Cloud Business Transformation in Retail

“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.” – George Westerman, MIT Sloan Initiative on Digital Economy

For years, retailers have been trying to keep pace with ever-evolving consumer demand for a personalized experience that blends the physical and virtual worlds.

That demand has only intensified during the global pandemic, which 65% of consumers say has changed their online buying behaviors.^[1]

As a result, retail finds itself amid an exciting revolution in which the power has shifted from the retailer to the consumer. Consumers expect relevant content in relation to what they’re doing anytime, anywhere, in a format appropriate for the device they’re currently using. It’s their journey that dictates the retailer’s strategy. They are influencing product trends through reviews and social media, doing extensive product research online, and expecting a seamless omnichannel experience.^[2]

To stay competitive, retailers face tremendous pressure to deliver new business capabilities faster.  Businesses’ demands for tech-enabled capabilities are compelling technology executives to advance and accelerate their technology-adoption schedules. An increasing number of leaders have come to recognize the critical role of the cloud in facilitating their technological reinvention. Although most agree migrating to the cloud is both necessary and valuable, they are often burdened by their multiple, disjointed, and hard-to-abandon legacy systems. 

Now that there is consensus on the transformation being necessary, the question becomes how an organization—such as a retailer with many disparate legacy systems—can prioritize their investments in cloud migration. The following is designed to provide guidance in alignment with retail best practices.

An often-used phrase, “While it may seem difficult, it really isn’t,” by its pure definition doesn’t apply in this situation. Although the transformation isn’t necessarily difficult, it takes some serious thought and planning given the disparate systems. To do otherwise may result in chaos and create something other than the desired impact. Rather than migrating applications and processes en masse, retailers should employ the following criteria for prioritizing which applications to migrate first:  

• The application is ideally suited to leverage advanced cloud-enabled capabilities such as data streaming and artificial intelligence
• The application and processes drive maximum value for consumers

Although plenty of retailers still think of cloud as a cost takeout, the mindset and momentum of the industry is shifting towards innovating with data.^[3]

In the following section we will review some common applications that many retailers consider a priority, including a brief synopsis of how a cloud solution can help. 

Common Applications for Migration to the Cloud

Real-time inventory 

A view of real-time inventory is one of the foundational capabilities for successful omnichannel retail. Often the current POS and inventory systems are not capable of updating inventory in real-time. 

• Cloud data platforms can construct a real-time single source of truth for inventory levels across all channels and all users by connecting into data pipelines and unifying all data sources.

Pricing and margin management:

Hard as this may be to believe, pricing and margin management largely remain a manual process. Data are frequently distributed across multiple channels (in-store, mobile, web, and even social media) with no single source of truth, making insight generation extremely cumbersome and time consuming.

• Cloud implementation can assist through the enablement of automated updates of in-store and online prices and integration of real-time inventory, utilizing machine learning and rule-based applications to manage markdowns in real-time.

Website and recommendation-engine personalization:

Retailers are still struggling to get a 360-degree view of the customer, as this requires data reconciliation, attribution across multiple channels, and integrating with partner data sources.

• The cloud can fuel website and recommendation-engine personalization through real-time data aggregation and curation, providing a 360-degree view of the customer, personalization based on past preferences, and the use of intelligent AI to make future recommendations. 

Loyalty-program management

Loyalty programs have been a traditional tool for customer retention, but they come with challenges of their own. Customer identification across channels is difficult, and CIOs also face two significant technological hurdles: data is often siloed at the store level and is not always processed in real time.

• The cloud can more quickly integrate multiple data sources to enable a unified view of consumers across transactions and channels. Furthermore, retailers can take advantage of cloud-based capabilities to engage customers through personalized digital promotions based on real-time big-data analytics.

Selecting from one of the above use cases—or one more suited to your organization’s immediate needs—is the first step in developing your organization’s strategy. The prioritized list of applications is foundational in the development of the strategy.^[4]

Developing Your Cloud Strategy

Cloud implementation within your organization begins with a blend of strategy and governance. Leveraging both the Informatica Data Strategy and Data Governance frameworks as contextual models will ensure data intelligence is part of the organization’s digital transformation plan.

