Future Of Retail 2020: Retail Industry CIOs Will Invest In Automation, Data, And Employees
To understand how Forrester’s predictions will unfold in the retail industry in 2020, my colleague Madeline Cyr and I interviewed experts within Forrester for our “Applying 2020 Predictions To Retail” series. To understand the CIO predictions for the year, we spoke with Bobby Cameron, a Forrester expert on CIO-targeted business technology research.
Madeline Cyr: You predict that CIOs will automate 10% of their IT tasks and look to upskill personnel. What types of skills should retailers retrain staff for so that they are able to undertake other (perhaps more complex) tasks?
Bobby Cameron: The need to automate signals across the supply chain is a key necessary automation skill. To illustrate how CIOs might automate tasks in the future, I’ll give you an example. The other day, I went to my local grocery in-store pharmacy for ChapStick. They were out of stock — which was frustrating, because this was the third time in a week that I had looked — so I ended up having to order some online. I think this reflects a challenge facing this sector that, despite increased connectivity, there was a failure of the out-of-stock signal to make it all the way up the stream and to drive changes in replenishment in a timely manner. The impact of these problems will accelerate particularly as eCommerce replaces in-store experiences.
For how this can be addressed through automation, let’s look at a manufacturing example. Leading manufacturers are using big data software robots in outbound finished-goods distribution channels to analyze the flow of finished goods. From that, they dynamically recommend changes to outbound flows that respond better to demand signals and move surplus stock to where it’s most needed. But this isn’t happening in the retail sector, where store associates today are doing a lot of the inventory management manually, like restocking and inventory counts — which can be slow and error-prone. It’s expensive, but what if the retail store used automation such as shelf instrumentation to track in-store inventory? And then the retailer could use big data software robots to automate the interpretation of supply and demand. We would see this inventory work change from a core manual job with a multiple-day delay to a rapid, nearly immediate, automated flow of work.
And to the question of the skills needed: There needs to be a shift from the normal, highly manual store operation jobs to jobs that automate in-store inventory capture and the analysis of that data to anticipate — and avoid — going out of stock. There would also need to be a push down to the associate level to take data collection seriously, as it would feed systems that make business decisions.
Madeline: What will the difference be between retailers who prioritized investment in data strategy versus the ones that have not? Will this difference become readily apparent in 2020 — and if so, what will that look like?
Bobby: 2020 is going to show early-stage differentiation for retailers that have invested in data strategies. Retailers will find that data is no longer just some painful thing they have to do to keep their books. In 2020 and beyond, data is becoming an essential part of the customer experience. For instance, say a consumer checks the app of a home improvement store to check if the item they need is indeed in stock. However, once they arrive at the store, they find that it is not in stock in the store — frustrating the customer, reducing their trust in the store, and possibly driving them to a competitor (whether in a store or online). This is a data failure that has led to a bad customer experience and possible loss of business.
We will see 2020 investments focusing not only on gathering the data but making sure that data is going to the right places. For example, if brick-and-mortar locations are collecting lots of in-store data and sending raw data back out to a central location, they might improve the cost and speed of their data analysis by doing in-store processing or to some cloud presence local to the store. The home improvement store that doesn’t have the item in stock even though it says it is in stock online might be suffering from a delay in communication between the store and the centralized location. Perhaps the app wasn’t looking at data in the store but instead at some central database that isn’t constantly up to date. Having the correct amount of budget in your data strategy will make retailers stand out as they get closer to near-real-time data-based decisions.
Madeline: You note that people will be at the top of the CIO agenda for 2020. What’s your sense for where some retailers are on the curve on investing in retail associate learning and development?
Bobby: Employee experiences do have a strong correlation with company performance. Many CIOs have had employees at the top of their checklist for a long time. What we will see in 2020 is this urgency increasing in companies that are more customer-obsessed. To focus on the employee experience requires that a firm has already solved for some more fundamental challenges around operations. For example, if a firm is inefficient in the things it does because of poor operating practices — such as failing to dynamically track in-store inventory — then changing employee experience won’t fix things.
And as for innovative investments, the biggest hurdle is funding the transformation of good ideas into commercial practice. Most companies find it difficult to invest in disruptive ideas that the business decision makers aren’t ready to spend money on. Most business leaders have already committed to funded performance improvements. Unless an innovation helps them meet their strategic commitments, they find it hard to spend on the innovation. However, once the firm gets its strategy, processes, and budget aligned with innovation, focusing on employee experience will accelerate innovation.
Madeline: How should retail businesses define the optimal retail CIO position in 2020? Whom should the CIO report to? How does that reporting path affect business outcomes?
Bobby: CIOs should report to the CEO. Technology underpins business success today, especially in retail. Titles for the technology leader can vary across companies based on corporate structure, but the tech leader should be a peer of the other business unit and operating unit heads. Some years ago, the COO of a retail chain hired Forrester to help define the CIO position. However, the COO was looking for the CIO to be an order taker. Instead, we advocated for the CIO to be a partner with the other business leaders — a key player in decision making. As we noted then, “Technology is going to redefine retail, and therefore you need the right CIO to drive this strategy.” In short, the CIO needs to be in the same meetings as the CMO, head of store ops, and head of supply chain — and should report to the top. The COO didn’t follow the partner CIO model, and that retail chain went out of business.
Retail has had an uneven move to a full digital model, often focusing digital mostly as a sales and marketing tool and setting up eCommerce as a standalone operation. All these factors are frustrating to the CIO. I worked with a large retail establishment where the buyer for everything was the same, but catalog and eCommerce were separate from the store in terms of how they operated and how they tracked the customer. As a result, the customer experience was disjointed. A lot of this happened because the funding for technology initiatives wasn’t handled across the company. This left IT architects trying to figure out how to design customer-led solutions without the support of all the business organizations — an impossible task. Where the CIO reported didn’t make any difference because the business areas that controlled IT’s budget were isolated from each other.
In the modern, digital era, customers expect end-to-end experiences — connected across the companies they do business with, those companies’ channel partners, and the customers’ own ecosystems. Technology leaders in customer-obsessed firms that meet these new customer expectations are partners with all the other business execs. They help create an adaptive enterprise, designing and delivering operations and experiences led by customers’ needs and constantly refreshing to match ever-changing business and technology realities.
To read more about Forrester’s 2020 predictions, please see the full series here.