Abstract della presentazione di Ivano Ortis, Vice President Retail, Manufacturing, Financial Insights di IDC, tenuta all'evento IDC Retail Summit 2017 di Milano il 21 giugno 2017
3. Real-time hyper micro autonomic customer
journeys are the way forward
Source: IDC Global Retail Innovation Survey 2017; N=400
13%
48%
36%
3%
Static
Segments
Dynamic
Segments
Dynamic
Personas
Real-time
Individual
Autonomic
4. 6%
52%
36%
7%
Low priority Byproduct Program Strategy
Strategic mission, programs, use cases. In order
Source: IDC Global Retail Innovation Survey 2017; N=400
What is the state of innovation strategy at your company?
5. A new Cx platform is the innovation priority
Source: IDC Global Retail Innovation Survey 2017; N=400
59% 50%
eCommerce
platform and
mobile
IoT
platform
41%
Omni-channel
customer
experience
platform
6. The retail platform for the next decade...
Source: IDC MarketScape: Retail Omni-Channel Commerce Platform, Vendor Assesment, 2017
7. How many global retailers will implement the new
retail platform over the next 12 months?
?
Source: IDC Global Retail Innovation Survey 2017; N=400
8. How many global retailers will implement the new
retail platform over the next 12 months?
46%
Source: IDC Global Retail Innovation Survey 2017; N=400
13. AI is a key enabler of retail innovation
54% of retailers think
AI is a key enabler of
innovation programs
Source: IDC Global Retail Innovation Survey 2017; N=400
14. Retail Investments on AI accelerate
37% investing in AI for
Cx personalization
Source: IDC Global Retail Innovation Survey 2017; N=400
15. Customer Experience Architecture
Dynamic Customer Journey Services
Analytics Services
Customer Product Inventory 3rd party
Acquisition Ingestion Integration
Information
Level
Back Office Partners IoT
Mobile Web Store Other ChannelsInterface
PRESENT ENGAGE SELL SERVICEATTRACT
Process
Level
AI
Real-Time,
Contextual
Hyper-Micro
Segmentation
Unified Info Lake
Welcome…we all hear a lot about retail transforming, changhing, the store experience changhing as ecommerce and omnichannel customer experience archetypes become the norm. Is this just an evolution? No I think we are at a singularity…
Think about the current market dynamics, changed customer expectations, disruptive competition, we are at the all time high for innovation in the industry, as witnessed by 17B spent in ecomm M&A over the past 12 months…project this to the time when IoT commerce will become a reality, and consumption will fundamentally change from ownership to use and service.
This is what I call the retail singularity, and if you want to thrive there are innovation opportunities geared around three key attroibutes for success: speed insight agility
Insights into customers and products to understand the context across complex and dynamic customer journeys and product lifecycles. Using customer insights everywhere - both anonymous and loyalty customers - to drive better, more personalized, more profitable product ranging and fulfillment decisions. Insights entails a more intelligent use of information, for example inventory data. No matter stock location, warehouse, distribution center or store, achieving omni-channel inventory visibility is foundational. Using this capability for intelligent order orchestration, more flexible logistics and last mile delivery is fundamental to achieve profit targets. So, insights will embrace all aspects of retail - operations, product and customer - to enable endless aisle approaches with reduced operational costs, higher sales close rates and improved fulfillment performance.
The speed of change, in other words the pace of implementing innovation at scale, is the second key strategy. As James F. Nordstrom Jr., Exec VP of Nordstrom said: "The better job we do in all our stores, but particularly our higher-traffic stores of showing the customer something new, giving them a reason to buy something new, the better our business is.” Outdated business models, company cultures and organizational structures can hinder the speed and the impact of retail digital transformations and omnichannel strategies. Consider for example working on a new micro-merchandising strategy while organizational siloes still exist, or where a merchandise and buying-centric organization don't leverage quickly enough new capabilities. It results into very long projects (2-3 years), missed opportunities and higher implementation costs for the change. Also, the lack of a technology roadmap and a formal innovation model across discovery, selection, pilot and implementation can result in slow time to market and higher costs. As a result, improved collaboration, a unified, real-time information and analytics landscape and a new commerce platform are necessary for retailers to succeed in the next decade.
