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Technology, like the future, is what we make of it and that's both me promise and the problem.

Stripped of all its complexity, retailing is ultimately little more than a value exchange between people--the transfer of some form of wealth, from bright feathers to e-cash, for some form of goods, service or offering, physical or virtual. In the same light, technology is, in the end, about speed, connectivity, facilitation and enabling, productivity, communication, accuracy, data generation, collection and interpretation, and, eventually, information creation and management. Retailing then is an activity--an extension and expression of who and what we are. And technology is a tool in both the simplest and most profound sense of the word. Technology creates value in retail systems by reducing absolute system cost and enhancing absolute system productivity. But it's people who, in the final analysis, create and define value at retail. The bottom line isn't buying and selling; it's agreement on value and, some would argue, values.

Pick up a business magazine of your choice, from Wired to Fortune, and you'll be bombarded by almost baffling discussions of software and hardware--discussions robust with product efficacy claims and visions of techno-utopias. But it's not the hardware--either in terms of physical equipment such as mainframes, PCs, laptops, PDAs or cell phones or the "plumbing" like switchers, routers or T-1 and T-3 lines--or the software that's limiting this industry's productive integration of technological solutions. It's the "wetware," the human beings who are the persistent "bugs" in the system. The truth is that we can replace the technology as many times as we want, but nothing is really going to change until we begin changing human behavior.

The litany of critical industry issues--from invoice reconciliation, to more effective inventory control and reduction to unsaleables and diverting--hasn't changed significantly in more than a decade. There has never been a greater need for solid, real-time information about consumer preferences and purchasing behavior. We spend a good deal of time congratulating ourselves on being "customer focused" and "information driven" when the truth is we're still overwhelmingly internally focused and drowning in data that we have little or no hope of effectively or efficiently processing. We've worshipped at the altar of efficiency for more than 10 years, and we've got precious little to show for it but some shopworn and jaundiced faith. Supply-side inventories still turn about 11 times on average. Less than 10% of the industry has anything even approaching full EDI implementation. For most of the industry CRP, CPFR, full EDI order management and real data-driven category management leading directly to improved turns, inventory reduction and the functional elimination of practices like diverting are still ECR-induced hallucinations buoyed by an occasional hit off the hookah of self-congratulation.

To date, we've placed an unfair burden on technology, and, as a result, we've all but ensured that we won't be able to receive anything approaching the full benefits it offers. Before we can take advantage of technology, we have to change ourselves, redefine our behaviors and, at the very least, almost immediately change our metrics and measures. As long as we continue to measure old behaviors, we will continue to practice old behaviors. As long as we reward inefficiencies, we shouldn't be too surprised when productivity doesn't improve.

This special report tells the story of the industry's current and near-future experience with technology, almost exclusively as seen through the eyes of technological partisans. These are the voices and opinions of the believers, people who see the pot of gold at the end of the technological rainbow. But what about the rest of us? How can we frame an effective context that allows us to share the vision of the believers? We're not sure we have a complete answer to that question, but we do have 10 thinking points to offer up for consideration. These points may raise as many questions as they answer, and we think that's good. It's high time we began to understand the scope and the scale of the opportunities technology offers us. Some of these points may seem obvious, others obscure, but all are intended to stimulate your thinking.

I. Technology can enable or enhance retail processes but it is not, in and of itself, either a process or an end. It's dangerous to believe that technology can save you from yourself. The old computing GIGO rule (garbage in/garbage out) holds firm across the entire technology spectrum. Technology isn't an answer, it just helps you more efficiently execute against an answer. Consider scanning, for example. Scanners efficiently capture point-of-purchase data. Collaborative filtering and other kinds of data mining software can aggregate and sort that data in a variety of ways. But unless and until that data is translated into strategic and/or tactical tools for sustaining and building sales, the application of the technology is functionally all for naught.

II. There is a distinction between point solutions and full solutions. Today the industry is awash in product and system claims from a variety of suppliers, some solid, some little more than vaporware. The industry will only get the full benefit of any technology if the system as a whole moves away from proprietary solutions (particularly on the back end of systems) and toward integrated industry systems. There are two factors at work here. First, the industry ought to accept the general principle that customization works best on the front end of systems (the customer interface) and has only limited application on the back end, where efficiency is built and costs are reduced by achieving scale.

III. Change requires new metrics. If one had a magic wand, one could in all probability foment radical change in this industry by making three simple changes. First, you would change buyer metrics so that their personal bonuses were calculated on the basis of how much of the product that they purchased actually passed through the front end rather than measuring gross margin. Second, you would wave your wand at retail so that every employee's personal bonus would be calculated on the basis of total store profitability rather than metrics such as departmental contribution to gross sales. Finally, you would compensate direct sales forces and sales and marketing agents on profitable volume sold rather than total case movement. Technology will never fully pay out in this industry until we are prepared to change the larger rules governing the way we do business together.

