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Organising for true omni-channel: the end of the digital director?

By Matt Houston, Associate Director at Javelin Group.

Recent changes in consumer spending behaviour are having a huge impact on the culture and organisational structure of major retail businesses. Whilst most retailers have recognised this (the organisational structure of today’s retail enterprise looks very different from how it did three or four years ago), the largest and most complex challenges still lie ahead.

Advanced retailers have today completed two of what will prove to be four phases of organisational transformation.

Phase 1: Early ecommerce and establishing a dedicated team

Phases one and two of the transformation are well known. In the early days of ecommerce, a traditional store-based retailer typically sets up a dedicated, specialist ecommerce team, led by a head of ecommerce/multi-channel.

Phase 2: Reintegrating ecommerce into an omni-channel team

In phase two, a retailer reintegrates functions and responsibility back from the separate silo into central, increasingly omni-channel business divisions. Most retailers today find themselves somewhere in the midst of phase two. With even advanced retail businesses only now at the end of phase two, we are only halfway through the transformation process.

Beyond phase two, a transition stage (phase three) will be required before the final re-shaping of the organisational structure from executive board downwards can take place (phase four). Retail CEOs must build a clear vision of their desired organisational end-state (i.e. end phase four) before embarking upon this transition and mobilisation phase.

The omni-channel organisational transformation process:

Phase 3: Centralising data and insight into a single business unit

Phase three (transition) is characterised by a focus on the centralisation of data and insight into a single and impartial business unit, allowing the retailer to move towards the customer-first mind-set required of any truly omnichannel business. Without the construction of an impartial data and insight function, any significant restructuring of the retail board is doomed to failure.

Phase 4: Restructuring of the executive board

Phase four is characterised by a wholesale restructuring of the retail board. This includes the creation of a chief customer officer (CCO) role, responsible for all areas of the business that touch the customer (e.g. marketing, all channels, customer service). Evidence of this trend already exists in the recent creation of this new role at Tesco, Morrisons and Asda as well as major US retailers such as Kohl’s.

Phase four will also see the addition of a new chief data officer (CDO) role to oversee the centralised and fully integrated data division. This function could sit under the CIO but must not sit anywhere in the organisation where its neutrality and impartiality is put at risk. There is limited evidence of CDOs being introduced in the retail industry but they are becoming increasingly commonplace in more advanced sectors such as financial services, insurance and media, in particular in the US. It is only a matter of time until retail follows suit.

The demise of the digital director

The fallout of the final two phases are the disappearance from the organisational design of both the retail director and the digital or omnichannel director role. Early signs of this trend can be seen at businesses such as Marks & Spencer, where executive director of multichannel, Laura Wade-Gery, this year assumed responsibility at board level for all stores as well as digital channels, and Selfridges, where Simon Forster’s role as multichannel chief has broadened to now also include marketing and supply chain.

Next steps for retail CEOs

Some retail CEOs may feel that these organisational changes lie too far ahead to worry about today. For others it is already high on their agenda. In truth, all retail CEOs should be planning now for transformation by first understanding their own ‘state of readiness’. This means appraising and benchmarking, the following:

1. Customer proposition and experience

  • How advanced and how omnichannel is our current customer experience?
  • Do we have a clear vision of the future business requirements that our organisational design needs to help deliver?

2. Organisational structure

  • How far progressed are we through the four phases of organisational development?
  • To what extend does the scale of my omnichannel director’s team align with the scale of his or her P&L?
  • Has the authority fallen out of line with the accountability?

3. Culture

  • How much work is left to do around hearts, minds and knowledge?
  • How does this vary at different levels of the organisation?

4. Data and systems

  • How strong, how centralised and how impartial is our data and analytics capability?
  • Do I have the right KPIs, reporting and incentives in place?

For the most advanced retailers, another set of requirements emerges for the CEO. They are as follows:

Defining short- and long-term structural redesign

  • What should our end goal organisational structure look like?
  • How would this be phased over time?

Beginning preparations and mobilising for change

  • What do detailed roles and responsibilities look like in the future?
  • What skill-sets and capabilities are required in future that we do not currently possess?
  • How can these skills be developed or acquired?
  • What training requirements exist?
  • How can I move people around my organisation today to help develop a team that is fit for purpose in five years’ time?
  • What data, reporting and incentive scheme requirements exist to support the transformation?

Only if retail CEOs plan ahead today for these challenges, set out a long-term vision and construct a clear change management programme, will they find themselves at the helm of agile, progressive and optimally aligned retail businesses in the near future.

First published in: Essential Retail

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For further information, please contact Matt Houston.

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