And lastly agility, which means the ability to be flexible and efficient when responding to changing business requirements, customers' expectations and competitive dynamics. To execute current and future customer journeys effectively and efficiently, retailers need a new unified and flexible customer experience architecture that will provide a seamless composition of customer services leveraging information (customer, product, inventory, etc..), processes (merchandising, supply chain, commerce) and channels consistently.
The foundational elements of the new customer experience architecture are data lakes, advanced analytics (predictive analytics, machine learning, artificial intelligence) and the Retail Omnichannel Commerce Platform, as illustrated in IDC MarketScape: Worldwide Retail Omichannel Commerce Platform Vendor Assessment, 2016
It all starts with the customer experience. Thorught my presentation I will refer to retail in abroad sense, including food, apparel, specialty retail but also consumer services sales like travel. I am going to share – actually as a WW preview only for you – the results of a research that we completed with400 EU & US retailers on innovating the industry. are the days of static customer segmentations, but it is still very popular in retail to find dynamic and persona segment. Unless you are in a very niche market, how can you truly personalzie the experience based on idealistic persona like hey I am Rachel 35 with 3 kids and a career in marketing? The future is all about the ability not only to sense but also to adapt and optimize customer journeys in real time, with thenecessary degree of automation and personalization that is required. So indidual not personas
Hyper-micro personalization is an advanced and real-time customization of CX at an individual level
Micro-segmentation is one-to-one segmentation (a specific product for a specific micro customer segment), but not adapted to the real-time customer context
Market is at low maturity. Opportunity to shift. Real-time, dynamic, personalization. But Need a new innovation model
What best describes the target customer journey model that your company plans to achieve over the next 12–24 months? [READ ALL, CHOOSE ONE]
- We are working on a customer experience model that enables the definition, execution, and dynamic, real-time updates of customer journeys, based on hyper micro customer segmentation. Over the next 12–24 months, we plan to use artificial intelligence to dynamically optimize customer journey options, and fully automate selection and delivery of individual customer offers across all available customer touchpoints.
- We are working on a customer experience model that enables the definition and execution of the customer journeys, based on customer personas segmentation. We update customer journeys every 3 to 6 months. Over the next 12–24 months, we plan to start leveraging artificial intelligence for micro-segmenting customer interaction flows across all available customer touchpoints.
- We are working on the construction and execution of segment-based customer journeys, planning to update it every 6 to 12 months. Over the next 12–24 months, we plan to use more advanced analytics to improve offers across selected customer touch points.
- We are working on the construction and execution of segment-based customer journeys. Over the next 12–24 months, we plan to use standardized customer interaction flows across selected customer touch points.
They say strategy is useless without execution, but a plan without a startegy may also not be a good thing.
When I firstly saw this result I was very surpirse, how could only 7% of retailers have a defined innovation strategy while others are running opportunitsic, use case based innovation-programs? We think it should start from defining what is the strategic mission for innovatioon, identify the programs that will deliver the mission, and then the use cases that will enable the program’s objectives.
What is the state of innovation strategy at your company?
An organizationwide innovation strategy is currently ongoing or is under development.
The organization has innovation activities or programs (current or planned), with no defined strategy.
Innovation happened or might happen as a "byproduct" of other initiatives (e.g., we needed to solve a business problem and came up with an innovative way of doing it).
Innovation is not a main priority in our organization.
Wheter it starts from eCommerce, mobile, IoT or a full omnichannel Cx platfrom, a new Cx platform is the innovation priority
Omni-channel CX is one of the top 3 capabilities to enable innovation programs
Considering the innovation priorities at your company over the next 12–24 months, please rate the importance of the following capabilities to enable innovation programs.
Top 3
59% eCommerce platform and mobile
50% IoT platform (providing hardware/sensor connectivity, data management, analytics, and real-time alerting and action automation)
41% Omni-channel customer experience (providing a seamless, dynamic, and personalized customer experience across touchpoints, and delivering optimized execution of promotional/marketing campaigns)
So let me share my view.
