How Cloud Adoption can help accelerate Retail’s Digital Capabilities
Adoption of Cloud Computing continues to rapidly increase as companies begin to recognise the reliance on this capability to drive their digital transformation. It is clear companies that are successful in adopting the cloud bring new capabilities to market more quickly, scale more efficiently and demonstrate business agility. However, the journey to the cloud is not an easy one and many companies have stalled along the way. Delays are sometimes caused by technical issues or lack of knowledge and skills, but others include unclear vision, business case and associated value, as well as believing that this is just an IT departmental issue.
Understanding the business challenges within your industry sector and the business value that can be delivered by the cloud is key and this paper begins to look at the problem in respect of Retail.
COVID-19 Impact on Digital Transformation
The world has become more digital, and businesses are increasingly using technology as a core driver to create business value through Digital Transformation, either by design or by influence, through external factors such as competition or market forces.
However, in 2020, the landscape dramatically changed with the COVID-19 pandemic and many businesses have been forced to review their Digital Transformation programmes to ensure that their business models are aligned with their changing business priorities. The imperative to embrace new technologies and ways of working, in some cases, is about driving improved business performance to assume industry leadership. In others, it’s a simple matter of survival. This compelling event has forced urgent decision-making on senior leadership, so many companies now have the reason to change as they face disruption and, in many cases, the pressure to drastically cut costs.
The challenge is often the velocity of change to introduce a new digital enterprise and new ways of working, and this can determine whether or not Digital Transformation is ignored, continued or accelerated. For many leaders this is seen as no longer optional; rather it’s an opportunity to move quickly in adopting digital.
However, the risk in these circumstances is that organisations solely focus on technological aspects. The industry impact and the focus on Digital Transformation is not just about the introduction of new technology but more of a fundamental rethink of the corporate model, for which digital technology is the catalyst.
Digital Transformation provides the opportunity to look at how to change a traditional business to think and act like a true digital-first business. It is not just a Technology business unit problem but a business-wide problem. Organisations need to keep the focus on their customers and business outcomes, by bringing together cross-functional teams that pool expertise from all areas of the company.
It is vital to bring all parties to the table, as having this breadth of knowledge is critical in understanding the current state and developing a vision and strategy for the future state together with a view on what you will need for it to be successful (expertise, funding, and time). This step is often neglected in the scramble to implement change. However, an understanding of the organisation’s starting point, including strengths, weaknesses and desired end-state will help you to identify the areas of focus, the stakeholders and the resources and investment required to be successful.
The way a company organises itself is key to a successful Digital Transformation. For example, adapting to remote working models during the COVID-19 pandemic has been an issue for some organisations. Also, the stability of the Supply Chain and the rapidly changing requirements of customers for different services and products in quicker time are just some of the areas that have led companies to question their Operating Model.
Business needs to consider agile principles, often associated with a DevOps and CI/CD approach and the adoption of agile as a way of responding more quickly to changing business priorities. Agile is not a process but a change in culture and the journey to a revised operating model starts by experimenting with new behaviours and organising in a different way to get a different outcome. By increasing external focus, adaptability and speed, traditional approaches to delivering projects are likely to be exposed quickly as not being the right answer. Companies that have embraced an agile approach to Digital Transformation have often adopted an Operating Model that has embraced the concept of an `Agile’ factory.
Retail and the Challenges Ahead
Retail is one sector where world events are having a tremendous impact. The introduction of lockdown has had a far-reaching impact on how people live and, subsequently, the way that consumers behave.
Some retail companies have faced massive declines in revenue and have had to close stores and make large-scale staff redundancies. In its September report, the Centre for Retail Research (CRR) estimated that nearly 125,000 retail jobs had been lost in the UK in the first eight months of 2020, as major chains including Debenhams, Marks & Spencer joined independents in shutting stores. Debenhams has made 6500 staff redundant and closed 20 stores, John Lewis has made 2890 redundant and closed 8 stores and Marks & Spencer announced that it slumped to its first loss as a listed business. As many as 13,867 shops have closed permanently, including thousands of small stores employing 32,598. During the same period, others have seen a huge surge in demand and have recruited accordingly, with Amazon announcing 7000 new jobs and supermarkets such as Tesco and Aldi announcing over 20,000 jobs to meet online shopping demand. This change is not likely to be short-term. Behaviours will continue to change, and customer journeys will need to be recalibrated.
