Q: I talk to many retailers that are 18 to 24 months deep into costly retail software projects, trying to implement omnichannel capabilities. Yet they are nowhere near a deployment after spending a fortune on consultants and upfront fees. Why is this happening and how do I avoid the same fate?
Michael Dattoma: I will not insult your intelligence. You already know everything about what is working and what is not working in your retail business, especially when it comes to getting all your channels, your stores, and e-commerce, to all march to the same beat.
In fact, you may be looking at enterprise retail software to bring together customer channels, but you see the massive investment in time (1 to 3 years) and money (multi-millions) it is costing. You also know, that if not managed well, it can actually cripple your business. Many of these enterprise systems need to be built from scratch and are a massively high-risk, costly proposition. It is a long, tedious, expensive road before you get an actually completed solution that works for store, web and back office.
You may find yourself in this position right now, caught in a money pit of consultants and coding and feeling stuck. The allure of the large traditional enterprise players is a conditioned response to the idea that they are a safe decision because they can do all back-end and front-end functions under one roof. In truth, many of these enterprise systems have tried to add customer-facing solutions (store, web, unified commerce, clienteling, etc.) through acquisition, and even changed their name to rebrand, but still don’t have a fully built, deployable solution.
ERP (Enterprise Resource Planning) has been the driver for the core back-office applications for manufacturing for many years, but more than ever it is the customer-facing, revenue-centric applications on the front end where ROI is generated. ERP systems are great for the core accounting, manufacturing, and wholesale applications, but their attempt at customer facing, cross-channel applications have come up short. They are not designed to handle today’s customer-facing needs across store and web, and they are not architected for the new unified commerce retail order that puts the customer at the center. They were born from manufacturing, not from the connected customer experience demanding more from retailers than ever before.
The traditional backend modules needed to run a business are far more commoditized today, where front-end customer-facing applications need to be on a modern architected platform that allows retailers to quickly respond to customer needs with a single view of both the customer and inventory. That should be the driver of the retail technology decision, with the customer in the center. Retailers don’t succeed because they have an excellent accounting system; it is the front end customer engagement that wins the day.
Most enterprise systems have very weak legacy front end (POS, e-commerce) modules because they were added through acquisition, not organically built. As a result, they are not architected for the modern challenges and demands of unifying the complex customer-facing functions of stores and web. Customer facing applications are simply not their core business. They will tell you they can do it, give wildly impressive sales and marketing presentations, and charge millions to develop it, but the end result is millions spent and years of delays because it is not their competency. It is all an illusion. Many enterprise systems were not built for the challenges of the modern retailer to service customers across channels and there are land mines exploding all over the retail landscape for retailers who did not check under the hood. What has been positioned as a Ferrari in the sales pitch, is missing a key component, the engine that drives all customer engagement and revenue.
Many smart retailers not wanting to get caught in this enterprise software death spiral are taking a more measured, incremental approach. They take the best of what ERP offers (the core applications they need like Accounting, PLM, HR) and marry it to a modern cloud unified commerce solution that is ERP agnostic, seamlessly integrated, and designed to meet the deep customer-driven needs across all channels required to succeed in today’s retail environment. By doing so, retailers remove the high risk of ground up software developments, massive costs and delayed deployments.
Retailers need to build solutions around their customers — start from the customer and work backward as Steve Jobs always preached. To avoid the enterprise retail software death spiral you must not be a lemming and follow the masses into old technology paradigms that don’t apply. The back-end systems no longer rule the day. Although they are important and essential, it’s the front end unified commerce systems that hug your customers that determine the success of failure. The old model is dead and retailers are waking up to it, abandoning failed enterprise implementations after already spending millions knowing they were doomed to failure on the front-end touch points.
So the lesson is to put the focus on the front end, on the B–to-C applications first, on your customers, their experience. You need to invert the whole technology priority from the old guard (back-end systems that are a commodity) to the front end solutions where the stakes are so much higher when choosing the right solution and partner.
By focusing on a customer-driven, unified commerce engine that does not need to be built from scratch, retailers can put their customer in the center of their technology investments. Rather than be caught up in complex ground-up development and customizations, they can take advantage of solutions that are architected for that very purpose. From there, integrating the core back-office functions like accounting and manufacturing that complete the picture is done easily, effectively and efficiently.
Most retailers already have these back-office pieces in place; what they are missing is the front end B-to-C engine, the engine of revenue across all channels. This is how you avoid the enterprise software death rattle, caused by trying to make old guard back-end systems do something they were not designed to do, which is to engage and nurture the customer across all sales channels, physical and digital. The customer-facing technology needed to meet the needs of today’s omnichannel, unified commerce retail requires a fresh technology approach
This fast-changing retail landscape requires that you see the world as it is, in real time, and act quickly to respond to the new king of the retail technology hierarchy: your multi-channel customers. They are fickle, demanding and ruthless if not given full importance. Build your retail technology around service to that most important asset, the customer, and the revenue and success will flow accordingly. That is how you avoid the enterprise retail software death spiral.
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