Retailers need to innovate in order to compete with Amazon. However what are the major barriers to innovation and how should retailers organise themselves to innovate and differentiate better.

1. UNLEASH YOUR DIGITAL VISION
#WITHOUTCOMPROMISE
Oliver Guy
Global Industry Director
Surviving in the Age of Amazon
@OliGuy

2. 2 |
SESSION TOPICS
Learning Session
• Nikki Baird, Managing
Partner - RSR Research
Panel Session
• Exploring obstacles to
innovation
Introduction
• Perspective on disruption
and the part that
Innovation plays
• Obstacles to innovation

3. 3 |

4. 4 |
DISRUPTORS DISRUPT BY
SOLVING A PAIN POINT IN THE
CUSTOMER EXPERIENCE

5. 5 |
Pain point solved:
‘When I find what I like, they never have my size’
Pain point solved:
‘I want to message my friends for free, no matter what
phone they have’
Pain point solved:
‘I struggle to choose the right clothes for me’
Pain point solved:
‘There’s nothing on TV I want to watch’

6. 6 |

7. 7 |
DISRUPTORS DISRUPT BY
SOLVING A PAIN POINT IN THE
CUSTOMER EXPERIENCE

8. 8 |
DISRUPTORS DISRUPT BY
SOLVING A PAIN POINT IN THE
CUSTOMER EXPERIENCE,
ENABLED BY INNOVATIVE USE
OF TECHNOLOGY

9. 9 |
HOW DO YOU MEASURE
INNOVATION?

10. 10 | https://www.forbes.com/sites/georgeanders/2017/05/23/the-looming-retail-bailout/#33a3c2c84ec7

11. 11 |
CONNECTED RETAIL
• Enabling an efficient differentiated
customer experience.
• Fulfilling customer needs at any time
across all channels.
• Customer journey steps being agnostic to
the previous steps.
• Achieving transparency and visibility
across the business.
• Understanding inventory,
merchandise, customers.
• Enabling automation & improved
decisions.
• Leveraging Internet of Things technology
for competitive advantage.
• Re-inventing stores using IoT to aid.
• Improving customer engagement,
increase store & supply chain efficiency,
visibility.
• Automating & streamlining processes.
• Enabling new customer offerings and
processes to differentiate.
• Enabling customer journeys across
channels.
OMNI-CHANNEL RETAILREAL-TIME VISIBILITY
OPERATIONAL EFFICIENCY
CURRENT FOCUSES
INTERCONNECTED INITIATIVES

12. 12 |
CURRENT FOCUSES
HOW SOFTWARE AG IS HELPING RETAILERS
CONNECTED RETAIL
OMNI-CHANNEL RETAILREAL-TIME VISIBILITY
OPERATIONAL EFFICIENCY
Leading sporting
goods retailer
Large Asian
Retail Bank
• Kiabi enabled accelerated omni-channel
rollout across 32 countries
• $6Bn revenue sports retailer power their
integrated commerce framework with
Software AG
• Lidl achieved real-time visibility of inventory
across all stores to improve decision making
• BUT attained total visibility of customers
and merchandise to improve profitability
• $4Bn luxury fashion retailer increased
conversion by putting data in the palm of
Store Associate's hands.
• Large Asian retail bank generated 150,000
additional customer interactions each day
• John Lewis reduced project costs by
up to 15%
• Lowes enabled rapid addition of
customer propositions & streamlined
order lifecycle
Luxury Fashion
Retailer

13. 13 |
IS THERE SOMETHING
GETTING IN THE WAY?

14. 14 |
ARCHITECTURES SUPPORTING INITIATIVES

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OBSTACLES TO INNOVATION
EXAMPLE OF IOT INITIATIVES
RSR Research - http://www.rsrresearch.com/research/the-internet-of-things-in-retail-getting-beyond-the-hype

16. 16 |
VALUE PROPOSITION
FORMULA

As-IsBusiness Initiatives
TOP
PRIORITIES
Obstacles

Enablers


To-Be
Business
Case
$

17. 17 |
Business
Initiatives
• Smart Store Initiatives
• Price & Promotion
Initiatives – improved
execution
AVOIDING THE OBSTACLES
BUILDING A VALUE PROPOSITION

18. 18 |
Business
Initiatives
• Smart Store Initiatives
• Price & Promotion
Initiatives – improved
execution
As-Is
Landscape
AVOIDING THE OBSTACLES
BUILDING A VALUE PROPOSITION

19. 19 |
Business
Initiatives
• Smart Store Initiatives
• Price & Promotion
Initiatives – improved
execution
Obstacles • Non-Standard process
automation & control
between systems
• Inconsistent connectivity
between systems
• Delayed visibility of
information & issues
As-Is
Landscape

