.

Thinking in an agile way and thinking about how to make those incremental changes has got to be part of your company’s DNA moving forward. You then don’t get stuck in the mindset that it takes months and years to deliver a project.

Why was ‘Tableau’ selected and do you also make use of Data Visualisations?

We have created super-users within the business, as this should not be just an IT tool. BI needs to be used in each business area, where they can take ownership and create the specific reports that they need. Though we keep control of the data structure in order to maintain the data integrity.

We now have the Finance and Supply Chain teams creating reports and visualising the data to make it real for them. Our teams know that their base data is the same data that everybody is using across the business. This has been extremely powerful. We run regular IT-led BI sessions for each business area to understand their priorities and help them create the reports they need.

It’s not just about the .com platform. Instead, it’s about all the different ecosystems. We all have some form of legacy systems, or new systems, that we need to integrate with existing platforms. That’s the key thing.

Did the transition to online and the higher number of smaller transactions delivered directly to clients require a lot of system integration, or was it a relatively seamless process?

No, it wasn’t seamless, and it wasn’t easy. Our legacy ERP system was the big bottleneck. The system just couldn’t cope with the move across to a new platform and moving the data.

Though it’s not just about the systems, it’s also about the physical locations. When we opened .com and the US Black Friday arrived, the warehouse was not geared up to cope with bringing in the volume of new product and getting that product out to our wholesale customers.

Today the business operates differently, and we have the physical space better aligned with systems, which enables us to manage these patterns of demand exceptionally well.

Are you able to drive brand loyalty through your digital commerce and are you able to share that with your wholesale customers? To date, we have very successfully been able to share information about which products are performing particularly well. We know the customer types and age profiles that are buying our footwear. This enables us to make clear recommendations to our wholesale customers for which type of product they should stock to maximise sales.

How much has changed over the course of the transformation project in terms of both your people and business operations?

Whenever you run a transformation programme such as this, there has to be an understanding that changes will be made to improve the running of the business. If you put a system like this into the business and things didn’t change, it’s a complete failure. You’ve got to be able to bring people with you on the journey and get buy-in from across the business to the ambitions for the business.

In the early days, there were some in the business who were sceptical about what we could achieve with a .com business. It now accounts for well over 50% of the business. That’s a massive paradigm shift in any business and we’ve been able to achieve that in a short space of time, essentially two years. It has allowed us to re-evaluate the business model and shown us that we can be fully confident in our product brand and market position. In turn, this has enabled us to take a confident stance in relation to our pricing which has turned the dial on our margin.

Delaying investment in legacy increases risk and cost over time. Every system has a shelf life. Ideally, I would have liked to move away from the existing ERP to the new one 12-18 months ago. We’ll get away with it this Christmas, but only just!

What was the biggest challenge you encountered?

The pace of change and bringing people along with the transformation. We had a project team that was focused on making the change happen, but there were others in the business who did not see the compelling reason to change. Getting all stakeholders, both inside the business and within our partners, was probably the biggest challenge, but also part of the success story. For example, our UK 3PL worked really closely with us from the outset to make sure the programme was a success.

Driving Data-led decisions is extremely important. Did you bring in new data governance once the new data was in use by the business to maintain data integrity?

Yes, we did. Right at the beginning, we compared the new data to existing legacy data, to ensure confidence levels in the data were high for all business areas. We also validated data integrity 2 or 3 times a week. With that in place, we can be very confident in the high level of data integrity.

Our Finance team shares that confidence in the data and now works very closely with the BI team to make sure they have the information that they need, whether that is in the UK, US or in the Far East. It takes time and a lot of hard work to reach that position, but it has been extremely worthwhile. Over and above that our data integrity will make the transfer of data into our new ERP system so much more straightforward. This would certainly not have been the case in the past.

Has the Data Lake enabled you to introduce more personalisation?

The opportunity is not just about what our customers are buying, it’s also about what they’re not buying. We use a multichannel marketing automation platform to engage with the existing loyal customers, for example, to give them the first opportunity to buy the in-demand product. Whilst some data remains anonymised for GDPR reasons, we can fully analyse the transactional data to see what people are buying. This enables us to send personalised offers, based on preferences and previous purchases.

What were Opportunities that you encountered but has not expected from the Outset of the Project?

The awareness and reputation of our brand has grown significantly as a result of our .com platform, which has been so successful for the business. We use all marketing channels, whether it’s paid search, affiliates, direct mail, to bring traffic to the website. Our business and sales have grown significantly through our online platform. Indeed, it has created a fantastic platform for us to set our sights even higher, with plans to move into new territories and the continued growth of the business.

If you would like to attend future Round Tables or for more information about creating IT transformation, agile methodologies, or digital delivery teams and delivering cultural change, please fill out the form below and we will be in touch!

We look forward to hearing from you.