While the pandemic was a blow to all industries, retail was among the hardest hit. The industry, already in the throes of adapting to the changing habits and preferences of consumers, then had to take on supply chain problems that led to product shortages (who will ever forget toilet paper hoarding?) as well as staffing shortages. To rejigger a famous quote just a bit: Never have so many needed so much from so few. And the few, in this case, were the retailers.
But perhaps because of their adaptive mindset, retailers are ahead of the pack when it comes to organizational agility. The findings from our latest global survey, "Organizational Agility: Roadmap to Digital Acceleration,” reveal that despite (or, because of) all the challenges, retail organizations are ahead of other sectors in understanding the importance of digital revenue and acting on it. The impetus comes from the C-suite and filters down to employees’ actions and behaviors.
Those in the retail sector are very confident in their ability to drive growth effectively by identifying digital opportunities quicker than their competitors do.
Retail leads the sectors in terms of current and future projections of digital revenues: Three years from now, more than two-thirds of retail income is projected to be digital. This puts retail slightly ahead of financial services and a full 7 percentage points ahead of professional services, the other industries we did a deep dive on.
Retailers have also been quicker than others to realize that digitally derived revenue streams are critical to their success and have established metrics to measure digital growth performance (80% compared with 72% overall).
Those in the retail sector are very confident in their ability to drive growth effectively by identifying digital opportunities quicker than their competitors do, with 82% of retail respondents agreeing with that statement. Eighty-five percent of the leaders in this sector say they also have the tools to measure the performance of new digital products and service lines, a number matched by financial services.
Perhaps as a result, retailers are pleased with their response to the COVID-19 pandemic and its ongoing impact, with 78% saying they were fast to respond and only 22% saying they were slow. Although fast to respond, some acknowledged pain from the disruption, with 32% of retail respondents saying they were unprepared.
Despite their relative speed, retailers are considerably more likely to say they were financially impacted by the pandemic. In retail, 36% of respondents said the pandemic left them in a weak financial position, versus 27% of all participants across industries and geographies.
Still, retail benefits from strong leadership: Organizations are more likely than those in most other sectors to agree that structural changes are communicated with clarity from the C-suite, and that there is a high level of alignment between the CEO and wider business. This filters down to employees, with retail employees more likely than average to regularly implement improvements to workflows and/or processes.
We collected written input from 1,024 respondents, including C-suite executives and their direct reports, and we interviewed 15 senior business executives, C-suite leaders, and transformation experts. Survey participants were from 14 countries and 12 industries.
Breaking it down by industries, 18% worked in financial services, 15% worked in professional services, 10% worked in IT, and 9% worked in retail. The survey measured facets of the five key characteristics of organizational agility:
Responsiveness. Organizations that are responsive are more adept at continuous planning and driving change.
Adaptability. Fluid organizational structures and processes boost agility by allowing organizations to use existing resources to adapt to emerging requirements.
Skills. Agile leaders have plans to upskill the majority of their workforce, push specific initiatives to increase employee engagement, and attract top talent.
Empowerment. Employees can make better decisions when they are empowered with timely and relevant data access.
Measurement. To effectively manage their digitally driven initiatives, organizations need tools and processes for continuously measuring performance.
Despite their relative speed, retailers are considerably more likely to say they were financially impacted by the pandemic.
The following four truths remained consistent in our survey results across industries and regions:
Digital revenues dominate and are accelerating. When firms were asked whether they expected 75% or more of their revenue to come from digital sources within the next three years, 36% said yes. Last year, only 12% of firms expected 75% or more of their revenue to come from digital sources within three years.
Smart technology is driving digital growth. Organizations that are deploying artificial intelligence (AI), machine learning (ML), or robotic process automation (RPA) are more than twice as likely to report high levels of digital revenue as those that have made little or no such progress.
Changing tools is easier than changing minds and habits. While more than half of organizations (56%) say their technology is compatible with digital transformation goals, just 16% say the same about their company’s culture. Adopting new technology to streamline workflows and help employees in their day-to-day roles is critical for organizations to realize their technology ROI goals.
Agility builds resilience. One-third of leaders agree that faster digital growth improves organizational resilience, especially in the face of crises. For example, organizations that rapidly responded to the pandemic were more likely to have embedded agile capabilities such as data accessibility and cross-functional collaboration.
To stay competitive, all industries will need to increase their adoption of smart technologies including AI, ML, and RPA, and they should also take a strategic look at their overall IT structure and how it facilitates goals. While retail has the extra challenge of keeping both its consumer-facing and business-facing technology powerful yet intuitive, it can use its penchant for speed and agility to build a positive look toward the future.
To learn more about the survey results, how the retail industry compares with others, and key insights from C-suite executives, read the full report, "Organizational Agility: The Roadmap to Digital Acceleration."