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Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift


Based on in-depth surveys and interviews with 192 senior business and IT executives from global retail enterprises as part of the TCS Study, ‘The Global Agenda of Retail CIOs - Get out of the Back Office and Innovate’.

The rapid adoption of digital technologies is redefining the way customers and retailers interact with each other. This sudden shift is also challenging retailers’ core business model and processes. The retail industry is exploring innovative digital opportunities to win over customers. To be successful in their digital journey, retail CIOs need to overcome the existing operational silos and think from a cross-functional perspective.

TCS commissioned Forrester Consulting to conduct an in-depth survey and interviews with 192 senior business and IT executives from global retail enterprises to evaluate the state of IT in the global retail industry. The aim was to capture CIOs’ attitudes and plans toward key trends and increasingly disruptive technologies. Our survey found that the primary focus of almost 87 percent of retail business executives is to increase revenue and growth. Around 64 percent of retail IT leadership teams consider cost reduction as a major focus area over the next few years—clearly pointing out the misaligned priorities between the global retail business and IT teams. Our study also reveals that disruptive technologies including mobile, social media, cloud, and Big Data will continue to radically transform the retail industry. However, technology innovation will suffer due to lack of strategy, leadership, and talent shortage at many organizations.

In this article, we share some of the key findings of our global retail CIO survey along with key recommendations on how retail CIOs can help their organization win over customers.

Retail CIO Agenda: Key Findings

Finding #1: Global retail CIOs struggle to balance business and IT priorities
Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift Revenue growth driven by multichannel integration and digital customer engagement continues to be the biggest priority for retail business executives. In contrast, retail IT leadership’s key strategic focus for the short and medium term is cost savings with 47 percent of CIOs aiming to reduce cost in the next two years. In fact, 24 percent of CIOs agree that a lack of clarity on business priorities leaves them unsure about their future course of action. Despite a clear business need to grow revenues, IT leadership continues to treat itself as a cost center rather than as a value-enabling business partner.

Our survey also revealed that the top IT priorities of retail executives vary across the world (refer Figure). 67 percent of CIOs in Europe believe in improving system stability. However, for 73 percent of retail CIOs from Latin America (LATAM) and Australia and New Zealand (ANZ), as well as North American CIOs reducing costs is a top priority. Addressing the digital agenda also figures high on the priority list of CIOs in the ANZ and Middle East and Africa (MEA) regions. In keeping with the trends, around 53 percent of LATAM CIOs plan to invest in Big Data and analytics in the next few years, with a view to increase their ability to deliver change.   

Finding #2: Digital forces are disrupting retail
The degree of adoption and implementation of digital technologies to sustain business and gain competitive advantageGlobal Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift varies across the industry. However, most CIOs understand the implications of these digital forces on their retail business. They rate context-aware technology, augmented reality, mobile payments, and mobile POS (mPOS) as technology disruptions that have the biggest impact on the retail industry (refer Figure). CIOs agree that retailers can gain better business benefits by combining digital technology with relevant data. Most retailers have access to voluminous customer data which can drive meaningful insights to accelerate growth and offer superior customer experience.

Mobile payments stand out as one of the active disruptive technologies with UK firms leading the movement. 73 percent of retail CIOs in the UK report that they have already implemented some form of mobile payment. Digital stores are on the rise, while mPOS, digital signage, and interactive store fixtures feature in the plans of more than two-thirds of retail CIOs. In contrast, 3D printing attracts the least interest.  

Finding #3: Mobile will continue to disrupt and change retail business over the coming yearsGlobal Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift
Retail CIOs regard mobile as a key focus area, with 59 percent of them planning to invest in mobile, enabling their partners and vendors over the next five years (refer Figure). Employee mobility comes in a close second with 50 percent CIOs citing that it features high on their current agenda.

Many retail IT teams are focusing on customer-facing mobile applications and clienteling. CIOs plan to rapidly implement an array of mobile technologies, with context-aware technology (32 percent), mobile payments (28 percent), digital signage (24 percent), and mPOS (22 percent) leading the way.

Finding #4: Retailers will adopt cloud to transform their core retail businesses
Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift

With cloud-based services beginning to replace core retail systems, most retail CIOs recognize cloud solutions as a major enabler of retail transformation. Customer-facing applications top the list of cloud services, with 45 percent of CIOs either already using cloud technology in this area or are considering doing so (refer Figure).

An already existing rich ecosystem of eCommerce cloud services supports the increasing adoption of cloud technology in the retail environment. Readily available cloud-based infrastructure services are driving almost 35 percent of retail CIOs to seriously consider leveraging laaS (Infrastructure as a Service) providers in the next year or two.

