At A Glance
Annual Cost Savings
Months Project Duration
Increased Sales Year 1
The Situation
LuxRetailCo, a venerable brand with over 150 brick-and-mortar stores throughout North America, was looking for growth opportunities. The company’s historic growth model–opening new stores–had become ineffective in acquiring and retaining newer generations of customers. The company’s existing web and mobile channels were not integrated to the stores and delivered suboptimal customer experience and operational economics. Since consumers now expected a seamless omnichannel experience, the company needed to evolve its go-to-market approach to the digital age–doing so required developing its technology capabilities and a fundamental transformation of its IT operating model.
To transform its IT function to become a strategic asset and business partner, LuxRetailCo needed to address:
- Complex, inflexible, and costly legacy systems and custom-developed applications which constrained agility and customer experience
- Limited long-term view of technology architecture strategy, IT delivery strategy, and consumer-focused digital strategy
- Highly siloed IT functions still in use from the 1990’s–engrained and partly necessitated by the costly legacy systems and custom applications dating back to the same era
- Historical mindset of under-investment in foundational technologies
- Lack of alignment and trust with the business partners that IT served
Our Approach
P&C worked closely with LuxRetailCo’s key project stakeholders–C-level leaders and stakeholders from across the company including IT–to gather, consolidate, and prioritize the expected outcomes of the transformation sought.
P&C led the key stakeholder team through a process to create a shared vision for the future state–a high-level capabilities roadmap, grounded in industry best practices and differentiating but attainable capabilities, which would represent the best transformation outcomes.
In addition, we established a targeted set of outcomes to define success. The targets included: revenue increase of 2-3% in year 1 and reduced IT infrastructure costs by $50-70M/year.
To ensure project success we:
- Conducted a deep and thorough diagnostic of the IT organization and existing technologies to identify barriers to achieving full potential.
- Defined and implemented prioritization and governance processes to align IT investments and capacity with business objectives.
- Redesigned the IT operating model based on plan/build/run to increase role clarity and speed to market.
- Facilitated and managed design, pilot, and implementation of omnichannel initiatives including:
- In store Wi-Fi for customers and associates.
- Deployment of mobile phones and tablets to all store associates for product lookup, availability, and mobile POS.
- Integration of online and in-store clienteling platforms to enable a single view to the customer and their purchase history.
- Omnichannel clienteling application on iPads to all store associates.
- Defined sourcing strategy, capabilities, and organization.
Our Recommendations
P&C recommended five major transformation initiatives to fully enable the digital capabilities of LuxRetailCo:
- Given the criticality and complexity of the transformation, which involved many highly interdependent workstreams and cross-functional teams, create a transformation governance function to:
- Identify leadership and sponsorship for the change process throughout the company
- Effectively communicate the transformation plan and progress
- Continually assess the plan’s impact on the business to ensure proactive adjustments where needed
- Embed the cultural and behavioral changes vital to success
- Redesign the IT organization around an operating model that:
- More effectively meets the needs of the internal customers and aligns functions and staff
- Reduces fragmentation in current infrastructure and operational functions with clear accountability at all levels—especially for store and omnichannel technology operations
- Fill key technology skillset gaps in Development, Project Management, Cyber Security, Capacity Planning, and Continuity
- Create a Technology Program Office to manage business aspects of IT and its customer relationships including IT Procurement, IT Finance, Portfolio Management, and Operational Excellence
- This includes a governance process to continually align and prioritize demand and supply of IT services based on business objectives
- Build procurement capabilities around a clearly defined strategy which focuses on vendor performance, capabilities, and consolidation of spending power–where appropriate–to maximize leverage
- Support execution through segmentation and rationalization of vendors
- Link vendor contracts to deliverables, service levels, and effective outcomes
- Reduce the number of vendors based on defined strategy and capabilities requirements to reduce complexity and associated costs
- Retire complex and costly legacy applications by identifying available enterprise software applications which provide the necessary functionality
- Evaluate existing third party software solutions to leverage the procurement strategy developed
- Ensure that any new software suite selected integrates with existing ERP platform to mitigate integration and maintenance costs
The Results
LuxRetailCo has one of the best omnichannel capability suites in luxury retail–seamlessly integrating in-store, online, and mobile customer experience. The company’s IT function effectively restructured and embarked on an aggressive, 14-month process which delivered 4.5% in year-1 increased omnichannel sales and over $170M in annual IT infrastructure, maintenance, and rollout cost savings.
Capability Enablement
- Reduced IT skillset and resource gaps to deliver critical projects
- Delivered in-store and online capabilities essential for a seamless, omnichannel customer experience
- Reduced in-store IT infrastructure costs by 50% by rolling out mobile technologies with fully integrated clienteling functionality
- Delivered an effective, secure, and redundant in-store network solution for both customers and associates
Solution Design
- Identified existing enterprise software capabilities, which integrated seamlessly with the ERP platform, and replaced costly legacy applications–saving $40M in annual operating costs
- Identified the governance methodology and processes to ensure IT initiatives remain in-tune and proactively aware of ever-changing business requirements
IT Organizational Effectiveness
- Implemented new IT organization and governance model
- Acquired the talent needed to fill the company’s key skillset gaps in IT–essential to the enduring success of the initiatives implemented
- Rationalized the complex portfolio of over 150 IT labor and infrastructure vendors, from the ground up, including renegotiating and restructuring costly multi-year contracts with telecommunications, hosting, and other providers–saving over $65M in annual operating costs
- Created the IT procurement competency within the new organization to enable ongoing success
