Many organizations that embark on a digital transformation journey get stuck. A framework developed by McKinsey can help retailers translate their strategic priorities into modular, scalable and extendable digital programs that start with the reality of where they are today.

Achim Schneider, global head of SAP’s retail business unit

Achim Schneider, global head of SAP’s retail business unit

Both pure-play and omnichannel retailers have had to come to terms with a new playing field, new rules and a very long list of requirements in recent years. Digitalization demands that you understand both your current and next generation of customers, deliver omnichannel customer engagement, optimize your digital supply chain, and learn how to navigate the convergence between physical and digital commerce.

It’s put retailers under considerable pressure with once-established high street retailers now digital casualties. The blistering pace of digitalization means it will isolate and ignore you if you don’t keep up. Although most retailers are engaged in various degrees of digital activities, the pace of progress means many are playing catch up, and more still don’t know how to implement a long-term strategy without compromising their short-term priorities. Those that do often find themselves in an impasse.

The conundrum for retailers is to figure out their long-term vision, and then take the business there in a way that accommodates both short-term and mid-term requirements.

In fact, IDC found that more than half of European organizations that embark on a digital transformation journey get stuck. This typically happens because they create a ‘special projects’ team for digital initiatives that’s separate from the rest of the business, ending in some form of digital deadlock.

The conundrum for retailers is to figure out what their long-term vision is, and then find a way to successfully take the business there in a way that accommodates both short-term and mid-term requirements. Nobody has effectively spelled this out for retail organizations to date—until now.

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IDC has adapted McKinsey’s “three horizons framework,” originally published in the book, The Alchemy of Growth. The framework helps retailers translate their strategic priorities into modular, scalable and extendable digital programs that start with the reality of where you are today.

IDC’s Digital Use Case Map for Retail spells out how to reverse engineer a roadmap to get your organization to your longer-term scenarios that are tailored to your corporate vision by incorporating the types of use cases you’ll need to get you there.

For example, hyper-personalized engagements enable retailers to develop a deep understanding of customer lifestyles and habits and leverage real-time information to monetize such experiences. This type of contextual marketing is a fundamental part of retail marketing and at the heart of modern business models, with the objective of generating a single view of the customer that translates into advanced targeting of messaging, experiences, and offerings.

However, the problem is that next-generation contextual marketing means aligning all of a customer’s interactions to his or her specific situation and lifestyle. This is the longer-term objective—otherwise known as Horizon 3. It requires unifying multiple data silos for a single view, and executing a personalized, orchestrated engagement strategy, which we’ll call our mid-term objective or Horizon 2. But of course, none of this is possible if retailers can’t leverage data from their ecosystem to gain insight into their customers and understand their specific needs better today—our short-term objective or Horizon 1.

A modular roadmap

This is just one example, but use cases like these should be an essential part of your digital roadmap. IDC identified more than 450 of them and found that successfully executing digital at scale requires use cases with capabilities that can be easily transferred across the enterprise, ranging from unified commerce platforms to next-generation payments. Think of these use cases as a foundation to enable more advanced uses cases to build on by layering them into your mid-term and long-term horizons.

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These use cases can be used to focus on business value, prioritize technology investments, facilitate innovation strategies, and identify when and where different executives need to get involved.

One of the many benefits of this approach is that it allows you to create a roadmap that’s modular (as use cases can be swapped in and out), as well as scalable (by factoring in the next horizon of your strategic development plan). And because the roadmap is extensible, as new technologies in your long-term horizon mature and go mainstream, they can easily be folded into the mix as required.

Think of it as hands-on, step-by-step guidance that can show you how to get started in the reality of your day-to-day here and now, with a roadmap to the longer-term scenario of how you want your business to operate in the future. Applying this framework approach and elaborating on the innovation process as you’d like it to be, means it’s no longer a best-guess scenario, but rather an acceleration path to digital maturity.

SAP is one of the world’s largest business software companies. Its SAP hybris subsidiary provides the e-commerce platform for 15 of North America’s Top 1000 online retailers, according to Top500Guide.com.

 

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