Priorities for Adopting an Exponential IT Mindset in the Retail Industry

Adopting Exponential IT is critical for business growth and sustainability.

Analyst perspective

Enable value creation through Exponential IT.

As technology continues to undergo game-changing levels of innovation, organizations are faced with the real possibility of being left behind their competition. It is imperative that organizations be prepared for the next wave of rapid, exponential technological evolution. Organizations that are readily positioned to pivot, adapt, and adopt new technologies have the greatest potential to unlock value.

Adopting an Exponential IT mindset is about being prepared for this growth by evaluating existing operations and organizational structures and taking steps to modernize them. Info-Tech has identified foundational capabilities and essential steps to take in the process of adopting an Exponential IT mindset to help organizations prepare.

Donnafay MacDonald
Research Director, Retail and Wholesale Industry
Info-Tech Research Group

Executive summary

Your challenge

Increasing competition from within the retail industry and the emergence of new technologies are pushing businesses to prioritize transformations to compete more effectively.

IT leaders struggle to identify which skills are needed and where to get specialized knowledge to keep up with the exponential shifts taking place across the industry.

The ability to advance human-machine processes and capabilities will be restrained by the lack of knowledge and skill resources.

Common obstacles

Customers are demanding personalized services and transparency, which is difficult for retail organizations due to complex and costly legacy infrastructures.

Real-time, data-driven capabilities are becoming increasingly critical to providing dynamic adaptability during market shifts and competitive pressures.

The organization recognizes the need to develop sustainable and environmentally friendly business processes and policies for the new world.

Info-Tech's approach

Recognize the urgency of adopting Exponential IT within the retail industry to combat and/or exploit industry disruptions.

Comprehend the three priorities of Exponential IT transformations in the retail industry that are being adopted today to remain competitive in the market.

Acknowledge the foundational capabilities and maturity required to begin an effective Exponential IT transformation, resulting in value creation.

Info-Tech Insight

Retailers are facing challenges in maintaining their competitiveness due to heightened competition, the use of legacy equipment, and traditionally large amounts of technical debt. The enablement of innovation is crucial for improving the business' competitive positioning, where IT leaders need to be recognized as valued business partners to empower the organization to embrace exponential technologies.

What is Exponential IT?

Exponential IT is a framework defined by Info-Tech Research Group.

The technology curve has recently bent exponentially.

Generative AI has been the catalyst for this sudden shift, but there are more and more new technologies emerging (e.g. quantum computing, 5G), putting significant pressure on all organizations.

Speed is now imperative. All IT leaders and organizations are at risk of falling behind if they do not adopt new technologies fast enough.

Our framework instructs all IT leaders on how to transform their organization and elevate their value-creation capabilities, to close the gap between the exponential progression of technological change and the linear progression of IT's ability to successfully manage that change.

This research provides IT leaders with industry-specific priorities for Exponential IT and how to begin an effective Exponential IT transformation, resulting in value creation.

Your Exponential IT journey

To keep pace with the exponential technology curve, adopt an Exponential IT mindset and practices. Assess your organization's readiness and embark on a transformation journey. This report will provide greater insights to help you build your Exponential IT Roadmap.

To access all Exponential IT research, visit the Exponential IT Research Center
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The pace of technological change will continue to increase exponentially in Retail

IT must solve the problem of rapidly and exponentially increasing expectations.

Organizations are adopting exponential technologies at an accelerated rate due to the rapidly changing landscape. Traditional linear IT is no longer viable to sustain IT's place as the leading technology provider for their organization.

Failure to launch will leave you far behind. The chasm between the organization's desire to harness technology and IT's ability to deliver it will continue to widen.

The challenges with traditional linear IT:

1. Slow to adapt to more modern service delivery models
2. Processes and decision-making that can't accelerate to meet demand
3. Transactional arms-length relationships with organization units and vendors
4. Insufficient funding and focus on technology innovation
5. Locked into a siloed and hierarchical operating model

The Case for Exponential IT

IT needs to fundamentally transform the way it is operating in the following ways:

1. Build an Adaptive Delivery Model: Enable flexible and efficient delivery of products and services.
2. Optimize & Autonomize Operations: Maximize efficiency while mitigating risks through intelligent automation and data-driven decision-making.
3. Broker Strategic Relationships: Strengthen and build both external and internal relationships to better align IT capabilities to organizational goals.
4. Embrace Digital Innovation: Evaluate and adopt solutions that drive consumer value, enterprise growth, and innovation.
5. Cultivate Workforce Flexibility: Dismantle traditional jobs and hierarchies, normalize new collaborative ways of working, and adopt a federated and hybrid IT operating model.

The retail industry has significant challenges in adopting Exponential IT

Adopting Technology

• Top-performing companies are action-oriented and unafraid of change. With an expected 6.8% increase in IT spending for 2024 over 2023, it is imperative that companies move off outdated systems to not be left behind.
• Retailers must continue to invest in technology and innovation. While companies are seeking to gain a deep understanding of Exponential IT, to stay competitive, they must continue to invest.

Increased Pressure on Profit Margins

• The industry is facing pressure on profit margins with increased competition, enduring inflation, and continued high interest rates into 2024, and higher pricing through the pandemic has increased competitive pressure as higher supply costs come off.
• Companies are responding with stronger management of sales channels and by curating experiences, leveraging their supply chain and most importantly optimized pricing by using machine learning and artificial intelligence to analyze and provide insights from their data sources.

Customer Expectations

• Customers are looking for products and services that serve their needs, which puts more pressure on retailers to listen, better understand their customers, and adjust their offerings.
• Companies are better able to meet demand post COVID-19 through better inventory controls and more efficient supply chains, but customers are expecting fast and convenient delivery.

Imperatives for Exponential IT adoption in Retail and how to navigate disruption

Market disruptions and obstacles

1. Demand-driven supply chain networks
   • The demand-driven supply chain networks offer immense flexibility and real-time decision-making capabilities that have not been seen before.
   • Companies must be cognizant of their existing capabilities to successfully implement and capitalize on demand-driven supply chain networks across the existing supply chain to incrementally implement solutions that best interface with internal and external stakeholders' ability to scale up.
2. Digital transformation
   • Companies must transform the existing technology architecture and operating model while being faced with changing technology to fully connect and automate.
   • Harness existing data to adopt and implement digital modernization to unleash its power through faster and better decision-making.
3. Dynamic pricing strategies
   • Improve pricing strategies by implementing dynamic pricing, which uses expanded data points to inform on product performance across channels and market conditions.
   • Companies that adopt dynamic pricing strategies can better differentiate from competitors and maximize company revenues.
4. Physical and digital experiential commerce
   • In 2021, "Experience First" increased in importance above "Health First" and "Society First" as the reason to purchase a given brand's products (EY, 2022).
   • Traditional loyalty programs are no longer providing strong growth in returns. Companies that engage with their customers across multiple touchpoints are seeing one-and-a-half to two times more value across all loyalty program tiers.

Info-Tech Insight

We are experiencing exponential change as the market is shifting to focus on autonomous automation, intelligent processing, sustainability, and human-centric business processes. Adopting new technology that aligns across the organization and leveraging AI and ML will set companies up to stay competitive and profitable.

Business opportunities are developed from industry disruptions

Challenges