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Digital Retail Leaders:
Driving Pace and Scale in a Dynamic Market
Introduction Society is dramatically evolving across all spheres—communities, the economy, consumer demands, the environment, technology and more. Smart cities are emerging, while immigration and population growth are on the rise. The shared economy and wealth concentration are re-shaping markets, along with the new demands of millennials, centennials, digital natives and expert consumers. Worldwide, extreme weather disruption, poverty and ecological concerns are posing significant challenges. From a technology perspective, rapid technological advances and new market players empowered by technology are creating or stealing significant economic value over very short periods. In this fast-changing environment, becoming digital is more than just about technology. It involves a fundamental change to the DNA of an organization, enabling it to become more agile and customer centric. The findings from our 2017 CGI Client Global Insights demonstrate an increasing urgency for clients to transform to meet the digital expectations of their customers and citizens. In 2017, 85% cite the need to transform as the top industry trend, up from 71% in 2016. While the retail and consumer services (RCS) industry continues to experience a greater pace of change than others, different companies within the industry are evolving at different speeds. Digital retail leaders are moving ahead of their industry majority, creating significant competitive gaps, as well as headroom. CGI set out to explore the pressures digital leaders in RCS and other industries are experiencing and how they are responding to those pressures through our 2017 CGI Client Global Insights program, which involved face-to-face interviews with more than 1,300 business and IT leaders. Among those interviewed, 10% were RCS clients. We also conducted research in partnership with IDC, in which more than 200 business leaders were surveyed on the topic of organizational design—15% of which were with retail business leaders. Insights from these initiatives reveal that digital leaders are more focused and committed to winning. In this paper, we share the key roadmap steps digital retail leaders across the globe are taking to successfully drive transformation across their business and compete in an increasingly dynamic market.
10 key roadmap steps digital retail leaders are taking Step #1 Compete beyond boundaries Today, organizations across commercial industries face not only competition from traditional organizations within their own industry (43%), but competition from disruptive companies (31%), as well as from businesses in adjacent industries (32%). RCS companies are feeling equal or greater pressure across all three fronts: 43%, 38% and 43%, respectively. In response, digital retail leaders are exploring opportunities now to compete beyond traditional boundaries and drive future growth. They’re taking advantage of innovation and disruption by evolving and extending their products and services or developing entirely new ones.
Step #2 Simplify the complex For retail leaders, digital transformation is a board-level agenda—in fact, 38% of retailers discuss digital transformation at every meeting of the board, and 62% once a year. Changing across the enterprise involves major challenges. In order to achieve their transformation goals, retailers are simplifying the way they operate (66%) and establishing a more collaborative culture (66%). Organizations now realize that they need a more strategic response. Not only do they need to build a business for the future, they need to define their ambition and what type of business they want to be in the future.
Step #3 Drive change at pace and scale Forty-four percent of retail and consumer services organizations have digital strategies across their enterprise. How these companies are driving digital transformation varies, but most are taking a continuous improvement approach. Seventy-six percent of RCS companies are incrementally transforming with an eye toward medium- and long-term gains, instead of taking a big-bang, disruptive approach to achieve quick wins. Regardless of the transformation approach chosen, the pace and scale at which an organization transforms not only now but over the long haul is critical to its success, especially as the market becomes more dynamic. To achieve the right pace and scale, digital retail leaders are focused on prioritization and achieving a balance between maintaining the existing business, building a supporting infrastructure and incubating new innovations around business models, products and services to create new growth opportunities and drive competitiveness.
Step #4 Adopt the right organizational structure As retailers pursue digital transformation, they recognize that fundamental organizational change is needed to become an agile digital business. In fact, 71% have made major changes to their core organizational structures. Decision-making is being pushed down— from the corporate level to the business, team and even individual level—and being moved closer to the customer. Many retailers are moving away from a traditional hierarchical structure to a flat one. Some are moving to more network-based structures consisting of autonomous business units that are not only empowered to make decisions closer to the customer, but also collaborate internally and externally to drive innovation and transformation.
