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Are retailers wasting an innovation opportunity?

26th Jul 2021
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The pace and scale of digital transformation within the retail industry since the beginning of the COVID-19 pandemic has been nothing short of phenomenal. For more than a year, businesses across the sector have driven through wide-ranging innovation projects at high speed, to meet dramatically changing customer needs and ensure their workforces can continue to operate effectively.

Just a look at some of the emerging trends in retail shows the pace and scale of innovation since the beginning of the pandemic. We’re seeing social commerce coming of age, highlighted by partnerships between TikTok and Shopify and the launch of Facebook Shops. There’s a marked increase in online brands opening up offline spaces - the launch of Amazon Fresh grocery stores for example. And more and more online fashion brands are now offering customers virtual fitting rooms using augmented reality (AR) and virtual reality (VR) technologies.

Of course, these are the headline-grabbing innovations but we shouldn’t forget that across the retail sector, within organizations large and small, IT departments have been driving through digital transformation programs to launch the new digital services that have enabled retailers to navigate through the pandemic.

In our most recent report, Agents of Transformation 2021: The Rise of Full-Stack Observability, we found that digital transformation in the retail sector accelerated at a faster rate than in any other industry during 2020. On average, innovation projects which would previously have taken 23 months to implement were rolled out in a mere seven months last year.

Retail leaders have seen the art of the possible when they prioritize and invest in digital transformation. They’ve been able to deliver enhanced digital experiences for customers and staff, and to completely redefine their propositions and operating models to compete in the future economy.

The expectation now is that this focus on innovation will continue throughout 2021 and beyond. Retailers will want to maintain the momentum they’ve built up around digital transformation. As stores start to re-open in some markets, retailers will grasp the opportunity to re-configure the in-store experience. We’ll see much greater interest in the use of Internet of Things, far more use of AR and VR technologies when it comes to fashion retail, and the introduction of drive-through collection for bricks-and-mortar retailers.

Complexity is now the biggest threat to rapid digital transformation

The upshot of all of this innovation and the explosion of cloud computing initiatives is massive complexity within the IT department.

Whether it’s a wholesale move to public cloud, or retailers preferring a hybrid approach of public and private cloud environments, technologists now find themselves attempting to manage an increasingly dispersed, patchwork of legacy and cloud technologies.

Unfortunately, many technologists in retail are still relying on multiple, disconnected monitoring solutions, and therefore they lack a single, unified view of IT performance up and down the IT stack, from customer-facing applications through to core infrastructure such as network and security. This is making it impossible for them to identify and analyze performance issues early so they can be resolved before they impact end users.

Additionally, technologists are unable to understand how performance issues impact customers and business outcomes. They have no way of linking IT performance data to real-time business metrics. This means that they can’t assess which issues really matter, and they’re unable to prioritize actions, innovation and investment based on real-world commercial impact.

The consequences of this lack of observability will soon start to be felt beyond the IT department. Our research uncovered significant fears amongst retail technologists around the sustainability of rapid digital transformation within their organizations. As many as 76% reported that, while their organization accelerated innovation in 2020, they are now concerned that they don’t have the IT tools to maximize the full potential of this investment in 2021.

Observability is critical to maintain momentum

Looking ahead, IT leaders will be seeking to consolidate and simplify their IT ecosystem to make their environments easier to manage. It’s likely we’ll see retailers adopting new approaches such as SRE (Service or Site Reliability Engineering) operating models and accelerate adoption of standards such as OpenTelemetry to become more agile.

These new approaches require new operating models, new security approaches and new skills; skills which are in high demand and are equally coveted by other industries who may have bigger budgets to attract individuals with the necessary skills and talent they need. This is the reality in which CIOs and IT teams now exist - a cycle of innovation, complexity and simplification, and a constant battle to ensure they have the right skills, visibility and insights to optimize performance.

Worryingly, the Agents of Transformation 2021 report found that nearly three quarters (74%) of retail technologists predicted that the inability to connect full-stack observability with business performance will be detrimental to their business in 2021; and 83% stated that they need more comprehensive observability tools if their organization is to achieve its innovation goals.

These findings should be a red flag to business and IT leaders across the retail industry. After a year in which so much progress has been made in innovation, there is now a very real risk that progress might stagnate simply because their technologists don’t have the tools and insight they need to continue delivering flawless digital experiences.

It’s no exaggeration to say that those retailers who fail to address this issue before it escalates any further will jeopardize the investments they’ve made over the last year and, worse, they will fall behind in the retail innovation race.

We can’t keep asking technologists to do an impossible job. How can they be expected to launch new AR-enabled virtual fitting rooms or deliver seamless omni-channel experiences, when they can’t even see how their actions are impacting end users and the business?

Retailers have to ensure their IT departments have real-time observability across the full IT estate and are able to connect IT performance to business outcomes. In doing so, they will enable their technologists to deliver faultless digital experiences and the game-changing innovation they need to succeed.

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