I don’t need to tell you how tough this has been.
Retailers are in survival mode, focusing on their liquidity, helping to retain or furlough employees, and negotiating rents with landlords.
I get it, these are top priorities! We are all in this fight. The good news is that we are also starting to emerge from this nightmare, States and stores are beginning to re-open. It will be slow, but a new day will dawn.
At some point, I pray sooner than later, this will be deep in the rearview mirror, and life will return to normal. I believe retail will have its true renaissance! Customers will appreciate the retail experience more than ever after this, but it must be done exceptionally well. It requires a friction-less customer experience when you re-open your stores. And for that investment, retailers will be rewarded with revenue growth across store and e-commerce, higher margins, and customer loyalty.
This is the proverbial “Tipping Point” for retailers. Customers will not tolerate a poor in-store experience after relying on e-commerce like never before during the shutdown. The retailers who got caught flat-footed during this pandemic with technology that could not service their customers due to a lack of omnichannel capabilities are now moving these investments to the top of the stack.
One of them is Bed Bed and Beyond, so I wanted to share this article. I know your business is different, but every retailer needs to employ omni capabilities for their customers to drive revenue. Covid-19 has been a catalyst, a massive wake up call to what was already known in the “Amazon Age”. There can be no friction between the store and e-commerce.
This is about relevancy and survival, learning the lessons and pivoting quickly. It’s time to move out of fear and into a growth mindset.
Q: I recently read an article on the death of ERP, (Enterprise Resource Planning) systems with their massive costs, years to deploy, and very public failures to meet client outcomes. Yet, there they were at the NRF show, with massive booths and displays, still touting their end to end solutions. Is this death of ERP fact or fiction?
If you happened to attend the NRF show in January in New York City it is easy tounderstand the sense of overwhelm in making strategic technology decisions in this environment of constant, never-ending change. Retailers are trying to respond to customer expectations in order to stay relevant and competitive with all these new forces at play. They know exactly what they want to accomplish in terms of unifying channels, eliminating friction, but struggle with the right path to get there.
Where should a retailer begin to establish a technology platform and framework that will set them on the right course given today’s rapid pace of change where a wrong, capital intensive, time draining project can have a crippling impact on the business?
For many years, ERP (Enterprise Resource Planning) software has been purported to be the end-all, be-all for corporations looking to streamline their technology with an end-to-end integrated suite that many expected would solve the problems of disparate, non -integrated, solutions. This was the “safe” decision for many CIOs. However, what has become increasingly evident is that this “end-to-end approach” has not delivered the value promised by these ERP solutions with their massive sales and marketing machines. ERP systems have notoriously been slow to deploy, with massive costs to implement and maintain, and most critically have failed to achieve the desired results on average 30% of the time. That is a huge roll of the dice for any organization trying to respond quickly to an ever more competitive marketplace. The “safe” decision has now become potentially perilous.
The stories of failed ERP projects have become more and more commonplace. Just do a Google search for “Failed ERP” and you will understand why a recent research report stated that approximately 30% of ERP implementations fail to achieve even half the planned business benefits. That is frightening and it is causing many retailers to think twice about following this “lemming” approach to enterprise technology.
Here is an article in CIO magazine to that point: 10 famous ERP disasters, dustups, and disappointments.
This awareness of the high risk of ERP ground-up development projects have caused many companies to pause before they step into a 2 to 5 year undertaking, a lifetime in today’s fast-moving retail climate, where the people who actually made the decision may not be around long enough to see the project miss key milestones and potentially derail.
Depending on which studies and research you read, the ERP failure rate is anywhere between 30% to 50%, so as companies navigate these dangerous shoals they already know going in that there is a high probability of failure. Despite this knowledge, the sales and marketing muscle of these organizations can still seduce and position them as “safe decisions”. Nothing can be further from the truth. With tens of millions of dollars invested in systems that are failing, something has to give. With these continued public failures, the digital innovation and transformation in technology is likely to render these dated monolithic technology strategies irrelevant. When millions are spent, results are not delivered, and leaves a company worse off than they began, it is an unsustainable, failing model.
The origins of ERP were all noble, to eliminate the confusion, the chaos, brought on multiple software platforms that were not integrated. There was a time where no software within an organization would talk to each other, a time before open APIs, where one standardized solution seemed like the Holy Grail to eliminate the issues of separate technology islands. ERP vendors attempted to solve this issue with ground up development on a common platform, but in the process of doing so, the hubris was a complete loss of control to these vendors who now controlled every aspect of their operations. So while the original purpose was to help save these clients from their own non-integrated solutions, and it certainly made sense at the time, it makes little sense today, where agility and speed in the digital age are critical to survival. These slow moving, monolithic systems do not have the customer-facing speed and agility needed to respond quickly and pivot when necessary.