IV. Existing industry management paradigms may actually stand in the way of effective technological implementation. This industry, similar to so many old economy industries, still clings to a fairly hierarchical organizational model. That's fine, of course, until you consider that under such models the person in charge is supposed to know as much (and, one hopes, more) than the person or persons who report to them. Technology, or at least the finer, nuanced realms of technology, is the province of the young and in many cases the multiple pierced and tattooed. So, management structures and styles that favor the scrubbed and deferential probably aren't going to attract the best and the brightest to the industry. Managing new economy employees requires both a more open organizational model and a more open mind.

V. We like to think of technology as a monolithic synonym for computation or digitalization, but it's not all that simple. Computation is just one form of technology, but the future of the food industry will be shaped by the convergence of any number of technologies, including nanotechnology, biotechnology, information technology, communications technology. These technologies will impact the industry in concert, not as separate threads existing in fragile isolation, but intertwined in a powerful rope wrapped around the overfed neck of complacent thinking. Deep in the shadows of Silicon Valley, the techno-pioneers are dreaming fervid dreams of computers that possess intelligence rather than facilitate its progress. The technological changes we have seen over the past decade or two will be dwarfed by those about to come. Progress is both inevitable and fickle in its affections.

VI. Systemwide solutions require systemwide standards, and global solutions require global standards. Before we can even begin to hope to achieve the systemwide hardware and software standardization discussed in point II, we need to know what kinds of standards we are engineering against. And as the world of technology is, almost by definition, a global world, it would help if those standards were global standards.

VII. Infrastructure isn't the enemy of technology; installed infrastructures are. A significant portion of this industry's asset base is tied up in infrastructure that is--to put it charitably--something less than flexible. Too much of this infrastructure is (literally) hardwired. Front ends are in fixed locations; shelving and cooling lines have been placed with a fervent sense of certitude about the future. Too often it seems that we want technology to somehow optimize around this installed infrastructure. Imagine for a moment a more modular approach to design that could link, say, shelf take-away against digitized POS price data and central price file maintenance. Imagine radio frequency technology that could "broad cast" affinity purchases from peanut butter and jelly to bleach and soap powder directly to a monitor on a shopping cart or a (yet to be invented) PSA--a personal shopping assistant designed along the lines of a Palm Pilot.

VIII. Technology can make us more efficient at pursuing bad practices. As we have hinted at already, one of the dangers of technology is that it can make us more and more efficient at doing things we shouldn't be doing at all. There's no doubt, for example, that the revolutions in computer and communications technologies have made it infinitely easier to divert. As we adopt technologies, we should make sure that their aim is to enable new, positive models rather than just to speed up bad practices.

IX. There's a reason that the food industry can't lay claim to a single technological best practice. Too often the industry's vision--especially in the area of technology--hasn't extended too far past the aggregate navel. Technological best practices exist in abundance outside the industry. Technology suppliers ought to be the natural conduits to these best practices, but only if the industry learns to treat its supply chain partners less as exploitable potential profit centers and more as full, valued trading partners. Technology is drawn to capital, and retailing has been (at least in the case of food retailing) notoriously slow to reach into its pocket to access cutting-edge practices and products. If this attitude continues, we may see real technologically enabled alternative trade channels spring up whose systemic efficiencies will make up for their lack of "traditional" food industry expertise.

X. The true test of any technology is whether or not it delivers tangible human benefits. In other words, the real "killer apps" of any technology are those that directly touch and benefit people. In this industry, that could mean technologies that touch consumers, employees and all supply chain partners. By creating real technologically facilitated differentiation, we can perhaps learn to stop worrying about holding onto the meager crumbs of a shrinking piece of the pie and instead turn our attention toward growing that pie. To date, scanning has been a questionable technology because it has failed to deliver a clear and tangible benefit to consumers who, en masse, continue to hate the time they spend at the front end. Even self-checkouts aren't really as shopper friendly as they could be. Why ask middle-aged shoppers to decipher small UPC codes on variable-weight produce items? How much harder would it be to install a magnifier to that scanner that would allow the shopper to actually see their purchase? We 're reminded of the register slips generated at Superquinn in Ireland. The slips flag indigenous Irish products (by printing a shamrock next to the item), tell the shopper what percent of their purchases are represented by native Irish products and exactly how many "club" points they received for their visit. In a country with as much national pride as Ireland, this is a tangible consumer benefit.

As we said, these 10 points don't represent a comprehensive litany of everything one ought to know about retail technology. We prefer to think of them as a starting point that will launch the reader of this report on the same voyage of possibility that draws the experts quoted in the stories that follow. Technology, like the future, is what we make of it--and that's both the promise and the problem.
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Publication:Grocery Headquarters
Date:Nov 1, 2000
Previous Article:Real-time revolution.

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