January 17, 2022
Since the COVID-19 pandemic began, more than one-third of Americans have drastically changed their regular buying habits. Many have shifted to buying online for delivery or for in-store pickup to their regular shopping routine, according to a recent McKinsey Insight. Nearly two-thirds plan to continue shopping that way. Retailers that quickly grasped the new reality, and those that were able to pivot quickly to what McKinsey calls an “omnichannel” retail model, are reaping the rewards.
A case in point is a regional division within a large multinational retailer. When the pandemic hit, they were already several years into a five-year digital transformation that would impact more than 2,400 stores and 200,000 employees within the division. Four years earlier, the company had implemented agile methodologies across technology and business areas to improve the speed and quality of operations and product development. That decision would prove prescient.
The new agile methodologies enabled them to rapidly address the immediate challenges of the pandemic, including the need to shift employees to remote work and to accommodate and serve the wave of customers now shopping from home. The company leaders accelerated that long-term transformation into a quick pivot to accommodate the new buying trend and gain first move advantage.
Fundamental to their success was the establishment of clear and concise mission objectives to drive efficient and focused execution. The retailer established two priorities that would guide subsequent decisions:
Like their peers at other companies, the executives first saw the looming pandemic as an immediate problem, but not an ongoing business disruptor. Most companies planned to power through the pandemic and then expected their business would return to normal. But as early as February 2020, executives in this division sensed the possibility that their entire workforce might have to work from home — with very little advanced warning.
So, while their peers delayed and continued to draw up plans, the leaders here decided to act decisively to send their entire IT team of more than 1,000 people home to work remotely. What had initially existed only as a strategic digital transformation goal to be achieved over several years would be tested immediately on a mission-critical part of the organization and become a test case for the entire company.
The division already had taken a critical first step as part of their transformation project. They answered the question that confronts many companies considering digital transformation: What’s more important, the digital realm or the physical?
Pre-pandemic, company leaders knew the answer was to leverage their strengths in the physical world, such as locating a store within 10 miles of nearly every resident in the region and combining those strengths with the new digital ways of doing business with customers. Instead of pushing hard into only one direction, the retailer has evolved a hybrid operating model, or omnichannel, that provides options for whatever the customer wants: shop online and have products delivered, shop online and pick up at the store, shop at the store and pick up items ordered previously, or any combination thereof. They call it “brick and click.”
To speed up the process, the IT team went on the offense and quickly made investments to reinforce the existing building blocks of the company’s leading-edge technology core. Areas of focus included telecommunications, collaboration tools and cloud services, as well as sophisticated building block technologies such as IoT and blockchain capabilities. The company particularly emphasized data analytics.
Confidence in that foundation of agile technology grew steadily, and by mid-2020, the company was ready to complete the transition offense. Changing the mindset of its people was the most critical factor. As people realized that remote collaboration worked and critical processes functioned, they embraced the new ways of working. The incremental steps forward that are part of agile methods helped build confidence in new ways of working and enabled staff members to be bold. They welcomed the influx of new tools and technologies for analytics, AI, and automation as opportunities to serve the business and the mission better.
The retailer still has long-term plans, but it is well-positioned to change quickly. There are many lessons to be learned from its success, but three, in particular, are worth bearing in mind:
The retailer’s ultimate goal remained to protect the company’s fundamental ways of working and its core values. The strategy and decision to move to brick and click propelled its ecommerce sales to triple-digit growth and set the stage for emerging from the pandemic a more agile and dynamic company.
This global retailer’s remarkable digital pivot is one of many success stories to come from the past year. The mature state of its digital transformation paid huge dividends when it mattered most. But they were not alone. For more insight about this company’s transformation and the strategies used by other companies, download Succeed in tough times: Make a digital pivot published by MIT Technology Review in conjunction with Hitachi Vantara.
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