Channeling Cooperation for Omnichannel
Omnichannel retail strategy, by definition, involves getting a lot of different things–websites, brick-and-mortar stores, supply chains, ads, consumer outreach–working in sync.
But before that can happen, the different departments that have to conceive and execute those components have to work in sync themselves.
For as long, probably, as organizations have existed, they have dealt with the problem of their departments working in "silos" that inhibit communication. This problem intensifies with the need for fast, flexible action.
The development and execution of omnichannel strategies–ways of engaging shoppers on multiple platforms, with various kinds of messages, in different locations–demands some of the fastest, most flexible action a retail company is capable of. That requires collaboration, often to a degree that a large, established company is not used to.
"To meet customer expectations for seamless omnichannel fulfillment, departments must collaborate and share data across the enterprise to execute flexible fulfillment strategies that are both efficient and cost-effective," says Mark Osborn, global lead for consumer products industry marketing at SAP.
Before deciding how to breach organizational silos to develop an omnichannel strategy (or for any other reason), planners should first realize why they exist–and that they're not always a bad thing. In fact, they're often a necessity, especially in large retail companies, says Tristan Rogers, CEO of Concrete Group, a provider of software platforms for intra-company communications. Big retailers tend to be complex, vertically integrated enterprises with long supply chains and hierarchical staffs. A certain degree of departmental separation is necessary for a company like that to function.
"You have to have siloed teams," Rogers says. "What I mean by that is, you can't have a marketing person, a merchandising person, a store operations person, a website manager, an IT manager, an HR manager, all sitting around one table talking at each other about everything they're doing all the time. It doesn't work. You have to at some point get your head down and get on with your own work."
SEPARATION, NOT ISOLATION
The problem comes when departmental separation becomes isolation, to the point where necessary information isn't flowing properly. This can be caused by calcification happening in the long term, Osborn says.
"Most silos were created over time based on the idea that each department should maintain its own part of the process and then hand off to another department at the appropriate time," he says. "Unfortunately, departmental turf wars, disparate IT systems and segregated budgets have helped root the silo mindset in many companies."
That kind of segregation can prove especially disastrous to an omnichannel strategy. Rogers cites the example of a big-box retailer that planned an ambitious promotion around Mother's Day. It included above-the-line marketing, online banner ads and social media outreach that included promo codes.
The last item proved to be the problem. Unknown to the other departments, IT had a point-of-sale system upgrade planned for that Mother's Day weekend. As a result, the social media promo codes were wiped out from the stores' POS systems.
"We asked the different teams whose fault was that, and of course everyone points in different directions, never at themselves," Rogers says. "The problem belongs to everyone and no one. It's literally the crack that exists between the teams. In other words, it's siloed behavior."
Certain departments within a retailer can be especially liable to operating out of sync with others. Paula Rosenblum of RSR Research points the finger at marketing.
"I think the biggest issue is that marketing has created their own systems, processes and procedures that have little to do with the rest of the company," Rosenblum says. "This certainly creates ripples across all other departments, but seems to be the root cause." Once marketing creates demand for a product, she says, other departments have to carry the ball in terms of ordering it, moving it around, merchandising it, etc.
Sam Cinquegrani, founder and CEO of ObjectWave, a digital marketing technology and services company, agrees that marketing can be out of sync, but frames the situation differently. From his perspective, when it comes to digital initiatives, marketing, especially the digital marketing department if there is one, owns the outreach because it's the one that most directly touches the customer.
"Organizations in general within a company that are not customer-facing are where problems can occur," Cinquegrani says. The problem is that with an omnichannel strategy, departments that never used to interface directly with customers, like IT and logistics, can suddenly find themselves having to do so.
"They're not used to catering to the end customer," he says. "They're used to catering to the customer within the organization. So it's now become an issue because the way that they traditionally have operated now is no longer appropriate for what's happening with omnichannel."
FILLING DIGITAL PROMISES
Other disparities can get in the way of an omnichannel strategy. One of the biggest general challenges in omnichannel is aligning in-store capabilities with what can be done (and promised) digitally.
"If the online offers or the online promises are not in sync with what the store is ready to do, or capable of doing, you run into pinch points," says Adam Pressman, a partner in the strategic IT practice of A.T. Kearney.
This often occurs because the brick-and-mortar stores are reluctant to, or even incapable of, changing their operations to jibe with online ordering, Rogers says.
"Over the last five to 10 years that [omnichannel] has been coming onstream, there's no evidence of the same level of investment and change in behavior being empowered inside the retailer's business."
"The problem is that over the last five to 10 years that [omnichannel] has been coming onstream, there's no evidence of the same level of investment and change in behavior being empowered inside the retailer's business," Rogers says. "It's still running the same operational processes it was running 10 years ago." This leads to things like stores converting the staff cafeteria into a staging area for online orders–something that Rogers says he has seen.
Silos that interfere with omnichannel development can also appear when digital functions, in their various forms, get set up as their own, separate department, often under a single senior executive, Pressman says.
In some cases, he says, this takes the form of physical separation, where the digital team works in a different suite or even a different geographical location from the rest of the team: "Perhaps because of perceived talent difference or wanting to be sure it wasn't constrained by old ways of working and that they were able to think new."
This may seem like an efficient way to move digital efforts forward, but it can inhibit their development over the long term because there isn't the necessary buy-in from the older, established departments, Pressman says.
"What you have then is a separate order that is digitally focused, that now is operating in parallel with your more traditional work," he says. "And while digital perhaps was a smaller effort when it was starting, as it now continues to grow, many retailers have somewhat duplicative efforts and are realizing that merchandising should be thought of across channels, and not in in isolation."
To avoid the "siloization" of omnichannel efforts, companies might need to rethink their entire way of communicating and executing. Many organizations operate in what Cinquegrani calls a "waterfall" mode, where things get done sequentially.
"Everything happens serially," he says. "You do one piece, you complete that piece, and then you hand it off to somebody else and they complete their piece, etc."
Successful organizations have what Cinquegrani calls "agile methodology." "Let's say you want to build an e-commerce site," he says. "You're into the product standard stage and you get to the point where you have a clear view as to what you're supposed to be doing, and you might develop a process to start developing, as opposed to waiting until all the discovery is done in order to start developing."
Getting omnichannel strategies in place, on a scale big enough to make a difference, requires transparency for broad implementation, Osborn says: "By coming to a common understanding of demand, everyone is in a position to execute against the defined forecast without compromising their own individual KPIs."
Common goals and KPIs (key performance indicators) are vital in maintaining the level of cross-departmental communication and cooperation needed for omnichannel strategy development. Pressman describes this as "having a set of common objectives and measures in terms of what good [performance] looks like, so that incentives are aligned with the type of performance that you're looking for, not within channels but more broadly."
Osborn offered the theoretical example of a consumer goods producer whose departments have different ways of measuring the demand created by a new campaign. Marketing may look at incremental revenue or volume; sales will look at how many cases retailers are going to buy, and the supply chain will be looking at how many different SKUs they can ship. The unit-specific demand should be aligned so that the campaign's collective demand can be measured in a way understood by all departments.
"The challenge is to rally the organization around a common view of demand and what it means for revenue and profitability overall," Osborn says.