Retailer Revamps Its Technology Operating Model for the Digital Age

Opportunity

A market-leading specialty retailer with hundreds of brick-and-mortar stores was looking for growth opportunities. But the company's historic growth model—opening new storefronts—had become obsolete. To meet increasing consumer demand for an omnichannel experience the company needed to overhaul its technology capabilities and embrace digital. A critical first step was to fundamentally redesign its existing technology operating model.

To successfully transform its technology function into a strategic asset and partner to the business, the retailer needed to address its:

• Complex, inflexible and costly legacy systems and custom-developed applications that were constraining agility and speed to market
• Limited long-term view of strategic and architecture strategy
• Siloed tech functions
• Historical mindset of under-investment in foundational technologies
• Lack of alignment and trust with business

Approach

Bain worked closely with RetailCo* to help undergo an overall technology transformation that will help them meet the strategic goals. We:

• Conducted deep diagnostics to identify barriers to achieving full potential
• Defined and implemented governance and prioritization processes to align technology investments and capacity with business objectives
• Redesigned technology operating model based on plan/build/run to increase role clarity and speed to market
• Facilitated design, pilot and implementation of ominichannel initiatives including:
  • In-store Wi-Fi for customers and associates
  • Rollout of mobile phones to all store associates for product lookup, availability and mobile POS
• Defined sourcing strategy, capabilities and organization

Recommendations

Bain recommended three major transformation initiatives to enable the digital capabilities of RetailCo:

• Create an office of the CIO to manage business aspects of technology strategy and the customer relationship, including sourcing, finance, portfolio management and operational excellence
  • Includes a portfolio management capability and governance process to align and prioritize demand and supply of tech services
• Redesign the technology organization around an operating model that:
  • More effectively meets the needs of internal customers and aligns function and staff
  • Reduces fragmentation in current infrastructure and operations functions
  • Identifies key decisions and interactions, and defines decision roles and responsibilities
• Build strategic sourcing capabilities around a clearly defined strategy
  • Support execution through the segmentation and rationalization of vendors
  • Link vendor contracts to deliverables and service levels

Given the complexity and criticality of the transformation, which involved highly interdependent workstreams and required cross-functional participation, we worked with RetailCo to establish a transformation office to:

• Identify leadership and sponsorship for the change process
• Communicate the transformation plan and progress
• Assess the plan's impact on the business
• Embed the culture and behavior changes necessary to success

Results

RetailCo now has the capabilities to be a more effective and efficient digital player, with a technology function positioned to fulfill its business needs for years to come.

Strategy enablement:

• Reduced the technology resource gap to deliver critical projects more efficiently
• Cut store infrastructure rollout plan in half, reducing costs by $40-70M
• Developed and communicated a new labor sourcing strategy

Solution redesign:

• Identified and substantially reduced technology risks in the portfolio
• Identified a better in-store networks solution

Technology organization effectiveness:

• Installed tech organization and governance models
• Identify and capitalize on technology synergies
• Rationalized a portfolio of more than 100 vendors for IT labor and built a sourcing organization and capabilities from the ground up, including a sourcing playbook that covers how to source, procure and manage vendors
• Increased collaboration and internal trust

Cost and complexity containment:

• Saved more than $100M in hardware procurement
• Consolidated 80% of labor hours from 10 to just three vendors