How Retailers Who Connect Their Value Stream Network Can Thrive In The Age Of Software

By Dr. Mik Kersten, Tasktop and author of Project to Product: How to Survive and Thrive in the Age of Digital Disruption with the Flow Framework

At first, software was disrupting the retail experience itself with web and mobile access to e-commerce. As we progress deeper into the Age of Software, the disruptions are becoming much more profound. The operating model is changing, while entire business models, supply chains, and customer relationships with brands are being transformed by digital experiences.

While retailers map out their omni-channel and digital strategy, a troubling trend is emerging. The digital transformations intended to stem the tide and allow established retailers to compete in the Age of Software are either moving too slowly or failing. Yet the rate of change in digital platforms, as evidenced by companies like Amazon and Alibaba, is progressing at such speeds that moving slowly is not an option for survival. The problem lies in the way most established retailers are approaching transformation.

Beyond E-Commerce

With the e-commerce market hitting $2.3 trillion in 2017 and expected to nearly double by 2022, e-commerce is now fundamental to any service offering, if not crucial. However, while website and apps are primary sales channels, they are still only one element of a powerful 360 consumer experience — software supports a number of core parts of any retail business:

1. Front — user experience, website, apps, in-store functionality (i.e. payment, stock control)
2. Middle — business intelligence, analysis, marketing, research
3. Back — operations such as fulfilment, shipping, logistics, HR, payroll

Furthermore, an explosion of new digital trends and technologies are heaping further pressure and software-based complexity onto an organization’s IT systems. These trends — such as subscription models, beacon/proximity technologies, and voice-activated ordering (via Amazon Alexa and Google Home) — underline how critical digital products and experiences are. With tech giants and startups attempting to gain further control of the buying journey, the pace of innovation on this front has been relentless.

It’s crucial, then, for retailers to have complete visibility into how their systems and products are delivering customer value, as well as a clear idea of their product portfolio backlog so they can quickly address and prioritize the specific and oft customized needs of the discerning and unpredictable market. Accelerating the time to value (TtV) of products is key. The problem is, retailers have been taking the wrong approach to managing their software portfolios.

The Shortcomings Of Modern Software Delivery

An effective omni-channel approach demands feature-rich software that is delivered quickly, easy-to use, reliable, and flexible. A lack of functionality or service downtime can negatively impact sales, customers, employees, and a brand’s reputation.

When evaluating their software delivery capability to see how work (value) flows from request to delivery, IT leaders are quickly realizing their process is implicit and unmanageable. They have no real-time understanding of their product portfolio or use of resources. Their outdated infrastructure may have worked for their basic e-commerce needs a few years ago (i.e., a basic front-end website linked to payment and stock and delivery, for instance), but that was then. What about everything else that contributes to an omni-channel experience?

Why is it so difficult to become a software innovator in retail? In the research leading up to Project to Product, we studied the software toolchains of numerous Fortune 500 retailers and noticed two critical problems. First, the way IT work is managed and planned uses a project management model that is not suitable for digital innovation. Second, the infrastructure needed for innovation, in other words, the software equivalent of a fulfillment or supply chain management layer, was generally not present.

An organization’s software delivery value stream comprises many specialist tools, roles, teams, and processes. These teams collaborate via product-critical information such as requirements, features, defects, tests, etc. How they share this information is where many retailers are running into trouble. Instead of having a management layer connecting these tools and specialists, they have silos, and those silos both impede the ability to deliver software and obfuscate what is actually being delivered — the main impediment to digital transformation.

Connecting Your Value Stream Network 

A Value Stream Network is the IT equivalent of a supply chain or web. It is the layer that connects the various people, processes, and tools involved in software delivery so they can share product-critical information (value) in real time. It’s critical to software innovation, both from a productivity and a business visibility point of view.

 As demonstrated by the likes of Courtney Kissler at Nike (and formerly at Nordstrom), by connecting this dynamic network of specialist tools, retailers can automate the flow of work across their value stream to:

• Provide specialists with the accurate information they need, when they need it, eradicating manual handoffs. Macy’s, for instance, saved up to 600 hours in manual work in just six months by automating their processes.

• Provide end-to-end visibility of the flow of business value across the Value Stream Network, enabling management to create dashboards and reports for CIOs to make informed business decisions that help the business excel in an omni-channel world

• Enable better traceability for compliance issues, such as PCI security compliance to mitigate payment risks, General Data Protection regulation for consumer data security, and other standards

• Establish a modular infrastructure whereby retailers can introduce new tools and processes to enhance the software delivery process without disrupting existing product workflow e.g. implementing beacon technology without neglecting maintenance of e-commerce website.

With software at the center of an omni-channel approach, traditional retailers can adopt the playbooks that Amazon, eBay, and others are using to disrupt the marketplace to fight digital fire with digital fire — with the added bonus of their vast retail experience, history, customer base, and brick and mortar stores to offer a truly dynamic 360 experience.

To do that, you need two things: an infrastructure for innovation that will be provided by your connected Value Stream Network and a way of managing the flows in that network in a product-oriented way.

You can read more on how the Flow Framework can help you survive and thrive in the Age of Software in my book, Project to Product.

About The Author

Dr. Mik Kersten is the CEO of Tasktop and author of Project to Product: How to Survive and Thrive in the Age of Digital Disruption with the Flow Framework. For more information, please visit, www.tasktop.com.