By Brian Kilcourse, Managing Editor
10/2/2007
The real issue associated with customers using the Internet to make shopping decisions has never been about the technology – it was a revolutionary process change, i.e. consumers became empowered by information about retailers’ products and services before they walked into a store (and therefore before retailers could influence their purchasing decisions). By the same token, the adoption of wireless PDA’s, RFID, VOIP pagers, etc. in the store has never been about technology, but about empowering retailers to operate at the same speed as consumers- in real time.
For example, RFID is not a technical evolution of symbologies, but a revolutionary change to how inventory is managed throughout the value chain. What differentiates most successful retailers is not their products, but services, and these are increasingly driven by the information assets that drive the processes that deliver the services in a differentiating, and yet cost-efficient, way.
One has to ask, if all of these technologies are so transforming, then why haven’t many of the retailers rolled them out across the breadth of their operations? The answer is probably in the realization that changing the business radically based on something other than “transactions” is hard. But in a recent study RSR published entitled “The Next Generation of Business Intelligence: Driving Customer Insights across the Retail Enterprise,” we saw that almost one-half of retail “winners” (those companies that out-perform their peer group) now collect data continuously from the selling environment, not waiting for daily transaction logs to be processed at the end-of-day. Those retailers are clearly aware of the opportunity to improve customer satisfaction, top line revenue, and gross profit profitability by using information and technology to proactively respond to conditions in all channels as they change.
How? Time-to-action is in direct proportion to the data and analytical lag time that is built into the decision cycle. By collecting store level transactional data continuously for upstream business intelligence systems, retailers overcome two factors that affect a timely response to in-store conditions: “data latency” and “analytic latency.” Because of the lag time inherent in periodic (rather than continuous) data collection from the selling environment, “data latency” exists, which in turn creates ”analytic latency” in upstream analytical systems. By eliminating these two latencies, retailers can react much more quickly to operational conditions, for example by alerting a store manager that a hot selling item needs to be replenished from the backroom within the next hour based on an analysis of the rate-of-sales compared to the calculated amount of inventory on the shelf.
This is the reason that solutions vendors are touting such things as “one view of demand,” “workflow integration,” “Web 2.0,” and even such seemingly overtly technical things as “services oriented architectures” and “middleware integration.” Perhaps in an echo of the age-old “alignment” problem that retail technologists have with their line-of-business peers, it’s easy to disregard these messages as so much marketing fluff to be ignored on the way to getting down to discussions of cost vs. tangible, measurable return of investment. But it does matter.
In his 1999 book entitled Adaptive Enterprise: Creating and Leading Sense-And-Respond Organizations, author Stephen Haeckel took the position that the rate and discontinuity of change in the business environment overwhelms organizations’ abilities to correct mistaken assumptions in their business plans. Therefore, he argued, businesses must architect their processes and supporting technologies to be able to respond very quickly to changing conditions.
This is not just an “ivory tower” perspective from an academician. Retailer “winners” get it, as the BI study shows. The mantra for retailing nowadays is “people, process, technology.” Technology companies love to talk about technology. Retailers love to talk about their people. Finally, process – empowered and accelerated by information and the technologies that deliver it – is finally getting a hearing in retail.
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