AVOIDING THE OBSTACLES
BUILDING A VALUE PROPOSITION

20. 20 |
Business
Initiatives
• Smart Store Initiatives
• Price & Promotion
Initiatives – improved
execution
To-Be
Landscape
Enablers • Automated control
processes across multiple
systems to drive efficiency
• Consistent connectivity
across the IT landscape
• Right-time visibility,
analytics and decisions
Obstacles • Non-Standard process
automation & control
between systems
• Inconsistent connectivity
between systems
• Delayed visibility of
information & issues
As-Is
Landscape

AVOIDING THE OBSTACLES
BUILDING A VALUE PROPOSITION

21. 21 |
Business
Initiatives
• Smart Store Initiatives
• Price & Promotion
Initiatives – improved
execution
To-Be
Landscape
Enablers • Automated control
processes across multiple
systems to drive efficiency
• Consistent connectivity
across the IT landscape
• Right-time visibility,
analytics and decisions
Obstacles • Non-standard process
automation & control
between systems
• Inconsistent connectivity
between systems
• Delayed visibility of
information & issues
As-Is
Landscape

Business
Case
• $59MM FTE cost reduction
• $48MM increase in
promotional sales
AVOIDING THE OBSTACLES
BUILDING A VALUE PROPOSITION

22. 22 |
”We really appreciate the way in
which Software AG are investing
time with us to help us align our
business priorities to our technology
investments.”
€15Bn Revenue
European Retailer
WHAT CUSTOMERS
ARE SAYING
SUCCEED

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BUT WHERE DO WE
START?

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LEARNING SESSION
Innovation In Retail: Why It’s Hard
Nikki Baird
Managing Partner – RSR Research

25. © 2017 Retail Systems Research. All Rights Reserved.
25
Innovation In Retail: Why It’s Hard
Nikki Baird, Managing Partner
September 2017

26. © 2017 Retail Systems Research. All Rights Reserved.
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Agenda
• Why Innovation In Retail Is Hard
• Why Technology Is About To Make It Worse
• What Retailers Can Do

27. © 2017 Retail Systems Research. All Rights Reserved.
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Why Retail Has An Innovation Problem
And it’s not Amazon’s fault, either.

28. © 2017 Retail Systems Research. All Rights Reserved.
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Retail Is Not Innovative
• Business process innovation, in particular, has been a
retail blind spot – retailers have spent the last 100
years optimizing the store-based business model
• Constrained by the idea of retail as a simple business
model difficult to execute: just buy low and sell high!
• Thin margins makes investing in R&D/innovation
highly risky
• Highly distributed, complex environment makes
experimenting highly risky
• Rise of technology & the innovation it enables is also
a blind spot: for most retailers, IT was a cost to be
minimized (and still is for far too many)
• To be fair, retailers may have a PRODUCT innovation
process – some concepts / experience may be
transferable

29. © 2017 Retail Systems Research. All Rights Reserved.
29
Even When Retailers ARE Innovative…
• They are largely constrained in their thinking by the fact that their ultimate goal is to sell
stuff.
• “Acquiring products” has been commoditized – that decision is now almost exclusively won
by lowest cost and/or fastest delivery
• Just like only 1-2 retailers can win in a war over offering the lowest price, only 1-2 retailers
can win in a war over who can sell stuff
• The only way to win is to change the game: to solve consumers’ problems so that you are
so ingrained in their lives there is no competition

30. © 2017 Retail Systems Research. All Rights Reserved.
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Disruptors Underscore The Problem
• Amazon invests more $$ in R&D than most retailers bring in in revenue
• White-space concepts are unconstrained by an existing asset base
• Bonobos, Warby Parker, Birchbox, b8ta, Rent the Runway, JustFab
• The whole structure of the retail business is at play
• Business model innovation
• Technology innovation

31. © 2017 Retail Systems Research. All Rights Reserved.
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Retail Is No Longer About “Selling Stuff”
• Like the railroad industry: Are
you in the railroad business or
the transportation business?
• Retail’s big question: Are you in
the business of selling stuff, or
are you in the business of
solving consumers’ problems?

32. © 2017 Retail Systems Research. All Rights Reserved.
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Matching Needs & Capabilities
Market Opportunities
Company CapabilitiesApplied Research
“Hammer looking for nail”
Pure Research
Seeking ground-breaking solutions
Adaptive Research
Innovation sweet spot
A lot of companies confuse “strategy” with “R&D” here – retailers especially.