ERP began as a way to systematize processes but slowly morphed into an “Enterprise Resource Prison” where companies are shackled by costs and limited by function. The Industrial Age has moved into the Digital Age yet the ERP model is fully stuck in its manufacturing roots. Given this, it is appropriate to ask, are ERPs relevant to the 21st-century business? Perhaps for the standard tried and true back office functions like Financial, HR, Manufacturing, but none of this addresses the most important component of business success, the customer journey, and experience.
While ERP has been strong in traditional applications where companies have regulatory requirements that need to be managed, like financial modules, those regulatory requirements will not help generate a dime of ROI or profit to a business. They are not a revenue engine. The revenue generation engine lies firmly with the customer-facing applications of the new digital age. That is where investments need to be made to survive in a world of Amazon, where the customer is king. This requires agility and speed to service the customer that is beyond the scope and architecture of ERP legacy platforms.
In the new digital age, Customer Centricity and Flexibility have become central to business, especially in retail. Businesses are becoming more outward-facing. Traditionally, ERP systems covered planning, manufacturing, sales, marketing, distribution, human resource management, project management, inventory management, service and maintenance, transportation and e-business. The only issue is that they left out a crucial element, the Customer. They left out the customer journey, the customer experience, the Universal Customer, the Unified Commerce experience, and that that is where everything happens in revenue generation and profitability. The front-end customer-facing applications are where success and failure are determined.
If the customer is not in the center of your technology, you have a problem.
Modern retail businesses need to bring agility and speed to the customer experience. They require a technology stack, an architecture, with a fundamental shift away from single vendor mega suites toward a more nimble, curated application environment built on modern platforms. ERP implementations are rife with duplicated effort, customizations, manual integration and inconsistent data. Open APIs now allow more nimble customer-centric solutions to be implemented and tied to back-end systems (Traditional ERP applications) that bring high performance to the customer experience. That is the best of both world scenario where the shackles are removed to deliver an optimal customer experience across all channels.
The larger ERP players have been trying to solve this lack of customer centricity by acquiring front-end software platforms instead of developing them organically. As a result, they have been marketing end-to-end solutions that are more akin to a Frankenstein’s monster of bolted on integrations that have caused many of these implementations to become failing ground-up construction projects, costing millions of dollars with no clear endpoint.
This change from old guard ERP to the new nimble players is in motion. Companies are now seeing that they have far more options beyond this standardized ERP strategy. They see that the whole “end-to-end” pitch is a myth. Stringing together acquisitions is not an end-to-end solution. That said, big, entrenched enterprise ERP players will continue to slug it out because their offering are now legacy solutions, with customers deeply entrenched with millions and millions already sunk into it, and massive sales and marketing machines keeping the myth alive.
In a stroke of massive irony, the cloud has acted as life support for these old guard legacy systems, since companies that would never take on the expensive stranglehold of a 3 to 5-year on-premise ERP implementation, may be seduced to roll the dice the cloud. The cloud gives these platform the perception of being “modern” but it is the same old, same old. It is essentially putting window dressing on an antiquated model. The large ERP software companies are trying to shine up their legacy offerings in the cloud but it is the architecture you put into the cloud that matters.
There is a shift happening from the old guard systems to disruptive modern platforms.
There is a shift from the old guard, single-vendor ERP solution to more agile, nimble curated applications that work seamlessly via open APIs, (Application Programming Interfaces) that allow seamless integration between front end and back-end systems.
Companies realize that they now have the freedom to employ the best solution for the particular function, especially the vital customer-facing functions. There has been an awakening from the heavy emphasis and marketing mantra of “best practices” espoused by ERP vendors wanting to hang on to that “one vendor” mindset. Post-modern ERP will be a best of breed approach where the tradition applications can be handled by specific ERP modules (ie Financials, Manufacturing) and where the front end, customer-facing applications can be handled by more modern architected cloud solutions centered around the customer.
Rather than an end to end ERP behemoth that has no customer-centric ability, you use only the traditional modules of ERP (Finance, HR, etc) on the backend, and employ modern customer agility platforms (Unified Commerce, Endless aisle, CRM) to service and engage the customer on the front-end. It is these customer-facing applications that drive the revenue of a business, determine the future success. With the open APIs of modern a customer-facing applications, the ability to share data in real time with the backend applications makes the need to be controlled by a single vendor that cannot handle all the needs of the business, a thing of the past.
So how do you stay out of the ERP, Enterprise Retail Prison?
