Strategic Planning: Is IT an after-thought or a critical player?
Twenty-five years ago, retail technology was at an infancy stage. IT resources were pure technologist applying technological solutions. They spent most of their time maintaining mainframe applications and supporting users. Decision makers would often decide on strategic planning with little consideration to its impact on the organizational systems. IT was an after-thought. It’s like trying to force a piece of the puzzle realizing much later that you don’t have the right piece. You wasted your time as well as everyone involved. Surprisingly enough, this is still going on today. There are organizations that continue to bring IT into the loop only after the decision or planning process.
Before we dive into the topic at hand, let’s go back a little in history.
In 1969, IBM Labs invented the magnetic strip on credit card, still being used today. Supermarkets started scanning UPC codes invented by IBM in 1973; also in use today.
Thirty years ago, IBM came out with its first Personal Computer, featuring the Intel 8088 processor running on DOS. Four years later, Microsoft introduced its Windows OS, twelve months after Apple had released the Macintosh with a Graphic User Interface. Cellular phones looked and felt like paperweight. The number of PCs shipped worldwide went from zero (0) in 1981 to 100 million in 1988, reaching approximately 175 million in 1991. Ten years later, that number grew to 961 million PCs. By the end of 2011, it will surpass the 3 billion cumulative mark.
Similarly with mobile devices, Nokia and Motorola lead the way with their pocket size and razorblade thin phones in the mid 90’s only to be upstaged by Apple’s revolutionary iPhone in 2007. The number of smartphones shipped worldwide went from 140 million in 2007 to an estimated 472 million in 2011. One interesting fact is that in Q4 of 2010, worldwide smartphone shipments surpassed PC shipments for the first time ever.
Prior to the arrival of personal computers in the corporate world, retail was pretty simple. First came the mechanical cash registers in the late 19th century, followed by the electric cash register, which have evolved into standalone electronic cash registers as we know them today (Sharp, Casio, Royal for example). In the mid 70s, McDonalds revolutionized the retail industry with the first microprocessor-controlled cash register systems. Around that same time, IBM came out with its 3650 and 3660 Store Systems. Behind these systems was a mainframe computer used as a store controller that could control 128 IBM 3653/3663 point of sale registers. It was the first commercial use of client-server technology, peer-to-peer communications, local area network simultaneous backup, and remote initialization. Mainframes were pretty much the norm back then. Fancy stuff for those days… Many are still in use today. They are smaller and more powerful. They can even run a variety of operating systems.
In 1992, seven years after Microsoft came out with it’s first Windows operating system, two gentlemen, Martin Goodwin and Bob Henry, created the first point of sale software that could run on the Windows platform. Guess how they named it? Retail IT! Feels like the birth of retail technology…
After the ERP boom and surviving the Y2K scare, then came the Dot.com bubble burst. Organizations felt the need to downsize. IT resources were especially vulnerable as this function was seen as a necessary evil, much like accounting. However, ERP systems made it possible to do more with less. During that time, large ERP vendors shifted their tactics toward the SME market. It was a time of consolidation; Microsoft with Great Plains, SAP with Triversity, PeopleSoft with JDE, Oracle with Retek and Oracle with PeopleSoft just to name a few.
Now, if we fast-forward to 2011, we can all agree the technological landscape has drastically evolved. There is a slew of retail applications (integrated ERP and merchandising systems, WMS, POS, CRM, interactive kiosks, social media, ecommerce, assisted shopping, planning & allocation, business intelligence, space management, workforce management, HR, payroll, managed, hosted or SaaS, etc…) and hardware (wireless registers and pin pads, contactless payment devices, RFID, scanners, traffic counters, tablets, etc…).
OK. History class is over. Now let’s dive into the heart of the topic.
Strategic Technological Planning:
Today’s technology pace is much faster than what it was three decades ago. There are a variety of technology vendors offering a wide range of solutions. Finding the right solution for your needs is not an easy task.
Core retail applications as well as the infrastructure required to operate them have become complex to implement and support, but most importantly, they have become strategic to your business. Such technology allows you to better plan and allocate your merchandise as well as your workforce. It enables you to establish and maintain a closer contact with your customers, allowing you to better understand who they are, what they like, their shopping history and to adapt your promotional tactics accordingly. It allows your buyers and vendors to easily communicate and to optimize your supply chain. It allows your warehouse and distribution centers to efficiently move merchandise to your stores. It allows your stores to efficiently process customer orders and sales, to assist shoppers and to improve their shopping experience.
Twenty-five years ago, retail technology was at an infancy stage. IT resources were pure technologist applying technological solutions. They spent most of their time maintaining mainframe applications and supporting users. Decision makers would often decide on a strategy with little consideration to its impact on the organizational systems. IT was an after-thought. It’s like trying to force a piece of the puzzle realizing much later that you don’t have the right piece. You wasted your time as well as everyone involved. Surprisingly enough, this is still going on today. There are organizations that continue to bring IT into the loop only after the decision or planning process.
To succeed in today’s world, the IT group needs to be part of the overall business strategic planning process since technology impacts every function’s ability to deliver its respective functional plan. Information technology has become a vital and sensitive part of an organization as it brings together people, processes & technology. Technology differentiates. It helps improve overall business performance. But it requires IT executives and resources that over the years, have learned to become business-savvy with a much deeper understanding of the organizational performance metrics and all related dependencies.
Retailers can no longer exclude IT from key strategic meetings and operate under the old saying: “if it’s not broken, why fix it?” Competition is fierce and technology solutions as well as optimized processes will definitely play a key role in retailers’ performance and viability. In this day and age, retailers must innovate to survive: innovate from a technology, business strategy and management style perspective. This is why leading retailers surround themselves with an IT leadership that brings business acumen, vision, strategy and excellent communication skills.
Can retailers whose IT department is an after-thought and who did not keep up with technology over the last 10-15 years continue to operate efficiently and survive? Maybe. But not for long!