33. © 2017 Retail Systems Research. All Rights Reserved.
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Portfolio Management
• Distinguishing between “infrastructure” investments that enable “payoff”
investments
• If an investment yields no downstream projects of value, it should be judged on
its own ROI – it’s a payoff project
• Infrastructure investments must be judged against more than just that project’s
or investment’s ROI – it’s about accounting for the potential the investment
creates for new value-delivering investments
• It’s a different kind of math to evaluate value platforms and enablers than it is to
value capabilities

34. © 2017 Retail Systems Research. All Rights Reserved.
34
Managing “In”
• Bringing innovation into the enterprise –
taking it mainstream
• Applies concepts of design for
manufacturing to innovation design
• Retailers made this mistake with
eCommerce – not designing the
processes or teams to ensure they could
“manage in” the learnings of
eCommerce to the larger business

35. © 2017 Retail Systems Research. All Rights Reserved.
35
Why Technology Is About To Make It Worse
It’s Not Just About Innovation Any Longer – It’s About Tech-Driven Innovation

36. © 2017 Retail Systems Research. All Rights Reserved.
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The Culprit: Cloud

37. © 2017 Retail Systems Research. All Rights Reserved.
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Traditional Approach to IT Implementation

38. © 2017 Retail Systems Research. All Rights Reserved.
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Cloud & The API Economy Changes Everything
• It’s not about a complete,
rich product & done
• It’s about speed to
learning
• A working product all
along the way
• Continuous improvement
that never ends
• APIs and service calls,
rather than integration

39. © 2017 Retail Systems Research. All Rights Reserved.
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The New IT Deployment Process
• Configuration, not customization
• 75-95% vanilla
• Take the recommended base case & ID only very special cases where it
absolutely does not fit
• Create extensions – again, not customizations – for those very special cases,
which also need a very strong business case

40. © 2017 Retail Systems Research. All Rights Reserved.
40
Machine Learning’s Impact
• That whole continuous improvement thing –
what if the software did that all by itself?
• What if companies no longer had to dedicate
resources to ensuring process & technology
alignment, except to make sure the AI is still
working?
• Key factor to AI success: “Time to Learning
Curve” is FAR more important than time to
deployment or initial ROI

41. © 2017 Retail Systems Research. All Rights Reserved.
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Retail Is Screwed
• “Technology Capabilities” is
replacing “Company Capabilities”
in innovation considerations
• Most retailers have so under-
invested in IT, they are already
hopelessly behind here
If retailers suck at TECHNOLOGY, and they suck at INNOVATION, what hope do
they have to compete in a world of TECHNOLOGY-driven INNOVATION?

42. © 2017 Retail Systems Research. All Rights Reserved.
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What Retailers Can Do
What They ARE Doing – And What Else Is Next
https://www.bizjournals.com/cincinnati/news/2015/05/15/macys-ceo-clues-us-in-to-whats-coming-out-of-a.html

43. © 2017 Retail Systems Research. All Rights Reserved.
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Retailers With Innovation Labs
• Walmart
• Sephora
• Kohl’s
• Sears (iR Labs)
• Staples
• CVS (Digital Innovation Lab)
• Lululemon
• Walgreens
• Macy’s
• Home Depot (Black Locus)
• Lowe’s
• Tesco
• Nike (Innovation Kitchen)
• American Eagle Outfitters
• Nordstrom
• …

44. © 2017 Retail Systems Research. All Rights Reserved.
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Macy’s
https://www.slideshare.net/Dreamforce/how-macys-does-mobile-
deepening-retail-engagement-with-salesforce

45. © 2017 Retail Systems Research. All Rights Reserved.
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More Than Labs…
• Partner with technology firms to stay on top of developing technologies
• AI is moving very fast
• Robotics is moving very fast
• Blockchain will probably be a core technology in enterprise use by 2020
• Create R&D-based methods for evaluating new ideas
• Customer engagement
• New customer experiences
• New business models
• Don’t wait until the next Stitch Fix or Birchbox or Blue Apron (or Amazon) threatens your
business model – invent the disruptor yourself
• Upgrade your technology infrastructure: if you averaged spending 2% or less of
Revenue on IT during any of the last 20 years, you have been under-investing in
IT and it is probably the largest threat to your business today.

46. © 2017 Retail Systems Research. All Rights Reserved.
46
Agenda
• Why Innovation In Retail Is hard
• Why Technology Is About To Make It Worse
• What Retailers Can Do

47. © 2017 Retail Systems Research. All Rights Reserved.
47
Thank You

48. 48 |
Nikki Baird
Managing Partner
RSR Research
PANEL SESSION
INNOVATING IN THE AGE OF AMAZON
John Rossman
Author – ‘The Amazon
Way‘
Ashish Khurana
Managing Partner Retail
& CPG
TCS
Don Adams
Senior Software
Engineer
W.W. Grainger

49. 49 |
SUMMING UP

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BUT WHERE DO WE
START?
• Where is our biggest need?
• What are our biggest obstacles?
• How do we compare with our peers?

51. 51 |
BUT WHERE DO WE
START?
• Where is our biggest need?
• What are our biggest obstacles?
• How do we compare with our peers?
• Ten-minute assessment:
http://digital.softwareag.com/

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THANK YOU
Oliver Guy
Oliver.Guy@SoftwareAG.com
+44 7721 956697
@OliGuy

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