This article is part of our Retail Reloaded series. The series offers a new vision for retail businesses through an evolved use of technology.
Our hypothesis suggests three core strategic actions. SAVE, ACCELERATE, and SHARE. These strategies will guide you on both how to best use technology and where a retail business should be developing new capabilities, new skills, and, importantly, a new vision for the future.
In this article, as part of the ACCELERATE strategy, we offer our insights on how to manage external teams to accelerate your business. These insights were garnered over many years of experience working with our clients on digitalising their business and developing technologies together.
Businesses used to feel uneasy about working with external development teams. But there is now a significant difference between the old style “bodyshop” which gave rise to many of these concerns and the more sophisticated new generation of outsourced companies who have understood in detail how best to align with customers, often located many thousands of miles away.
The climate for partnerships between industry and technology is rapidly changing, especially in the wake of the latest economic and healthcare crisis. This has accentuated the need for a more effective workforce management at the same time as requiring retail to develop a far stronger digital presence. An increasing number of retailers are now choosing to hire external teams as a viable growth strategy and for a plethora of good reasons. When implemented right, this model flows amazingly.
For the world’s largest retail companies, there’s an increasing shift to more global, strategically more flexible and demand-based models that are expected to provide higher value at lower cost. The win here is obvious. These global partnerships between retailers and technology development companies are creating an environment where digital capabilities can be rapidly adopted and scaled.
By sourcing technical excellence through external partners and vendors, companies are not only strengthening their innovation and product development capacities, but also growing their intellectual capital.
These disruptive new external models have become the incubators for digital and operational transformation. The traditional “mercenary” outsourcing is replaced by new types of engagement that drive innovation and support faster product to market delivery.
Let us look into the reasons why, when done right, the relationship between your internal and external teams could be a match made in heaven, propelling your business forward with a new vision and powerful development engine.
Industry + technology = digital transformation ♥
While cost optimization is still a critically important reason for hiring external teams — according to Deloitte’s survey of more than 500 executives from leading organizations — it is no longer at the top of the list. And for good reason. When executed well, the collaboration between an organization’s domain experts and external tech professionals can unlock a considerable competitive advantage and provide an acceleration highway for digital transformation.
The path to digitalization is not an easy one. It transforms the way organizations operate from the ground up. It presents a crucial turning point for any business, making it more agile, intelligent and efficient.
Most traditional retailers hire technology consultants to guide them through the complexities and options and help them to make the right choices when it comes to building, buying, or partnering with technology solutions in order to achieve the maximum efficiency and savings.
Organizations recognize that “buying” technical expertise is generally faster and more scalable than developing such capabilities in-house. Moreover, digitalization specialists are able to provide wider perspectives and work with the latest methodologies that they will often choose based on the experience of seeing what previously worked.
How to choose a tech consultant?
There are many moving parts. An average retailer does not have the necessary technical capabilities to envision and develop complete digital solutions and innovative technology. A dedicated tech provider, on the other hand, has dealt with similar challenges on an everyday basis and is quickly able to understand the nuances and hidden potential. This significantly reduces the time and risk involved with building complex systems from the scratch.
Now, you may be wondering about the price tag on these services. Hiring a tech consulting and development company has never been more accessible. The tech services market is incredibly diversified, offering tailored services and price options that respond to different clients and their specific technology needs.
CTOs tend to hire top consultancies to reduce risks and liabilities and to ensure project coverage and completion from strategy planning to delivery. The downside of hiring top consultancy firms is that they may have the vision but your company is just one of many they work with. Their focus on your specific case is not strong. Moreover, major consulting firms mostly do not provide the actual technology development for the strategies they propose. They also look externally.
Medium tech consulting and development companies often have a strong technical background combined with business acumen focused on a specific niche or industry. These companies see more value in delivering solutions with excellence thus extending their expertise and business connections with satisfied clients. They are often ready to invest more effort and brain power into making your project a success.
At HTEC, we have on more than one occasion inherited the work of some of the leading consulting companies. This is usually due to their failure with deadlines, not being able to deliver what they promised or not being engaged enough to care about the nuances of a given project.
This brings us to the second important reason why external teams could bring unprecedented speed to your business, if engaged and focused on your project:
Retailers increasingly join forces with external technology and innovation companies to augment internal team capabilities, vision and culture.
We are witnessing a paradigm shift as more companies take new approaches to business transformation. Onboarding remote teams and involving external technology advisory and development companies has become a rising trend in the last five years. Why?
Recruiting is intensive and expensive. For technical staff, results can be uncertain and with such demand for the very best, it can be hard for retailers to keep their “rockstars” from looking elsewhere. As a result, many retailers are now rethinking what they previously thought about outsourcing.
It’s a sweet spot for retailers because, with tech team augmentation, all they need to know is “when can I expect the thing to be available for my customers?”—the risk of the tech stack and dedicated team is now passed to the tech provider to oversee and secure for the entire duration of the project.
When we add to this the current social distancing situation, the advantages of maintaining an in-house tech team are getting slimmer.
When expectations are laid out clearly early on, these kinds of partnerships work extremely well. They are rewarding for both sides and extremely effective in getting high-quality tech products to market quickly. By letting someone else worry about the technology, many established retailers and startups alike free their time to focus on their customer.
Ideally, a dedicated external team will have a track record of successfully delivered similar products and have developed effective methodologies that allow it to blend with the client’s processes, manage expectations and pick up the requirements quickly.
From a retailer’s point of view — a CTO still holds all the power, but his or her power is now vastly supported and strengthened by the external PMs. Their expertise is needed to address security and cyber risks, changing regulations, organizational resistance, skill gaps, and to help flatten fragmented processes.
