Technology and the retail industry are changing–and changing fast. In today’s retail landscape of rapid digital transformations, getting ahead and staying ahead can provide a major advantage.
McKinsey’s Digital Quotient Survey found that digital leaders in the consumer and retail industries generate 3.3x the total shareholder return of digital laggards. Everything from self-service checkout to omnichannel experiences can help that bottom line.
The problem, however, is that tech never sleeps. The disruptive power of trends like e-commerce has gutted malls and big box stores. Some players, such as Walmart, continue to successfully pivot, while others—RIP Bed Bath & Beyond—fade into oblivion.
Yet, it’s not like you couldn’t go on bedbathandbeyond.com to purchase high thread-count sheets. Furthermore, that purchasing flexibility characterizes the rapidly changing consumer behavior that today so drives retail innovation and digital transformation, where retailers must trends and innovations make the most sense for them and their customers. Many retailers did their best to keep up with those customers, but still failed. What happened?
From our perspective, it’s all about pace. When retailers don’t pace their digital transformations properly, they can find themselves in hot water.
Some retailers see tech adoption as a marathon: even walking over the finish line is better than nothing, they reason. Others see it as a sprint. They push through a rapid digital transformation, and then, feeling that they’re all caught up, they sit down and watch the world pass by as they catch their breath.
Successful companies take a different approach. They use tech to support their operations by running a series of sprints.
They know that they need to keep running at peak performance, but they also understand that they need to stop every now and then to assess the situation, adjust, and take off again.
What this looks like on the ground is retailers saving money. They cut costs by not needing to completely upgrade their software and hardware systems at every new release.
Modular hardware for operational longevity
Before IBM released the System/360, the world’s first modular computer of the early 60’s, computers were tightly integrated devices that had to be built from scratch on a case-by-case basis.
“The support of older applications and systems was becoming a problem of nightmarish proportions [because of] the growing complexity of the systems and the interdependent structure of their designs,” writes Harvard Professors Kim Clark and Carliss Baldwin in their book Design Rules: The Power of Modularity.
“Each new computer system had to be designed from the ground up, and only new systems could take advantage of new technologies,” she continues.
Sound familiar?
Just as hardware modularity enables users and businesses to customize and upgrade their machines to meet changing requirements, retailers can take advantage of modular hardware to offer changing and more personalized customer journeys.
Today’s customers have unique, non-linear customer journeys, and they expect retailers to meet them where they are. That often means providing technologies that let consumers communicate with brands, check inventory levels, and take control of their own experiences.
When retailers are stuck with inflexible hardware, they may feel bound between two choices: either throw everything out or try to ignore the problem and work around it.
That’s why Matt Redwood, VP of Retail Technology Solutions at Diebold Nixdorf, emphasizes the importance of modular hardware. He says it “allows retailers to build up and configure their own devices. They get a much more tailored technology approach to their stores and their consumers.”
Just as IBM’s modular hardware shifted the paradigm when it came to customizing and extending the lifespan of computers in general, modular retail hardware enables retailers to stay flexible and get more out of their technology investment.
“That means they can drive a better in-store experience, but it also gives them longevity, because they can swap out modules and units and extend the life cycle of those devices in stores,” Redwood continues. “So it’s very green, very environmentally friendly, but it also drives a lot of future-proofing and flexibility for retailers.”
A white paper from Diebold Nixdorf drives the point home. “Retailers unable to adapt will see consumers doubt their relevance,” they write. “Modularity offers this flexibility and agility to quickly respond to changes in consumer demand and to competitive threats.” For example, retailers can more easily incorporate innovations like self-checkout, in-store ordering via kiosks, and mobile self-scanning.
In other words, the best way to optimize for longevity is to plan for change, to make your operations more responsive and flexible. Much like how staying limber can prevent back surgery later in life, retailers who take this approach will find that they have a head start in the competition when it does come time to sprint.
Flexible software for operational longevity
Flexibility doesn’t stop at modular hardware. It’s just as important for retailers to cultivate openness in their software ecosystem, both for in-store devices and back-end infrastructure.
Open APIs, publicly available application programming interfaces that enable developers to interact with software, are key here. Even proprietary software can include open APIs. Just like modular hardware, they provide flexibility by opening the door to future integrations and adaptations.
The important thing to keep in mind is that this future is closer than it might appear. Especially as retailers adopt AI to provide personalized shopping experiences and other novel use cases, we find ourselves at an exciting inflection point.
It’s hard to say what’s going to happen next. All we know is that it’s going to happen soon.
That’s why retailers need flexible software. “Openness enables and smooths the permanent evolution of consumer journeys and IT landscape in order to cope with a future which is increasingly hard to predict,” advises a Diebold Nixdorf white paper on Open Retailing.
For Matt Redwood, that “word is innovation.” In a recent interview, he explained, “We talk about it a lot, but there’s a lot more deeply rooted innovation now, particularly in the self-service space, where a lot of vendors are looking at how they can improve the consumer journey, drive greater efficiencies for retailers, and generally make the overall experience of implementing and using the technology as seamless as possible.”
The next evolution
By adopting modular hardware and flexible software, retailers put themselves in a position to sprint when they need to. Because their systems can change alongside technological advancements and customer demands, they have the opportunity to reassess and move forward.
Most importantly, they don’t have to completely rip out their current set up. Retailers can build upon flexible technology for operational longevity.
Modular hardware and flexible software enables retailers to adapt to changing customer journeys and offer more personalization. It also speeds up the process of adopting new technologies like AI.
The evolution that you need to make today is to get ready for tomorrow’s evolution.
