About six months ago, I started as CDO at Kesko. What have I learned since?
Digitalization is tearing down the long-standing power structures of retail trade.
In this gauntlet, large size is not always an asset. New and more agile companies are able to adapt more easily to the ever-changing business environment. They are unhampered by the burden of age-old structures and software. They are able to develop, test, and deploy new processes and services more swiftly.
Kesko is one of the largest retailers in Finland. Obviously, size has its advantages: a large chain of brick and mortar stores is an asset in a multi-channel retail business. At the same time, large size makes reforming the company difficult, and forces us to reconsider the company structures and processes. How can we compete against smaller and more adaptable companies in a digital race towards happy customers?
Next, I will discuss five lessons I have learned during my entire career and as CDO at Kesko:
1. Digitalization is more than just online shopping
In retail business, discussion about digitalization often circles around online shopping. Online shopping is, of course, an important topic, but it is only a one small part of a larger whole.
At Kesko, digitalization affects everything we do: the way we work. The way we sell. What is expected of the employees that serve our customers. And, above all: what customers expect from us.
One of the biggest opportunities (and challenges) we face, is related to marketing. When we sell and market, our customers expect it to feel like a good service.
If we want to live up to the expectations and serve our customers better, we need to utilize the data collected of consumer behavior, both in-stores and online. Customers want retailers to understand their needs, and to receive carefully targeted and personalized messages and product offers.
A good example of comprehensive understanding of digitalization and its utilization is British department store, John Lewis. Simon Russell, Director Of Retail Operations Development at John Lewis, discussed the matter of digitalization at Kauppa 2016 seminar in Helsinki last October . John Lewis is a great example of how physical and digital retail can be combined into a functional whole.
2. 100 ideas are better than just one
The traditional waterfall model cannot be utilized in the digitalization process. The world shifts while you wait for the results, and the solution becomes outdated even before it is constructed.
It is essential to create a culture in which everyone is encouraged to try things out, and present new ideas. Coming up with one hundred ideas is better than coming up with just one. Failure is not fatal. It is a chance to learn a valuable lesson.
It is important for the executives to understand that tolerating failure is necessary, because facing failures cannot be avoided. However, trying and failing before making any large investments or heavy system integrations might be a good idea.
A company culture that encourages to experiment on what works, does not equal weak leadership and ‘let-us-see-what-happens’ attitude. You still need to have key performance indicators to measure the experiment. These KPIs will tell you whether or not the experiment should be continued, and new investments made.
Consumer feedback is essential when launching new digital services in retail business. Customers should be given an opportunity to take part in the development from an early stage on.
3. A revolution cannot happen in silos
In the era of brutal price war and global competition, customer experience becomes an even more important competitive advantage for retail companies.
Customer experience is comprised of all the interactions between a company and a customer: whether they are recognized or unrecognized, online or in-store, at the streets or in the media. Customers expect a seamless experience when shifting between different channels and mediums. They do not wish to interact with separate silos.
The physical organization structures and procedures do not function well in a digital environment. For the customer, a physical store and an online store of the same retailer are the same thing.
In order to serve customers better, no matter which channels they use, the organization must change. Artificial fences between departments, countries, and stores, both physical and online, must be torn down. Or at least one must learn how to operate through them, for the benefit of customers.
Kesko is working hard to learn the best practices of digitalization. And when there is a will, there is a way, and mutual development projects are plentiful. For example, different lines of business may have common goals when digitalizing in-store consumer experience. Many stores operate in the same basic principle, no matter what kind of products they sell. Therefore, best practices can be replicated from one retail chain to another.
4. Digital development officers form the core of development strategy
Digital development cannot be led only from above. One needs to gather a group of digital development officers from different departments in the company. Give them a genuine opportunity to develop the digitalization process and to make a difference, even though it may not be written down in their job description. Combine people from different backgrounds, who have the ability and desire to enhance and develop digital processes, and customer experience.
The executives should trust these officers, and empower them to guide the company’s digital agenda. The digital development officers should concentrate on how to serve the customers as well as possible. What if this works, and our customers will love us?
To succeed, any company needs both solid experience and unlimited, bold, and even radical thinking that benefits the customer, but is still based on financial facts.
5. If the business culture does not change, neither will anything else
Technology no longer hinders the digitalization of retail business. All the technical solutions needed already exist. The question is, who is able and bold enough to utilize digitalization in practice, and charm all the customers.
Digitalization has become a much bigger challenge to retail business than we could ever imagine, and it should be embraced. The change begins between our ears. If we do not change the way we think and do business, digitalization will never be part of our everyday lives.