If you have an internal tech development team, then an external team can be used to pick up the “dirty work” or the work where specific technology skill is needed. By dirty work, we mean the work that is holding you back, like legacy system migrations, fixing infrastructure, moving to cloud, features that have been needing a fix or new features that are in the pipeline.
At HTEC, we do a lot of research and development of new technologies and their application to our customers’ businesses, as well as customization of existing products per market value streams.
This may sound like a less attractive feature when you’re looking for an immediate solution, but over time, it usually becomes one of the more attractive ones.
Culture and intel sharing
From our experience, culture matters as much as tech proficiency.
Our teams have had the privilege of being exposed to the practices of some of the world’s top technology companies. Working closely with their teams, we have developed products that serve hundreds of millions of users globally. Armed with this knowledge, our teams make available the same innovative approaches and development practices that have skyrocketed the world’s largest tech companies, to all of our customers sharing this unique culture with their teams.
Teams that support each other. Teams that learn from each other
One of our European clients, the leader in workforce management software, had some difficulty connecting with our team initially. Their culture was closed off and quiet so, for example, their engineers rarely took part in product planning. They moved slowly with low levels of innovation and discovery. Little did they know how much was going to change with some “new blood”.
We asked, we proposed, we probed, we dared. Eventually, they followed. Two years later, not only are we working together but our work together has radically changed their approach to innovation, reset their company culture, and landed numerous product improvements.
Pay to Play
The Pay to Play model is enabling retailers to leverage significant cost and risk reduction. And, more importantly, this model works best when scale-ups need to ramp up their existing teams in order to achieve the planned growth. It can be equally effective the other way round, as recent times have shown when companies are forced to scale down.
Besides scaling, external teams can often fill in technical knowledge gaps for the parts of the product, where companies do not need engineers in the long run. These specialized technical teams, provide the critical skills required when they’re needed most.
Innovation is propelling retail forward at an incredible rate. But retail still has a long way to go in how it masters emerging technologies to create new shopping experiences. Many retailers lack a startup mentality and agile development methodologies.
Often what is needed is a mentor. Someone that can help these retailers understand how to innovate. This can also be the role of an external team. As innovation experts, they bring to the table a combination of cross-industry expertise, creativity and deep technology skill. On top of this, they will know how to implement disruptive solutions across organizations and create platforms for their adoption.
Spin-offs and M&As
Have you heard of the term disruption inside-out?
This is what happens when a company develops proprietary technology to address niche needs, but, after seeing how effectively the technology has transformed its business, they decide to spin it off and bring the technology to the market, knowing already that there is a gap which the product fills perfectly.
This way, the company ensures an ROI on the investment in technology development, at least, if not significant profits from the new market penetration.
In many cases, the external team that has helped build proprietary technology can be a dedicated tech team that can also help to develop a spin-off venture. Since the team is already invested in the product, they may be open for a partnership-based model — shared new venture ownership in exchange for development work.
In one of our cases, the digital solution for maritime transportation management, which was created by Stena and HTEC to digitize Stena Bulk division, is on its way to transform the entire shipping industry.
According to Deloitte’s Global Outsourcing Survey Report from 2018, the number of organizations using tech service providers to enhance M&A efforts has risen from 45% in 2016 to 67% in 2018. “The top three benefits identified by respondents are to reduce the need for transition service agreements (34%), to accelerate the integration of the new organization (33%), and to lower operating costs of the acquired entity (31%).”
Technologies driving the disruption
Now that you have made the decision to entrust a specialized team with developing a piece or a complete end-to-end technology solution for your business, there are a few steps you can take to set your project up for success.
For authenticity of the information contained here, we interviewed our leadership and project management teams, and the advice that follows is based on our personal, decade-long experience supporting our clients with technical excellence.
1) Set expectations
The mismatching of expectations between a client and technology vendor side will inevitably cause friction in the relationship.
Getting good at working together takes a bit of time and effort. Things will get bumpy in the beginning! As a leader, it is your role to prepare your team for the new situation. You can expect resistance in the beginning, as your in-house team may be fearing that the new remote team is coming for their jobs. Reassure them and stay focused.
Be transparent. Expose your intentions and invite your in-house teams to help onboard new team the best they can as it will benefit everyone in the long run. Inspire them to be tolerant and open to new experiences and cultures. Reward collaboration and mutual wins.
Eventually, working with a new team will enrich your culture. It will expand your views, skills, and opportunities. You will discover the true benefits when the relationship turns to partnership.
2) Define the scope of work
Spend more time in RFP and service provider selection.
Define the scope of work as correctly and in as much detail as you can to weed out unqualified providers.
An external company will need as much information as possible in the beginning to be able to propose the correct solution and technologies, create a roadmap, assign the correct skill profiles to the project, understand your vision, know how to integrate with the internal teams, and finally, to propose a realistic price, milestones and MVP.
If there were one word to describe the scenario chief technology officers (CTOs) are facing in 2020, it would be complexity. Each new step in the direction of digital transformation and technology development adds another node to an ever-growing network of complex initiatives and challenges to address.
Adding to the existing complexity is the retail industry crisis caused by the global pandemic. Retailers are forced to react to new problems, such as the high levels of risk and uncertainty prevalent in the current business environment and the necessity to go digital.
With a need to move faster and more cost-effectively than ever, retail businesses have come to recognize the value of external team extensions. When collaboration between internal and external teams is set up properly, they will deliver combined excellence that creates an unprecedented competitive advantage, making organizations more innovative, agile, and efficient.
As the commerce impacts of COVID-19 continue to disrupt the industry, retail companies are re-evaluating their capabilities, strategies, and partnerships – looking for ways to stay resilient through the pandemic and beyond.
Read our next article, which explains the ACCELERATION engines a business gains through an effective use of integrated technologies, the benefits and downsides of building proprietary technology and how to set up partnerships for domain excellence.