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SOFTWARE

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Leaders vs. explorers: Who is winning retail's race to digital transformation?

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02/12/2019 | 11:51am EST

By Oliver Guy, global industry director, retail, Software AG

Digital transformation is a reality for most industries and businesses today, but few are experiencing the urgency more than retail. With steep competition from Amazon and other disruptive competitors, retailers that want to survive must invest in improving everything from customer engagement to operational efficiencies to serve increasingly digital shoppers.

The good news is that retailers are beginning to build digital competencies at the executive levels and the speed of adoption is increasing. On the whole, retailers that are implementing these tools and strategies are experiencing significant benefits. However, this doesn't come without challenges. The same retailers are also encountering some form of schedule delay and cost overrun due to vague requirements, underscoring the need for clear vision and messaging from leadership.

To drill own on the triumphs and tribulations experienced by retailers embarking on their digital transformation journey, a new independent survey, Digital Adoption Survey 2018 Report, sponsored by Software AG seeks to shed light on its current state. By exploring the digital deployments of digital leaders vs. digital explorers, retailers can start to understand the key factors helping or hindering their digital transformation.

Digital leaders vs. digital explorers

A group of Digital Leaders, defined as companies that are very active in applying digital technologies to business problems, has emerged and is already reaping the benefits born from digital adoption. In addition to outperforming their peers, Digital Leaders are establishing digital platforms to enable them to capitalize on changing trends and customer patterns inherent in a digital age. Digital Explorers, which include companies that are exploring digital but have not fully committed to broad implementation, are not as far along. While it's clear that Digital Leaders have an advantage -- evidenced through higher growth and equity performance, here's how Leaders and Explorers approach digital deployments in four key technology areas shaping the industry.

Big Data and advanced analytics

Big Data and Advanced Analytics have generated significant interest from retailers, and it's an area they're thriving in. Retailers indicated that Big Data (76 percent) and advanced analytics (82 percent) efforts were either completed or in progress. However, 38 percent of Explorers reported completed at least a portion of their Big Data and advanced analytics deployment -- a sharp contrast to the 80 percent of digital leaders at the same state of deployment. Predictive analytics was the predominant form of advanced analytics followed by artificial intelligence. Interestingly, 80 percent of digital leaders are pursuing AI initiatives. Cost was the most frequent inhibitor of adoption in this area, followed by master data quality and availability of technical talent as the next challenges.

IoT

Retailers are early in IoT implementation. While 87 percent of retailers with physical stores are planning IoT initiatives, none were fully deployed. A majority of digital leaders (80 percent) are pursuing beacons/sensors and self-service kiosks/vending machines and digital signage. However, for the most part, digital leader's tendencies in IoT are in step with other survey respondents. The primary inhibitor for IoT deployment is business prioritization because it's not yet viewed as a critical enabler by the business. Poor or unclear business value is cited as the second largest inhibitor. Interestingly, despite IoT technologies generally being more expensive to deploy, neither leaders or explorers cited cost as the primary inhibitor to IoT deployment.

Development and architecture

It comes as no surprise that Digital Leaders are much more likely to apply a modern approach to information technology practices, and they tend to be adopting agile and devops approaches with their IT delivery teams. More fundamentally, they are also choosing to use independent integration platforms to insulate themselves from change and increase agility. The logic here is that retailers can focus on avoiding 'vendor lock-in,' thus are able to easily leverage technology from multiple vendors without constraints. From an agility perspective it enables retailers to rapidly support new business models and enable new approaches to streamline customer experience as the need arises.

Customer experience

As with Big Data and advanced Aaalytics, cost was the biggest inhibitor of digital customer experience adoption -- but that's not stopping leaders or explorers. Retailers are continuing their CX efforts -- which includes e-commerce, mobile and in-store technologies -- to the tune of 94 percent in 2019. CX was the area of digital adoption that was providing the most benefits to retailers, with 57 percent of retailers noting their CX initiatives were already delivering results. In fact, 80 percent of digital leaders already see benefits from their CX initiatives.

While 75 percent of retailers expect digital technologies to increase their annual IT budget in the coming year, it's still early days for digital technology adoption. Many retailers are still formulating plans for how to introduce more advanced technology and processes in their organization, but the digital leaders can serve as a path to emulate as they set to conquer the digital divide.

Copyright © 2019 Networld Media. All rights reserved., source Industry News

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Financials (€)
Sales 2019 900 M
EBIT 2019 252 M
Net income 2019 161 M
Finance 2019 270 M
Yield 2019 2,27%
P/E ratio 2019 15,03
P/E ratio 2020 14,26
EV / Sales 2019 2,34x
EV / Sales 2020 2,15x
Capitalization 2 375 M
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Average target price 39,5 €
Spread / Average Target 23%
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Sanjay Brahmawar Chief Executive Officer
Andreas Bereczky Chairman-Supervisory Board
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