Tesco CIO sharpens focus on the digital customer experience
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Tesco CIO sharpens focus on the digital customer experience

Jessica Twentyman – October 2013

At supermarket chain Tesco, “technology is the new property,” according to Mike McNamara, CIO of the £72 billion ($115bn) international group.

As digital channels become an increasingly critical way to sell groceries to customers across all markets, he says, the battle for views and clicks on customer smartphones, tablets and PCs has become a much higher priority than the battle to dominate real-world postcodes.

That’s a real epiphany for a company that, during the 1990s and early 2000s, saw as fundamental the creation of an ever-expanding portfolio of property in its home ground of the UK. Today, these assets in the UK (a country recently declared as the world’s most mature online retail market by real estate firm Cushman & Wakefield) may still be worth around £20 billion ($32bn), but a write-down of £804 million ($1.3bn) earlier this year strongly suggests that the historical landgrab of prime shopping sites may be giving way to a digital customer focus.

“Price becomes increasingly personalized and promotions will be more individually targeted, moving to your smartphone.”

But in every market where it operates — from India and Poland to China — digital is on the rise and, as global CIO, McNamara is leading the charge here. That is a reflection of how boards are looking to the IT team to fulfill on strategy rather than just ‘keeping the lights on.’ Two years ago, he says, the focus of his role as CIO was on “process automation, simplification and information.” Today, that's all changed: he now sees himself as leading the customer experience and the priorities in the IT organization have shifted accordingly.

“The focus of our technology investments has swung 180 degrees, from the operations to the customer, from efficiency to loyalty, from lowering our cost base to increasing our revenues,” he says.

And that has shifted the center of gravity to the application of customer data on a grand scale. “The reality today is that I don’t come to work every day to run a heap of infrastructure. This is something that I don’t need to worry about. It’s not something that excites me and it's not an area where I can add value,” he says.

“In particular, our focus on the customer experience means we have to prioritize our time and I’d rather we spent that time building new things for customers, things that will improve their experience of shopping with Tesco.

With that in mind, he is swelling the team’s ranks with more of what he calls ‘creative technical’ staff, who will focus on bringing to market engaging new mobile and web-based apps for customers. This quarter, Tesco plans to open a new, 30,000-square foot facility that will house 200 to 300 staff in London’s Farringdon district — a home of design, fashion, media and technology talent past and present.

“I want to see the blend of technical and marketing skills reflected all the way down the organization and put to work on designing anything a customer might use to interact with us: mobile apps, websites, in-store digital signage, kiosks and so on,” he says.
Let's get personal

A major focus for this team’s efforts will be on personalization — the ability to take highly granular data about customer behavior in order to deliver a compelling, non-intrusive service. That’s the frontline on which the battle for digital-retail supremacy will be fought, McNamara predicts, creating a new era of “mass customization.”

Today, he says, if two customers go to a Tesco store and buy the same basket of goods, they’ll pay the same price at the checkout. With the Tesco Price Promise scheme, the first stage in that personalization journey, they'll both receive coupons up to the value of £10 ($16) at the checkout if they could have purchased the same products cheaper elsewhere.

But that is becoming even more sophisticated as “price becomes increasingly personalized and promotions will be more individually targeted, with e-coupons moving to your smartphone.” Physical stores, meanwhile, will become more finely tuned to local preferences and needs.
Forecasting a cloud burst

Cloud technology will play a major part in aspects of that strategy, increasingly offering a way for Tesco to free up staff time and skills to focus on these higher-level strategic goals, rather than on managing systems, says McNamara. Most of Tesco’s in-house IT has already been reorganized into a private cloud architecture: “We virtualized all of our servers a good while back and we’re currently putting in automation that will give a very cloud-like, self-provisioning experience for developers building new apps,” says McNamara.

Over time, the company will move towards a more hybrid cloud strategy supporting ‘cloud bursting’, the diversion of online traffic to public-cloud resources when volumes hit a peak. “That’s a huge promise of cloud technology for us because today the only way to handle it is to over-provision on [in-house] infrastructure, which then requires management,” he says.

“The battleground for the future is who serves the customer best in this seamless and connected world of physical and digital.”

Software-as-a-service also currently plays a small but growing role in the move away from day-to-day IT management at Tesco: the company uses Concur for expense management and cloud-based software from Cisco and BT in its call centers. And earlier this year, it announced it would be deploying Microsoft Office 365 for company-wide email, collaboration and social networking.

“Right now, very little of our applications estate is [public] cloud-based, but as new services become available, if the commercial reasons are sound, then I'll begin to move a lot more of our apps into the cloud,” says McNamara.

If all this sounds as if digital trumps physical for Tesco, however, think again. Any talk of online channels cannibalizing bricks-and-mortar stores is an anathema to McNamara. In the age of multichannel retail, he argues, all channels are important: many customers now ‘click and collect’ products ordered online for pick-up at the company’s real-world stores and much of the digital technology that he and his team are putting in place is designed to enhance the customer's in-store experience, rather than eliminate that experience entirely. In South Korea, for example, it has trialed virtual stores in subways and at bus stops where customers can choose goods from electronic displays using their smartphones for same-day delivery to their homes and offices (pictured).

“Some customers are online only, some are offline only, but many, many of them are both, and frankly, it doesn’t matter. They're all customers,” he says. “Our approach to succeeding in this 'new normal' world is around combining our digital and physical assets into a compelling customer proposition. The battleground for the future is who serves the customer best in this seamless and connected world.”

First published October 2013
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