The change in retail has happened with unprecedented speed. Business disruption is real and is littered with extreme examples such as Primark, which has seen sales plunge from £650 million a month to zero, coupled with no online business to fall back on. Consumers are changing the way that they shop because of health concerns, Online shopping is going to increase, `Small Brand` sales are increasing and consumer’s requirements are changing. Many companies have therefore taken steps toward transforming their businesses and re-inventing themselves as they try to imagine and articulate what the new normal may look like for them.
Retail – How Cloud can help drive Digital Adoption
What are the business imperatives for the Retail sector and how have these been impacted by the recent COVID-19 pandemic? Most companies already understand what the cloud can do for their business in a post-COVID-19 world and appreciate the fact that cloud enablement is needed to accelerate their digital strategy, distribution channels and supply chains. If companies believe that migrating to Cloud is just a way to reduce infrastructure and associated operating costs, then they are not understanding the issues that need to be addressed. The cloud needs to accelerate retailers’ ability to offer new capabilities in a more nimble, scalable, and cost-effective manner and, above all, this needs to happen faster in retail than in any other industry.
Many businesses have adopted cloud computing, or have at least put a strategy in place, over the last few years. The business rationale for doing so is understood (reduced costs, flexibility, scalability, security, recovery, access, etc) and focus is often on the choice of cloud approach, the Cloud provider(s) and the migration journey to deliver the perceived business value from adopting Cloud technology.
However, businesses are struggling to take advantage of the greater flexibility, increased agility, and the opportunities for innovation made possible by Cloud transformation. They are finding it difficult to adopt the right platform, migrate workloads and map the value of migration to their business imperatives. Everyone tells you that now is the time to take advantage of the Cloud evolution but how do you begin to ensure – and indeed prove the case - that a technology adoption continues to deliver the benefits that your industry needs at this time?
As consumers stayed home to stop the spread of the coronavirus, they used mobile apps and websites to buy a different mix of products than they had previously purchased in-store, with more focus on pantry staple products. When the lockdown was eased, those who have returned to the stores have found the experience transformed by new rules on physical distancing, hygiene, and use of face masks. People are changing how they buy and what they buy because of the crisis. This perfect storm of change means that the Retail industry needs not only to accelerate plans for Cloud transformation but to develop strategies that can evolve with the constantly shifting sands of consumer behaviour.
To stay competitive, retailers face pressure to deliver new business capabilities faster. This, in turn, puts pressure on their already low margins and impacts all aspects of the retail value chain until the benefits can be realised. Advanced analytics-based merchandising reliant on big data as well as predictive and even prescriptive models are now viewed widely as a requirement, not an option. New Operating Models are required for logistics and store operations as online shopping dictates high degrees of agility, obsessive customer experience focus and the capability to enable rapid change. Digitisation is required now, and businesses’ demands for technology capabilities delivered at speed point to the urgent need for rapid, targeted Cloud adoption projects to support this digital evolution.
The word ‘targeted’ is key here. Junkshon knows the importance of understanding the current IT estate and ensuring that this landscape data is enriched with additional business context, so that migration can be designed to deliver the business functions, processes and workflows, supported by their underpinning applications, rather than taking just a technical view to migration. It is also important that there is synergy with the rest of the Digital Transformation programme, so cloud adoption supports other digital initiatives that are driving maximum value for customers and the business.
So, whether you decide that Loyalty Programme Management, or Omnichannel order fulfilment, or Inventory control, or other key functions are the priority, they are a good starting point to inform the cloud-migration roadmap and to enable the selection of the right technology partner to support the cloud journey. Adopting the cloud is a transformative journey, and you need to consider key areas to inform that journey:
Reviewing workflows and determining new capabilities that are required;
Ensure you adopt the right Cloud Strategy and architecture to bring together the various organisational leaders and Cloud partners to get clarity on Cloud priorities;
Define the security and data governance model;
Design lightweight processes. Cloud migration should be coupled with changes of mindset and ways of working. Retailers need to make their enterprise processes lightweight to take full advantage of the nimbleness that the cloud offers; and
Consider organisation and talent. To sustain a successful cloud journey, it will be critical to reskill existing IT talent and acquire external talent that has the requisite skills and experience with cloud platforms.
Organising for Success
Regardless of whether you are addressing changing consumer perspectives, the omnichannel demands or other key workflows, time is of the essence. Things must get done fast, and with consistent quality and standardisation across development teams. Successful organisations are those that have become (or are becoming) more agile, removed boundaries and broken-down silos. They have streamlined decisions and processes, empowered frontline leaders as well as suspended slow-moving hierarchies and bureaucracies. Because of the pandemic, leadership teams are embracing technology and data, reinventing core processes and adopting new collaboration tools. How technology and people interact in new ways is at the heart of the new operating model for business—and of creating an effective post-pandemic organisation.