The retail platform for the next decade is not ERP or your merchandising system, rather what we call at IDC The retail omnichannel commerce platform
4 boxes.
Microservices
Analytics foundation
MDM example
46% of global retailers are going to implement a retail omni-channel commerce platform in the next 12 months
46% of global retailers are going to implement a retail omni-channel commerce platform in the next 12 months
So enough from the theory, The role of an alysts is to understand the theory enough so that it can give reccomnendations on how to do it. Here is a great example on how Lowe’s is driving their innovation effort
https://www.youtube.com/watch?v=k4US6BO59YU
What is the right model for innovation? Well I think it depends on the objective, in other words what is the innovation mission?
q3. Currently - Considering the total effort (investments and resources) spent on innovation at your organization in the current fiscal year, how is it distributed across different innovation missions?
Contextual 38%
Disruptive 32%
Ecosystem 30%
Pilot on the platform for agility...
Pilots are embedded in the platform. Agile/DevOps. Formal reuse of learnings
Implement @ Scale & Speed with Platform and Industry Clouds. No barriers
New capabilities available across business functions through the platform and industry clouds to scale fast
So if we put everything together here is an high level view of the IDC Retail Innovation Model. Central to the model ar two things:
Paths or innovation trajectory, how do you plan to achieve an innovation mission passing though the diffrent phases? What partners, masteries and business case constructs will you use? Are you really ready to fail fast and move on with a smile and a gain?
And secondly The platform, which becomes not only your core retail system but also your core innovation platform to scale fast and increase business results at speed. Both your production and your test environment. So having to bring to you the best of both worlds.
In addition to the retail omnichannel commerce platform, Analytics and AI are a foundational element for retail strategies. Half of retailers think that AI infact is a key enabler of innovation programs, and I am personally receiving from retailers across segments, and countries a lot of questions about AI, how to use it, and what are the benefits
Have you already implemented or do you plan to invest in the following innovations over the next 12–24 months?
Adopting AI for CX personalization 37%
This goes along with 81% of retailers that are implementing IoT, that is increasing the available customer data
Considering the innovation priorities at your company over the next 12–24 months, please rate the importance of the following capabilities to enable innovation programs.
For 54% of retailers, AI is of high importance in the innovation strategy of the next 2 to 3 years
And one of the key domani where AI promises to bring important benefits is personalization.
Have you already implemented or do you plan to invest in the following innovations over the next 12–24 months?
Adopting AI for CX personalization 37%
This goes along with 81% of retailers that are implementing IoT, that is increasing the available customer data
Considering the innovation priorities at your company over the next 12–24 months, please rate the importance of the following capabilities to enable innovation programs.
For 54% of retailers, AI is of high importance in the innovation strategy of the next 2 to 3 years
So, Artificial Intelligence is a reality and It’s innovating the customer experience, and customer experience is at the core of innovation.
To execute the new dynamic customer journey, retailers need a new unified and flexible customer experience architecture aimed at providing a seamless composition of customer services leveraging information, processes, and channels consistently.
A unified information lake makes all the information available from different sources, structured and unstructured. So, retailers need to expand the rich offline data they hold, to include the more dynamic aspects of the customer relationship.
Once behavioral triggers and detailed customer profiles have been identified, retailers should apply descriptive, diagnostic, and prescriptive analytics and use these insights to guide the execution of customer experience processes.
Once context is established, retailers can deliver the next best action for individual customers, regardless of channels, and ensure continuous improvement.
This dynamic environment requires a continuous adaptation of the composition of services, due to the constant change of the customer journey. The dynamic composition services layer allows retailers to deliver innovative services and meet customer needs through an iterative learn and adapt process.
Behavioral economics – Personalization
Pricing, assortment strategies and supply chain decisions optimized for different conditions, e.g., new customer, short- and long-supply inventory, seasonality, margin target, etc
Stockturns – a fast fashion retail with revenues of 1.5B was carrying 300M of old stock every year. They reduced further the product lifecycle and moved to more granular, customer centric assortment planning and achieved revenue increases and a 20% improvement in stockturns which saved them 10s of million.