Step #5 Innovate to differentiate Internal pressure to increase innovation is the top factor influencing digital transformation in RCS (57%). Leaders see a separate innovation group as critical to developing differentiated products and services. In a digital world, the speed and scale of innovation also is key. To keep up with the demand, the process of innovating is changing. It’s moving beyond rooms with whiteboards into factories where ideas can be prototyped, tested with partners, suppliers and customers, and launched as minimum viable products (MVPs). And,
it’s also becoming more dependent on enabling processes and technologies, such as design thinking, lean startup, agile, DevOps and cloud.
Step #6 Engage in the wider ecosystem Leading retail players are taking a strategic position to secure the future and take advantage of new growth opportunities. In fact, 27% of our RCS clients extend their enterprise digital strategy to include ecosystem partners. This expansion and the creation of new business combinations is intended to achieve a number of strategic goals, including generating new revenue streams (46%), accessing new customers (46%), technologies (35%), markets (35%) and talent (33%), driving innovation (24%), and more. While partnering is not new, there are some new business combinations (e.g., crowd innovation, serendipity work locations, open source and crowd source development communities, etc.) that provide innovation opportunities.
Step #7 Protect the organization Along with digitalization come cyber risks and concerns. Sixty-eight percent of retail and consumer service executives cited addressing cyber risks as a top IT priority. A 2017 CGI research study in the UK with Oxford Economics called The Cyber-Value Connection revealed that share prices fall by an average of 1.8%, equivalent to some £120 million for a FTSE 100 company of company value following a severe breach. With the direct link between cyber breaches and company value, it’s clear a CEO’s responsibility must continue to include strategic oversight and governance of cybersecurity.
Step #8 Shape the business through data-driven insight Most retailers understand the importance of making use of today’s wealth of data to drive transformation and competitiveness and have made it a top priority. In fact, 71% of retail and consumer service executives cite harnessing data insights as a top business priority. Digital retail leaders understand that real insight is driven by the customer, not the company. And, they’re willing to invest in artificial intelligence technology to generate the insight needed to evolve their products and services in line with evolving customer demands.
Step #9 Modernize delivery and invest in emerging technologies One of the biggest challenges to becoming a digital business is transitioning from legacy processes and systems to new ways of operating and modern technologies. Digital leaders understand the need for modernization, along with its challenges and implications. They’re considering and integrating agile working practices, consolidating and simplifying applications, and replacing legacy applications with applications that run on modern technology platforms. Seventy-five percent of RCS executives cite driving IT modernization as a top IT priority. To meet customer expectations, RCS companies also are investing in advanced technologies such as robotics, artificial intelligence and virtual reality to drive efficiencies and productivity.
Step #10 Re-envision customer touchpoints Leading retailers understand that how they deliver to customers is beginning to be as important as what they deliver. They’re experimenting with and investing in emerging technology to meet the changing needs of customers. Digital retail leaders understand the importance of creating differentiated products and experiences. They’re generating insight from data to create unique customer experiences while driving operational efficiencies. In turn, they’re increasing customer loyalty and retention and driving value as they compete against new digitally agile competitors. Today, 71% of RCS executives are investing in an innovative omni-channel customer experience, and 75% said they will invest in the next 3 years.
Conclusion A majority of organizations are in the early stages of transforming their enterprise to become a digital business. Digital leaders, however, are gaining ground. Over the next three years, many industries, including RCS, will reach a digital tipping point, putting increasing pressure on the organizations not moving fast enough. Among these, two-thirds will fail due to a lack of ambition and boldness, along with a major talent and capability gap. Digital leaders have anticipated the future and are driving continuous change that impacts the entire enterprise, including their business model, organization, people, processes and technology. CGI is partnering with RCS companies worldwide to drive their digital transformation success, and we would welcome the opportunity to support your organization. To learn more about our work, contact us at
[email protected] or visit cgi.com/digital-transformation.
About CGI Founded in 1976, CGI is one of the largest IT and business consulting services firms in the world. Operating in hundreds of locations across the globe, CGI professionals help clients to achieve their goals, including becoming customer-centric digital organizations. We deliver an end-to-end portfolio of capabilities, from high-end IT and business consulting to systems integration, outsourcing services and intellectual property solutions that help accelerate clients’ results. CGI works with clients around the world through a unique client proximity model complemented by a global delivery center of excellence network to help clients accelerate results, transform their organizations and drive competitive advantage.
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