But as companies modernise their IT through Digital Transformation, other hidden perils emerge that could undermine their efforts. The case for change still has to be made and the CFO of the company will want to understand the business value of the investment. This is made more challenging as the usual technology-funding mechanisms no longer support the agility required to deliver key digital capability such as cloud adoption.
At the same time, the CIO needs to talk the language of `Finance` so the Business Risk is understood, resulting in better target-state economics and properly forecasted and managed transformation costs.
The value rather than the cost of Digital also highlights the need to understand the issue of Technical Debt, which is the off-balance-sheet accumulation of all the technology work a company needs to do in the future. Poor management of technical debt can limit a company’s ability to understand the true value of Digital Transformation. Integrating old systems with new technologies can also cause problems and result in delay and increased cost. Without technical insight, there is a very real danger of spending too much time managing complexity rather than thinking innovatively about the future.
It is important to avoid looking for business problems only within the current environment. Instead, consider the end-to-end Value Chain so you can see opportunities to reinvent the complete value chain through digital technologies, rather than simply installing multiple “point” solutions that convert analogue practices into their digital equivalents.
The case for change is widely recognised, and to get started organisations need to understand the basics of where they are today, where they want to get to and how to get there. Obviously, the way a business organises itself to be successful is critical. Access and the ability to analyse the data that you hold today, particularly as it pertains to business applications, is at the heart of any Digital Transformation strategy.
Partners can help
As the Retail industry tries to respond to the shock of the global pandemic, and ready itself for a post-Covid-19 world, the race is on to push through Digital Transformation programmes, with Cloud adoption forming a key element. However, while the potential benefits are clear, getting this wrong can cost millions and waste months – even years – of time, which Retailers simply don’t have. Every decision is critical. Which public Cloud platform is right for me? Which workloads should I move first? Where will I see the faster ROI? How can I prove the business case?
Now, more than ever, Retailers need a partner who can help answer these questions. At Junkshon, we have a detailed understanding of the major Cloud hyperscalers and their own technology roadmaps and pricing models. We also use both our platform and our real-world experience to help with the critical task of prioritisation. Where can Cloud help you most, with the least disruption?
Junkshon has a platform that can provide that data in a fraction of the time of manual methods and standard tooling in CMDBs, so you understand your business applications and the unpinning infrastructure. This allows leaders to make data-driven decisions that deliver tangible business outcomes and value that companies are looking to achieve. This is underpinned by a proven process that underpins our engagement that has been designed around achieving results jointly and quickly.
If companies are going to be successful in migrating to the cloud, they need to address the following:
Look for objective advice;
Ensure that advanced tooling support is brought to bear to help the rapid creation of the IT and Business Applications estate picture. Data exists in company estates today, through numerous sources, to enable Rapid discovery and assessment;
Look at the whole estate and not just straight forward workloads, to create a migration approach that aligns with the economic and risk profiles of the company. This will also need to focus on key business priorities to address the unique economic challenges of today’s world, by targeting both cost improvements and levering full cloud capability to support enterprise application and digital transformation to drive revenue and profit improvements;
It isn’t practical to migrate all applications and data to the cloud at the same time, so smart analysis of the data based on what’s in the environment, the interdependencies, what’s going to be easy to migrate and what’s going to be hard to migrate, and finally, using the 6R’s, show how each application will be migrated;
Get outputs from a rapid 360 degree (technology, business case, planning and project start-up) assessment and recommended, founded on fact-based scenario analysis;
Avoid delays and analysis paralysis;
Create foundations for detailed migration planning and precision migration execution.
The above are some of the key critical success factors to enable a successful cloud migration. You will have read how junkshon understands the challenges and is able to help by utilising the decades of collective migration experience embedded into our purpose-built junkshon workload mobility analytics platform, to provide the rapid results you need today to make the informed business decisions.
As Retail companies seek to develop and execute solutions to help improve safety and experience across key business workflows, digital solutions/services and particularly the Cloud are going to be critical enablers for success. The Cloud will provide the ability to scale better and substantially reduce IT costs by improving the ability to react to market supply-and-demand dynamics to adjust your capacity. It will be easier to integrate new workflows/services/businesses faster by using the Cloud to reduce or avoid complex migration activities and the flexibility delivered will allow you to connect with others quickly. But you must get there first.