Target guests can use mobile apps o build shopping lists, find product locations, determine availability at their local store, and get personalized recommendations.
And, according to retailers, innovation will provide interesting outcomes in many other different areas
Who has a strategy expect more than 10% rev increase (48%), ecommerce highest than any other segment 2X
VP omnichannel and QSR expect highest conversion rate impro (10%) 2X
45% of Food stores and DIY/Cons Elect/Home expect more than 10% improvement in traffic
37% VP omnichannel expect as well more than 10% improvement in promo & loyalty. At the same time, 40% of eCommerce and DIY/Cons Elect/Home expect improvement between 5 – 9%
eCommerce (29%) and QSR (30%) show the top confidence for more than 10% improvement in CX metrics
Thinking about your expected outcomes from innovation programs, please estimate the percentage improvement in each of the following areas
Increased traffic 31%
Increased promotion and loyalty effectiveness 45%
Increased conversion rate 47%
Increased revenue 46%
Increased CX metrics (net promoter score, customer satisfaction) 45%
And, according to retailers, innovation will provide interesting outcomes in many other different areas
Who has a strategy expect more than 10% rev increase (48%), ecommerce highest than any other segment 2X
VP omnichannel and QSR expect highest conversion rate impro (10%) 2X
45% of Food stores and DIY/Cons Elect/Home expect more than 10% improvement in traffic
37% VP omnichannel expect as well more than 10% improvement in promo & loyalty. At the same time, 40% of eCommerce and DIY/Cons Elect/Home expect improvement between 5 – 9%
eCommerce (29%) and QSR (30%) show the top confidence for more than 10% improvement in CX metrics
Thinking about your expected outcomes from innovation programs, please estimate the percentage improvement in each of the following areas
Increased traffic 31%
Increased promotion and loyalty effectiveness 45%
Increased conversion rate 47%
Increased revenue 46%
Increased CX metrics (net promoter score, customer satisfaction) 45%
29% eCommerce expect more than 10% improvement in reduced out of stocks
31% eCommerce expect more than 10% improvement in reduced inventory costs. VP omnichannel (37%) are the ones with highest expectations for reduction of inventory costs.
One third of the companies that have an innovation strategy expect more than 10% improvement in reduced operational costs, at significant distance from companies at previous maturity levels (average 16%)
Specialty retailers and eCommerce are top segment (27%) for more than 10% improvement in reduced promotional pressure. To be highlighted that almost half of DIY/Cons Elect/Home expect improvement between 5 – 9%
QSR are the top ones (35%) for expectations in reduction of inventory write-offs, this could be mainly related to perishable goods.
It’s again strategy, ecommerce, omnichannel….
29% eCommerce expect more than 10% improvement in reduced out of stocks
31% eCommerce expect more than 10% improvement in reduced inventory costs. VP omnichannel (37%) are the ones with highest expectations for reduction of inventory costs.
One third of the companies that have an innovation strategy expect more than 10% improvement in reduced operational costs, at significant distance from companies at previous maturity levels (average 16%)
Specialty retailers and eCommerce are top segment (27%) for more than 10% improvement in reduced promotional pressure. To be highlighted that almost half of DIY/Cons Elect/Home expect improvement between 5 – 9%
QSR are the top ones (35%) for expectations in reduction of inventory write-offs, this could be mainly related to perishable goods.
So to wrap up, what is the business case for omnichannel retail and customer experience innovation?
The retail omnichannel commerce platform enables retailers to respond to accelerated customer needs, competitive dynamics, and business ecosystem opportunities. Essentially allowing retail organizations to be more agile as retailers will constantly re-evaluate the business needs and shift focus when necessary, being more innovative, capable of enabling rapid development and deployment of new services.
The difficulty in measuring the business case for omnichannel retail is it is in a large part all about discovering untapped demand
And think of IoT Commerce on the horizon, a large market opportunity but also another threat to the idnustry.
So my recomendation is to accelerate on the digital platforms for growth. Driven by an innovation strategy that is centered on speed, insight, and agility
Thank you very much
So my recomendation is to accelerate on the digital platforms for growth. Driven by an innovation strategy that is centered on speed, insight, and agility
Thank you very much