These frameworks provide a pragmatic approach to defining data strategy and data governance enablers within an organization to support your cloud-first, cloud-native strategy. Utilizing these frameworks as guideposts, the transition to the cloud, one application at a time, can be distilled into these four (relatively) simple steps.

Step 1: Collaborate across business and technology

 Ideally, this collaboration should occur during the prioritization discussions ensuring the technology meets the needs of the business. Utilizing the criteria referenced above, together the business and technology teams will need to develop a value-driven roadmap.

Step 2: Define Your Migration Strategy

There are many ways to move to the cloud, with each option offering different capabilities, timeframes, and benefits. In general, there are five main strategies organizations will adopt. Some may use a single migration strategy, but often different strategies can be used to migrate different systems based on your available resources and system requirements. Here are some of the more common strategies:

• Retain/Retire: Determine which systems will remain on-premises, which will be permanently retired, and which will migrate to the cloud. Analogous to cleaning your closet, this is where you’ll need to make decisions about what to keep and what to displace.
• Rehost: Lift-and-shift applications to the cloud using virtualization. This offers speed and ease but often means you don’t realize the full benefits of what the cloud can offer. Drawing on the analogy above, this is the same as simply moving items from one storage location to another. It can be very helpful but may not necessarily bring the full benefit of what you are trying to accomplish. 
• Re-platform: Create a completely new platform to offer the benefits of the lift-and-shift approach, while capitalizing on more of the performance opportunities the cloud can offer.
• Repurchase: Purchase alternative services from your vendors that are designed specifically for the cloud. This can be expensive or even impossible for bespoke applications.
• Refactor:  Build new applications using microservices.

Step 3: Define the data governance model

A good starting point is defining the core data governance capabilities needed to support both on-premises and cloud-based data. Organizations leveraging a hybrid cloud architecture, which most likely will be the situation in retail for the foreseeable future, may have data stored in on-premises data centers and cloud-based solutions. Effective cloud data governance starts with centralizing data governance and establishing control over all datasets regardless of where they are hosted. 

Step 4: Define your change management strategy

When an enterprise decides to migrate to a cloud-based data warehouse platform, it’s easy to get excited about the foreseen advantages (lower overall cost, improved speed and performance, etc.) and to become wrapped up in the technical side of the transition. While technical due diligence is a vital part of planning, it’s equally important to tend to the corresponding human factors—user education, adoption, and understanding—through a well-thought-out and well-executed change management strategy. 

All too often, organizations leave change management as an afterthought to be addressed once the technical transition to the new platform is complete. However, if users don’t understand what the change is, why it’s a good thing, and how it affects their work on Day One, the benefits of the transition will be delayed—if they are realized at all. Following are three key components to ensuring a successful change management strategy to migrating to the cloud:

• Conduct a comprehensive strategic change assessment: Remember that the ecosystem of stakeholders for your data migration goes beyond the front-end users who actually log on to the system. Gaining buy-in from end users of the data—the business users who receive the reports and use the data to make strategic decisions—is no less important.
• Create personas and target training and communication for each: Once you have a grasp of the stakeholder environment, you’ll want to create personas for each user type and build a training and communications plan for each based on their specific needs, preferences, and interests.
• Provide training: Different skills will be required with the transformation. A skills assessment should be undertaken to identify gaps and provide stakeholders the opportunity to re-skill and upskill.

Commit to the New

To be successful, any digital transformation effort needs to be led by the senior leaders of the organization.   Change can be difficult but can be made less painful with the right strategy and the appropriate level of support. Wherever you are on your transformation journey, Informatica can assist. 

The Informatica Advisory Services Team can assist through our Cloud Business Transformation Workshop, where one of our team members will help develop and execute the building and execution of the strategy. For additional information, visit our Services Catalog.

And don’t miss the opportunity to hear from industry experts and innovators at our virtual Digital Commerce and Supply Chain Summit.

^{[1] Accenture: Cloud – The Retail Essential} 

^{[2] IBID}

^{[3] IBID}

^{[4] McKinsey & Company: The cloud as a catalyst for retail}