The great news for organizations today is that they can take advantage of the traditional back-end ERP style modules for the tried and true functions of Financials, HR, Manufacturing (and do these in Cloud even more efficiently) while utilizing far more modern customer facing, revenue generating cloud solutions to deliver a seamless sales experience for customers across all channels. The model of the single vendor ERP is an outdated, industrial age concept. It is all about employing the best solution and the power is in the hands of the retailer to deliver speed and agility and put their attention firmly on where it belongs, the customer.
These are exciting times for retailers in that they can now step into cloud solutions that deliver the customer engagement tools necessary to service clients across all channels, in real time, with a universal view of the customer. No matter how the customer engages with the brand (Stores, E-commerce, mobile) they can have the speed and agility to service them at the highest level and drive revenue. All the while these modern, agile front-end solutions can be communicating in real time with the more traditional ERP tools in the backend, like Accounting, to complete picture.
This is the how you stay out of the Enterprise Resource Prison.
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February 9, 2018
As was to be expected, the NRF show, held last month in New York, was very exciting this year and very well attended. It certainly looked like retailers were there to make something happen in 2018. While there, I had the opportunity to speak to many retailers, and although there was much buzz about the use of “AI and personalization” to better engage customers, most of them were there with one sole purpose: to find the way to unify all their sales channels and remove friction in that process. What was different between this year and last year was that many of these retailers have seemingly exhausted their efforts to try to make their current systems accomplish that goal.
“I just don’t think we realized how hard it was going to be,” said one retailer I spoke with, echoing the general sentiment. They have invested time and money to partially integrate systems such as CRM, Inventory, Order Management, but the issue for them is that the information is not always accurate and it is not in real time. The real-time visibility in these critical areas is just not available to help their staff service/support the customer, and the sales channel friction is a nagging ongoing issue.
When you are trying to do Unified Commerce, what good is offering “buy online and pick up at the store” when the system says it’s in-stock but the customer arrives and it is not? The opportunities to burn customer bridges and relationships are never greater when customer expectations are not met. Today’s consumer expects and demands a frictionless experience with little patience to the contrary.
Failing to get their legacy systems to play nicely together, many retailers were looking for a technology reset. There are certainly many paths one can take to achieve that “Unified Commerce” end goal, but the core focus center needs to be on the customer-facing applications. It is the touch points across the stores, e-commerce, and mobile where success is achieved or lost.
What was particularly interesting is that retailers were starting to see through the marketing mantra that many large players, such as ERP companies and others, are pushing regarding an end to end “Unified platform” to achieve this goal. They are finding that these large ERP companies are trying to paint this “end to end” picture by having acquired other companies, not developing the solution organically. As a result, there is no actual single platform solution; instead, one must cobble together different solutions that were not designed to talk to each other. Retailers are seeing that when they go down this path they are dealing with a ground-up construction project, not something that is ready to implement.
When they challenge these vendors and say, ok “show me this unified solution”, they see that they are still selling the old software they acquired, not some new “unified” version. So retailers are not only seeing that the “emperor has no clothes”, but are also realizing that the best path is a more curated approach, targeting the best solution for the particular job at hand. In terms of Unified Commerce and eliminating silos between channels, they are understanding that they do not need to spend millions of dollars on consultants and ground up custom development projects when these tools are available largely off-the-shelf if the system is architected for this modern retail environment.
Many of these retailers have ERP systems currently in place and realize that the promise of an end to end approach did not deliver the value they expected. They also understand that these systems are costly to implement and maintain. While there is an obvious comfort with ERP for the back-end traditional applications (such as financials, manufacturing, human resources), there is a realization that the customer-facing applications, the customer centricity, flexibility, and agility are severely lacking. In this retail age, the customer-facing applications are the Holy Grail of success and revenue growth – in fact, for survival itself! Clearly, there is a need to leverage different approaches to technology and look to the more agile, modern solutions for the customer-facing applications, while the old tried-and-true back-end applications, like financials, have their traditional role. However, it is customer facing solutions that will make or break retailers.
Retailers that have had the experience with expensive, monolithic ERP systems are resisting signing on to these recently acquired customer-facing solutions that were not developed organically. They are seeing that all these attempts to integrate customer-facing solutions with these ERP systems are a ground-up construction project that will cost millions of dollars with no guarantee of success. In fact, we spoke to many retailers at NRF who have abandoned projects after spending millions of dollars knowing that the project would take years and millions more to complete. Retailers want to unify their channels and they want to do it now, not wait for these ERP systems to integrate their recently acquired front-end applications on the customer’s own dime.
