How Retailers Can Chart a Path to Digital Value

Digital disruption is here.

According to a 2015 survey from the Global Center for Digital Business Transformation (DBT Center), a joint initiative of Cisco and the Institute of Management Development (IMD), 47 percent of retail executives say digital disruption increases the risk of going out of business. In addition, the survey revealed that four of the top 10 retail incumbents will be displaced by digital disruption over the next five years.

The good news is that a new Cisco analysis shows that digital transformation can help retailers tap into an estimated $506 billion of value globally through 2018. For a $20B retailer, this represents $823 million of annual Digital Value at Stake — new value or value that shifts among retail firms based on their ability to harness digital capabilities. The challenge is that in 2015, retailers realized only 15 percent of their potential Digital Value at Stake.

The Threat and Opportunity of Digitization

Given both the threat of being displaced and the opportunity of capturing significant value, why aren’t more retailers becoming digital?

The path to digital value can be complex and includes a myriad of options. Many retailers become “paralyzed” just thinking about where to start at a time when bold action is required. What’s needed is a clear roadmap that minimizes risks and maximizes returns.

Cisco has developed a three-step roadmap that shows retailers a clear path to creating digital business value:

Step 1 – Understand where you are today on your digital journey. While this is an involved process, you can start by answering a simple question: Do you use digital technology to enable IT agility and operational effectiveness, differentiate with new products, services, and business processes, or to define new business models?

Step 2 – Select use cases to drive the most value. Cisco conducted a thorough economic analysis on numerous retail use cases for each category in step one (enable, define, differentiate). Select the use cases that align best with your business strategy and offer the most value to your business.

Select Use Cases To Drive Digital Value

Step 3 – Close the gap in digital capabilities to achieve your business goals. By starting with use cases that deliver the fastest return, you can quickly generate savings or additional revenue to invest in the next round of value-generating use cases. Focus on building the common infrastructure you need—such as location services, workforce collaboration, and cybersecurity—to support multiple use cases that create accelerating value.

By taking these steps, you will be well on your way to digitizing your business to create a sustainable competitive advantage.

Perhaps most important, you will avoid being part of the 40 percent of leading retailers that are likely to be displaced by digital disruption. Instead, you’ll be positioned to capture your share of the $506 billion in digital value that’s there for the taking through 2018.