Insight. The capacity to gain an accurate and deep understanding of someone or something. An “accurate and deep understanding”.
And that’s the biggest, most important challenge facing Retailers as they battle to embrace Digital Transformation.
Ironically, the issues surrounding leveraging technology and innovation as enablers of transformation pale into relative insignificance when compared to the greatest obstacle facing the sector today: how to manage the change into an insight-driven culture. At the heart of things is, of course, data – and finding ways of transforming the latent insight it contains into meaningful insight which in turn, can become beneficial business actions and outcomes. Data strategy which encompasses the identification of sources, formats, the ingestion, storage, transformation, governance, access, ownership and not forgetting how people and processes use the insight analysed data becomes is hypercritical.
Too few Retailers have strategies, full stop, and many of those that do are only in the embryonic stages of development. Retail has relied upon transactional data, much of it generated by Point of Sale (PoS) history for decades but this creates no more than the first step on the so-called Gartner Analytics Ascendancy model, i.e. Descriptive Analytics. In other words, ‘what happened?’. It’s valuable because it allows Retailers to base future Supply and Fulfilment strategies on historic Demand patterns but that’s about it: the next step is to move to Diagnostic Analytics, the ‘so, why did it happen?’ phase. Do this and we’re starting to move from hindsight to insight.
Moving even further upwards towards foresight is the trick. Gartner describes the following steps as Predictive Analytics (‘what will happen?’) and Prescriptive Analytics (‘How can I make it happen?’) and to attain such foresight requires weapons-grade data analysis capability. However, Retailers without a unified data strategy also have no capability or indeed emphasis on turning data into insights through deeper analysis. Much of Retail continues to rely on long-standing corporate assumptions about what their customers really want, about what they believe to work, and still has no single version of the truth to use as empirical evidence in order to fight back against such corporate assumptions.
The much (over-…) used term Digital Transformation within Retail is, in reality, as much about re-engineering the culture of the business as it is about deploying and implementing technology. ‘Old Retail’ was extremely Product-centric, all about buying products at the right price and being able to satisfy demand from customers at a subsequent cost which allowed a profit, sometimes a pretty thin one, taking into account all of the steps in between the sourcing and the selling phases. The New Retail reality is instead Customer-centric, one in which Retailers need to focus on the digital value chain, which is all about collecting data (about products, customers, locations, behaviours, patterns, etc.), turning that data into insights and then turning those insights into actions.
It is those Retailers who understand this new reality that are succeeding against the backdrop of continuing bad news from the sector. Success in Retail is in moving operations from efficiency to flexibility, from optimisation to inspiration. Value, and with it profitability, comes from the volume of customer insights a business can generate and how quickly they can put those insights into play.
The “marriage of artificial intelligence with automation” is beginning to effect real change in the retail industry.