“A Wolf in Sheep’s Clothing” is an idiom of Biblical origin. It is used to describe those playing a role contrary to their real character, with whom contact is dangerous. – Wikipedia
Buzz words filled the air at the NRF Big Show, held at the Javitz Convention Center in New York last week. The air was thick. Words like big data, omni-channel fulfillment, smarter commerce, mobility and customer-centric retail filled the room. I believe in each of these concepts, and would like to see progression in the execution of the delivery of value in the retail value network. However, I think that it is time to take a time-out. At the NRF event, I feel that the words were largely overhyped and the solutions showcased on the floor largely underdelivered. As my feet got blisters, and my bag grew heavy on my shoulder going from booth to booth, three thoughts kept rolling around in my mind.
A Wolf in Sheep’s Clothing?
As these words filled the air in session after session, the promises were vast and overarching, but the solutions showcased in the vendor booths on the floor were largely the same. It was as if we were viewing solutions from five years ago with changed signage. For most providers on the floor, I feel that it is like a wolf in sheep’s clothing. It is dangerous for the uneducated buyer because they cannot discern between the hype and reality. In short, we cannot put a wrapper around ERP, traditional reporting, or traditional fulfillment and call it Big Data, Customer-Centric Retailing or Omni-Channel Fulfillment. It requires new forms of analytics, cloud-based solutions and the design of packaged applications from the consumer back. Traditional solutions cannot be retrofitted.
On the show floor it is hard to get to the truth. Too few companies are asking vendors for specifics. The questions should be about workflow, data models and capabilities; but instead, it is a discussion about high-level concepts. To make it worse, we have a broken ecosystem. System integrators want to sell what they know, and solution providers want to sell what they have. The legacy solutions from ten years ago are more expensive and both the traditional software licence model and the consulting model are incented to sell the MOST EXPENSIVE, not the BEST, systems.
The analyst market is also broken. There is pressure for analysts to stay the course and walk the traditional lines of application referrals. The analyst business model was developed when there was more stability in the market. There are fewer and fewer truly objective points of view in the market.
I am saddened. IT spending is tight, market growth is slowing, and most technology vendors are deploying very sales-driven, opportunistic strategies. There are very few, very few, breakthrough solutions that elevate the discussion around retail execution against these goals.
In the old days, when retail profits were high and the competition was not so intense, it did not matter as much. Today, it matters more than ever. I have a short list of retailers that I am watching that I think will fail in 2013 due to the lack of this understanding.
Acronym Babble Falls Short
In the last decade, we defined a set of new terms to describe enterprise requirements. Today, these three- and four-letter acronyms are an impediment versus a useful aid to help buyers of technology. The old terms of CRM, PLM and SCM have lost meaning. With a broken ecosystem of analysts, consultants, and technology providers there are fewer checks and balances. There is more selling and less education. The focus is on the sales cycle, not on raising the level of dialogue. lt has become a stew pot largely driven by sales-motivated approaches to close tactical, short-term deals.
Innovation is slow and the adoption of new approaches is painful. Companies want to adopt the “safe” approach that is ironically risky. I strongly believe that the path forward does not come from the large vendors. Acquisition and consolidation have reduced innovation, moving the market backwards, not forwards.
To meet the goals of multi-channel retailing and the omni-channel consumer, I would rather see companies discussing cross-functional solutions and viewing analytics through the new lens of systems of reference, systems of record, systems of insights, and systems of synchronization with a strong focus on market sensing and commercial orchestration. In this model, we can elevate the discussion to embrace new forms of analytics to enable digital path to purchase, multi-channel retail, learning systems, rules-based ontologies and sentiment analysis. This framework frees us to use new data forms (unstructured and structured data, video, maps, etc.), innovation in visualization (geo-mapping, heat maps, control towers and new forms of predictive analytics) and cloud-based solutions across an extended network.
By giving up the constraints of the enterprise acronym babble, companies can make market-driven orchestration across the network of 3PLs, suppliers, transportation providers, and third-party cloud-based solutions a reality. Yesterday’s solutions for DRP, forecasting, merchandising and assortment/fulfillment are just not up to the task, and ERP needs to be recognized as the important system of record, but not the platform for the market-driven retail value network.
Digital Icing on a Stale Cake?
Investments and excitement over the past five years have accelerated in the areas of digital marketing and eCommerce. Social and mobile interest reigns. However, as more and more retailers attempt to power growth through new digital technologies, they sadly find that this area called “fulfillment” is an Achilles Heel. At the Big Show, I found that it is not well understood. Most of the retailers’ presentations described the dilemma as outlined in figure 2. The supply chain is designed from the supplier forward, focused on product assortment and traditional merchandising, with product flowing through well-defined physical channels to the shopper. It is based on traditional signals of orders and shipments, largely voice of consumer insights, and flexible, agile systems to drive a more meaningful response.
Over the course of history, with the exception of Amazon, Apple and Wal-Mart, retailers have never been supply chain leaders. The adoption of technologies and processes have been slow. What I feel most retailers are missing is that the implementation of multi-channel fulfillment requires the redesign, from the shopper back, based on cross-channel insights and shopping behaviors. It is a redesign, not a modification or tweak of existing processes. The price/merchandising systems need to be fluid to work cross-channel and the fulfillment systems need to be designed for multi-channel fulfillment. A major gap is the lack of a perpetual inventory signal that can show the network levels of inventory, and manage Available to Promise and Allocation in an extended value network, where drop shipments are a reality not an exception. Multiple channels are competing for inventory and this requires a new form of interoperability. As the metronome of the retail supply chain speeds up, it becomes more and more critical to have this real-time network-based signal as shown in figure 3 below.
As I walked the show and talked to venture capitalists and software vendors about fulfillment, I smiled. Most believe that we can put digital frosting on a stale cake. I think that they are wrong. I believe that we have taken the world of digital as far as the existing supply chain structures can stand. It is time for a redesign, starting from the outside-in, focused on shopper behaviors and market sensing. It is time for retailers to orchestrate demand and supply market-to-market. And, the good news is that cloud-based technologies and new forms of sensors can make this a reality. However, this only becomes a reality if the buyer sidesteps the traditional licensed vendors of ERP, WMS, and BI and embraces the newer more nimble solutions that can help companies to sense, shape, translate and orchestrate demand market-to-market. As a retailer, my focus would be on solutions like RetailNext, Predictix, Revionics, SAS Institute and Quantisence. I would spend little time in discussions with traditional solutions that are trying to put new lingo on an old jalopy. Those old solutions just are not going to get you there.
I also believe that the reinvention of retail needs to focus on service. Recently, I was facilitating a session at a Retail Connections conference on the “Role of the Store in 2013.” The discussion was on how to thwart the impact of Amazon. The uniform response was through “service-based offerings.” Godiva discussed how they implemented a “fruit dipping station in their stores” to drive foot traffic and net new revenue. A tire retailer discussed the redefinition of car service to improve the sale of tires. More and more, I think that companies need to see “showrooming” as an opportunity. Every time that a shopper enters a store, it is an opportunity to drive brand awareness, provide a service-based offering and drive cross-channel sales. However, this cannot happen unless the retail organization redesigns the organization to support the cross-channel experience. It requires a rethinking of the role of the store and the redesign of metrics. Today, most retailers say “cross-channel,” but are organized in silos focused only on a piece of the channel. The focus needs to be on the shopper.
We would love to hear your thoughts on what you are doing and what you thought of NRF. We are currently working on a study on how Retailers are rethinking the Role of the Store. If you fill out our study, we will be glad to share the results. We look forward to hearing from you. Here is the link. http://tinyurl.com/sci-ros-lcb