So what is the answer? It is to keep the back office ERP modules functioning (until there is confidence in a better, cheaper alternative, such as a Cloud ERP that is easier to install and less costly to maintain) and integrate a customer facing, revenue generating front-end technology engine that is designed for the modern retailer. What is needed is a solution that is not architected from the manufacturing world like ERP systems, but one developed around the agility, speed, and visibility needed to service today’s consumer. That can only be accomplished when the customer is placed squarely in the center of the technology stack, where the customer profile is shared across all channels “universally”, which allows for a consistent experience across all channels.
Today, everything needs to center around the customer, not around just inventory or transactions but the customer. When the customer enters the store the staff has to be able to know everything about them, online and in-stores, their preferences, their loyalty points, gift card balances, their current orders, everywhere they have touched the brand. They need to be able to make recommendations to them using AI based on past purchases, be able to personalize the customer experience. To do these things effectively, your front end, customer facing solution needs to be designed with the horsepower to meet these modern retail needs. Older legacy systems were simply not designed to perform in this new fluid channel environment. As a result, bottlenecks and friction abound.
At NRF, retailers were clearly seeing the difference between providers who can talk the talk, and the ones who can actually walk the walk, right now, to deliver Unified Commerce. Rather than just believe the marketing hype, these retailers are learning the two most important words in due diligence are “Show me.” Show me how I can see in real time everything my customer is doing across all channels, show me how I can treat my customers, my inventory and order management as shared assets in real time. These retailers understand that they have no more time to waste and the idea of ground-up construction projects that cost multi-millions and years of implements is a non-starter. There is a better path and they simply need to ask “Show Me”. When they ask that question, they will get the truth.
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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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Throughout history, in any industry, certain people and companies have been the thought leaders and set the price levels. Whether we are talking about Andrew Carnegie and the steel industry, Bill Gates with software, and Sears and Walmart in retail (at their peak), these people and companies dominated their markets. But as we have all seen, many once-dominant industry titans rule their worlds no longer, having been massively disrupted by new technology and other forces.
In enterprise retail technology software, there has also been a handful of dominant players that have been massively disrupted, and believe me, they know it. But the marketing and sales muscle of these organizations have largely kept this dirty little secret hidden. They have held the collapsing house of cards together with the illusion that their way – the tried and true — is still the best course. Moreover, they are just hoping you don’t find out that you (the specialty retailer) are spending tens of millions of dollars for systems built on a legacy platform that has not adapted to the current needs of retailers in this unified commerce, mobile, fast-paced environment.
If you are an enterprise retailer with many locations, you may have gone down this system engagement path only to find that you have purchased a solution that is nothing more than a “framework” with a system that you need to completely customize from scratch. Worse yet, this solution costs millions of dollars and, ultimately, years to fully deploy. So why would so many retailers end up thinking they are making the safe decision based on the ideology of the past?
Admittedly, getting software “built to suit” used to work very effectively for these behemoth software companies when retail technology needs were more basic and channels were less integrated. But then the world changed. Unfortunately for them, these companies did not have the ability to change rapidly enough; they needed to reinvent the wheel for each client and incorporate technology that had not yet built. Still, the old systems are being sold by powerful sales and marketing organizations who realize that as long as the client is not complaining and willing to sign on the dotted line, they can still collect their hefty fees and have the client get in line and wait years for a solution that they really need now.
However, retailers are now starting to catch on. They are being told that they don’t yet have a “deployable build” for the stores, after already investing millions of dollars and waiting 12 to 18 months for their new system. A feeling of buyer’s remorse is setting in and they are looking for a way out.
So what is the answer to this technology quagmire? Do you really need a custom-built system costing millions of dollars that takes years to deploy? The answer is no. You can implement cloud technology today for retail that is “out of the box” to a large degree but highly customizable in order to get you over the finish line. Rather than start a 100 percent custom-build frame and spend a vast amount of time and money, you can get 90 percent of what you need right off the shelf and add the finishing touches from there.
You can rapidly deploy a cloud-based solution with a powerful enterprise “out of the box” solution with a modern architecture that can be customized and integrated into a variety of ERP, e-commerce platforms at a cost that is 10 times less than the traditional old guard solutions. You can have enterprise POS, inventory control, mobile, clienteling, CRM, merchandising, allocation, OMS, unified commerce e-commerce integrations with the major platforms (Demandware, Magento, Shopify, etc), all with a powerful back-end reporting engine without having to reinvent the wheel from the ground up at 10x the cost and massive delays in deployment.
So the dirty little secret of retail technology is no longer hidden from you. What you choose to do with that information is yours and yours alone.