Despite the stiff economic headwinds, the need to get digital transformation right has never been more important, says AlixPartners managing director Brian Kalms.

Binary code, skyscrapers and bright light to illustrate digital transformation

Overhauling IT systems can strike fear into even the most forward-thinking chief executive

Retailers are grappling with the reality of record inflation at a time when the industry already faces huge disruption in the wake of the pandemic. 

Leadership teams are contending with rising costs across the board, from labour to fuel, and May’s reported 1.1% dip in retail sales will put further downward pressure on profits. 

The timing is not good for retailers trying to navigate complex and often costly IT journeys to meet heightened levels of demand for ecommerce with a digital-first mindset and associated operating model. 

Overhauling legacy IT systems or implementing new ones at a time of such economic uncertainty is likely to strike fear into even the most forward-thinking retail chief executive.

A sustainable approach to transformation

Too often, chief executives are told they need to spend hundreds of millions on a fundamental IT rebuild. The challenge in the current market is that systems integrators and software vendors are inherently linked to particular products and delivery teams, which doesn’t always serve a retailer’s ambitions. 

However, in our experience of working with retail leaders, it is more than possible to find smaller, simpler and often more nimble approaches to re-platforming and integration programmes, which are driven by the business proposition, the budget and the pursuit of maintaining business as usual.

“In retail, where IT is not always regarded as a strategic partner, the case for cooperation is greater than ever”

Acting as technology advisers to the chief executive or chief financial officer, not just the chief information officer, can also broaden strategic perspectives, factor in enterprise-wide objectives and drive a more effective relationship between the two parties.

In retail, where IT is not always regarded as a strategic partner, the case for cooperation is greater than ever. 

Leaders must rethink how technology teams intersect with the rest of the business, and there are always opportunities to simplify infrastructure and consolidate suppliers across the retail ecosystem to build a resilient, flexible and secure network that uses the right partners and leverages the best in-house capabilities.

End-to-end digitisation

Despite the stiff economic headwinds, the need to get digital transformation right has never been more important and, to meet rising demand, companies worldwide are expected to have invested $6.8trn (£5.53trn) in digital transformation between 2020 and 2023, according to global market intelligence firm IDC. 

The next wave of ecommerce goes beyond simply perfecting the online shopping experience, and those who fail to adapt now will fall far behind. 

We are seeing leading retailers recognise that digital plays a part in nearly all sales when social media and influence are adding to web research and online sales. Stores – if they have them – must now transform to be in service of digital. 

This is a huge shift in mindset for many traditional retailers who have survived the last two years by patching up the online side of their businesses and closing seemingly non-performing stores. 

“While it is tempting to get bogged down in the technical challenges, failure is often due to an organisation’s inability to transform”

They must now digitise their business and operating models from end to end – even some of the much-heralded digital natives are encountering growing pains as they struggle with the challenges of building out their first-generation pureplay models.

While it is tempting to get bogged down in the technical challenges, failure is often due to an organisation’s inability to transform. 

Moving from managing channels in silos – such as separate online and stores teams, distinct digital and IT teams – to integrated ways of working is hugely challenging. 

Opaque leadership structures, cultural barriers and breakdowns in coordination between technology teams and the rest of the business are typical root causes. 

There’s little doubt that the organisations that get their digital transformation efforts right will reap significant rewards – we know how the story ends for those who don’t. 

However, before the implementation of any technological overhaul begins, it will likely be the human elements of close collaboration in shaping the way forward between leadership team members and trusted counsel that dictates whether ‘digital first’ efforts prove to be successful.