Finding #5: Despite Big Data strategies, retailers struggle to deliver actionable insights
Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift

The current siloed approach to data concentrates more on delivering functional insights rather than cross-functional or customer-centric insights, thereby eroding data value. 68 percent of retail CIOs agree that they collect a lot of data but do not consistently maximize its value. Many retail CIOs lack effective data strategies that go beyond the initial data capture phase. 53 percent of CIOs state that their data strategy is to expand the scope of data. The survey shows that only 25 percent of retailers have plans to invest in Big Data analytics to support customer service (refer Figure). Consequently, many retail CIOs risk drowning in a deluge of data. Only 38 percent of CIOs see cross-channel analytics as a critical part of their future data strategy. Our survey findings also indicate that current approaches to data concentrate on driving functional insights rather than cross-functional or customer-centric analysis.

Finding #6: Social media intelligence will influence product designGlobal Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift
Retail CIOs have an opportunity to harness social media to transform the way their firms design products and services. Marketing, sales, and recruitment functions lead the charge in social activities among global retailers. 80 percent of retail CIOs report that their firms leverage social media for marketing and sales, while almost half of them rate monitoring customer conversations on social media as a critical component.

Over the next five years, 46 percent of retail CIOs link R&D and product development to social touch-points to bring customer insights into the product development life cycle (refer Figure). Canadian firms lead the way in socially influenced product development, with 67 percent already leveraging social media for R&D.  

Finding #7: Retail IT teams innovate but CIOs struggle to drive business value from technology innovation

Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift
58 percent of retail CIOs believe that their IT teams bring innovation to the table. Less than half agree that they co-create technology roadmaps with their business counterparts and only half of the respondents believe that IT teams clearly understand key requirements of the business functions. Despite cost-cutting pressures, IT operating budgets are on the rise. Many retail CIOs are therefore ring-fencing their innovation budgets. In 2013, retailers funneled an impressive 22 percent of IT spending into innovation (refer Figure). CIOs also acknowledge that embracing innovation systematically is the only route to winning customers and countering competition. 


Finding #8: Shortage of talent is dampening retailers’ digital reimagination dreams
Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift

Technology innovators are a rare breed with most of the CIOs struggling to source talent with digital and architecture skills. 39 percent of retail firms contend with lack of technical architecture experts, and 34 percent with shortage of mobile talent (refer Figure).

Almost 67 percent retail CIOs surveyed consider attracting and retaining talent a critically important challenge over the next three to five years, while 34 percent report difficulty in obtaining the necessary mobile technology talent.

How can Retail CIOs get on the digital bandwagon?
Mobile services will enable retailers to transform the way they serve their customers and employees. Digitally and mobile-enabled supply chains can help gather interactive customer insights to influence product design. This can also provide unparalleled transparency of stock availability to drive deeper customer engagement. In addition, cloud computing will transform the retail core, while Big Data and analytics is set to drive cross-functional customer-centric insights. If retail CIOs are to play a key leadership role in this dynamic new world, they must get out of the back office and lead the innovation agenda.

Here are a few key recommendations based on the survey findings:

  • CIOs must shift focus from cost savings to differentiation and innovation: CIOs must move beyond cost savings to embrace differentiation while adopting cloud and SaaS solutions to drive cost savings and continuous innovation. They should also look at developing world-class vendor management capabilities, and focus their internal resources on strategy and business alignment.
  • Tap the cross-channel data and turn it into actionable insights: CIOs must view deeper digital engagement of consumers through mobile, eCommerce, and multichannel services as key to growth. Visionary CIOs are taking to cloud to rebuild core retail capabilities and leveraging advanced analytics for better decision-making.
  • Invest now in re-imagining and digitizing the entire retail value chain: Retail CIOs need to start thinking cross-functionally, and re-imagine every single business process and tool to exploit the true value of digital technologies. CIOs must ensure that these key technologies are not seen as IT implementation projects rather as business transformation opportunities.

Our study reflects that retailers’ IT teams are increasingly bringing in valuable transformation. CIOs are not just driving the IT teams but also playing a crucial role in creating value for the business through technology. CIOs are clearly at the forefront of business change in every retail organization. They will continue to drive cost savings, while accessing the latest technology innovations and leveraging partners, to provide commodity services as well as high value and hard-to-find capabilities like mobile development, architecture skills, and business requirement definition.

TCS Retail Forum Journal
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- Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift

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