Retailers, Is Your Organization Choking You?
You’ve invested time and money on growth initiative XYZ and yet, your business is not seeing the bump in sales, efficiency or profitability that you’ve promised. Why?
Why are some omnichannel commerce initiatives more successful than others? Why do some retailers grow faster than others? Or record higher profits?
The answer may lie not in any particular technology choice a retailer makes, or even in the tactical execution of an initiative. In many cases, strategic initiatives are at a higher risk of failure if the organization is not designed for optimum effectiveness; i.e. too many people, too few people, people in the wrong roles, insufficiently empowered for their responsibilities, or unable to influence cross-functional processes.
I’ve seen this firsthand. As an Industry Principal in the Retail Practice group at Demandware, I’ve seen many retailers fail to meet their goals because of unexamined organizational assumptions that hinder their progress. Over the last few years I’ve worked with close to a hundred retail brands to support their organizational design, resource planning and change management as they transition to the Demandware platform or expand to leverage its multi-region or omnichannel capabilities.
The fact is, organizational design is hard, especially given the pace of change and diversity in retail, which has created a lack of stable, comparative precedents to learn from. But retailers must face their organizational challenges if they want to grow and compete effectively.
A key disruptor is the need to deliver a consistent, unified customer experience, which is driving the realization that ecommerce activities need to be better integrated and managed within the business. The danger is that technological change can outpace organizational change, leading to a situation where aspirations for customer-centricity are undermined by channel-centric KPIs and outdated mindsets.
The good news is that as retailers tackle the new retail reality, useful patterns and approaches are beginning to emerge. However, to make use of them, leaders first need to shed some of the old assumptions that may have served them well in the past but are no longer valid in the digital age. These underpin a few recurrent myths that I have encountered, that can complicate the planning and execution of even the best-laid plans.
1) There is a stable end state for retail organizations
Successful organizational development requires a shift in mentality that welcomes and embraces a constant state of change, because that’s what the furious pace of change in consumer shopping habits demand. There is no “end” to organizational development because there is no end to the evolution of the retail market. Many successful retailers are shifting from traditional top-down hierarchies and static business processes to an agile model operating in a constant state of beta, with iterative work cycles and horizontal communication that allows for trial-and-error initiatives.
2) There is a formula for establishing the target size of your digital commerce team
Many industries rely on a rule of thumb that relates the number of employees to revenue generated. In reality, the cross-functional nature of ecommerce blurs the boundaries between it and the rest of the organization. Although it’s often treated as a separate channel, online activities mirror many of the offline ones. As organizations mature, ecommerce skills filter through the business, with centralized teams becoming smaller and more specialized. These factors combine to make the idea of a headcount formula unrealistic and unworkable. The better approach is one that starts with a focus on processes, metrics and decision authority.
3)Business process follows technology
This myth manifests itself as a tendency to design the technology solution first, with the organization required to support that initiative following after. In truth, they should evolve in tandem. It’s true that tools influence process, because people have to fill whatever gaps in the process technology can’t support, and it’s unlikely that any technology will support the desired processes exactly. However, there is almost always flexibility in how the tools are implemented, and seemingly minor technical decisions can have a major impact on the level of effort required to support the tool once it is in production. Yet, often such decisions are taken by technical or project teams who do not appreciate the business impact of those decisions.
4) Org charts provide a window on best practice
The problem with organizational charts is that they pigeonhole retailers into one-size-fits all solutions likely to be out of step with their unique needs. Building your team from an existing org chart or job description usually means you’re using the wrong blueprint and hiring for the wrong skill set. Job titles can map onto vastly different roles, especially for fast-evolving digital specialisms. Instead, think about what needs to be done, how you will measure it and where decision authority will lie, before defining the roles. Using this method, a job description will get written in the process. Think about what sort of person will do a job well and enjoy it and what skills they need. Cluster tasks into roles by considering skills and aptitude mix. Give people the authority that accompanies their responsibilities.
5) Technology enables cross-channel initiatives
Change management is, in fact, more important than technology in enabling cross-channel initiatives. Organizations realize they must adopt an ethos of customer centricity that spans all digital and physical operations, but unless they can inspire staff with the vision, and equip them with the skills, resources and incentives needed for changed processes, all within a clear action plan, these initiatives risk causing anxiety, confusion or resistance that can undermine even the best technology solution. Even better, engaging staff in change planning directly not only creates a sense of shared ownership but also unlocks powerful new opportunities for innovation.
When these misconceptions have taken hold at board level of a traditional retailer or branded manufacturer, it can be very hard for a digital leader to argue for the resources they need to be effective. One ecommerce leader of a large UK homewares retail brand was under so much pressure to defend her small team using traditional arguments that when she lost a staff member, even the replacement headcount was under threat! By focusing instead on education and evolving perspectives, it was possible to acquire the support needed to secure and grow the team.
Demandware will soon publish details of a new tool, the Retail Operations Canvas, which aids discussion and collaboration around organizational design. Although there are no one-size-fits-all solutions, the ROC provides a framework for exposing the operational constraints and dependencies to consider as you plan your organization’s transformation.
I don’t need to tell you, retailers, that our industry is changing faster and more dramatically than at any time in history. But in adapting to changes in technology and shopping behavior, I would urge you to not overlook the organizational development changes required to thrive in modern retail.