Many retailers are currently struggling to understand how to define a strategy to effectively leverage advanced analytics. More so than the omni-channel imperative (which arguably is simply about keeping up with each other), there is a window of opportunity during which effective use of analytics can be a significant differentiator and a source of competitive advantage. In December 2013, Accenture released an outstanding research report, entitled “Seamless Analytics – Three Imperatives for the Retail Digital Marketplace“, where they state “the choice is clear: the digital marketplace is the future, and the decisive difference is analytics.” That assertion, as well as the three imperatives identified are spot on. However, there is one very important imperative that was missing…more on that later. But first, here are the three imperatives, with my insights added.
- “The Insights Imperative: Applying retail analytics to data for sharper customer insights.” – Retailers need to get a handle on their internal data and establish data governance processes to cleanse, manage and monitor the quality of their data. Most have shortcomings in their current data environments and this initiative can be long and tedious. It is important, but it is also not a complete impediment to leveraging analytics. The fact is that data will never be perfect and monitoring/cleansing will become a normal operational process. Measuring data quality and using quantitative methods to adjust for issues can be employed to enable effective analytics while data quality is being improved to acceptable standards.
- “The Actions Imperative: Turning insights into actions, at speed and at scale.” – Analytic insights must drive actions to be effective. Without a specific decision or action, analytics are merely interesting and not nearly worth the investment or attention. But once a decision point is identified, many retailers become overly reliant on their experience, instinct and gut. And for good reason…those are likely what has helped them be successful. But now with the availability of advanced analytics, decision-making is vastly improved. Consider the following equation: data + gut > gut. When you add an understanding of the data (assuming it was developed with a reasonable effort, cost and duration) to gut feel, the end decision is better than one made on gut feel alone. Those retailers that understand this equation will soon, and significantly, outperform those that rely on their historical methods.
- “The Outcomes Imperative: Focusing on business outcomes.” – To be truly transformational, analytics must be employed to support specific business outcomes and strategies. Once a retailer understands how they plan to differentiate, be it customer service, product quality, scale or something else, then metrics and analytics can effectively be employed to support the strategy. More metrics and more analytics are not necessarily better…but having a smaller set of the right measurements that support and drive the overall business strategy is imperative. And these metrics must become embedded in the ongoing operational mindset of the enterprise.
- The Missing Imperative – Leadership – In my opinion, this imperative is by far the most important, and without it, the value of analytics in the organization will be limited. Senior leadership, starting at the CEO and extending throughout the executive leadership team, must be strong advocates and active supporters of analytics. With that foundation, a retailer can change the culture from gut-driven to data-driven decision-making. Without it there is little chance of success. So the initial focus for any retailer must be on understanding these key stakeholders, educating them and confirming their commitment to analytics. Once this is accomplished, no small feat, then strategies and tactics around the other three imperatives can be defined and executed.
And then, as Accenture confirms, “when retailers routinely start making data-driven and analytics- supported decisions with the seamless customer experience in mind, they will increasingly see the impact in their bottom line.”