Investing in digital when times are tough
2023 – a tough year for fashion
Let’s face it, 2023 is going to be a tough year.
The events from last year continue to have knock on effects. Inflation, which was at a record high last year, both in the UK and the US, is now on the decline possibly in response to increased interest rates. But prices are still high and still getting higher, even if the rate at which they are doing so is less than before.
The war in Ukraine is still raging, with a mounting humanitarian toll and a subsequent global impact on everything from energy prices to defence budgets. The climate is an unpredictable mess and will only get less predictable.
All this is coming together to create a perfect storm (quite literally sometimes) of unpleasant consequences. For example, the UK faced fresh food shortages in February because of bad weather in Europe and North Africa. When inflation was running rampant, to keep prices low, UK suppliers opted to source away from UK and Dutch producers who were burdened by excessive energy bills from heated greenhouses. This meant less fresh produce grown in the UK and Netherlands during the winter. But the gamble that didn’t pan out because of freak weather elsewhere.
The Silicon Valley Bank just collapsed, having invested heavily in US government bonds, which lost value as the Fed raised interest rates. Not an issue, if it could have held on to the bonds for a few more years. But unfortunately, most of the bank’s customers, hit by recent woes, were pulling out their deposits to pay bills. The bank had to sell the bonds too early, suffering massive losses. News of this created a run on the bank. Boom. It looks like a subsequent banking crisis has been averted, as this wasn’t the result of Lehman Brothers style risky investing, but the Fed will have to rethink its current plan for interest rates, which will affect inflation.
The world is cautiously watching.
Investing in digital when money is tight
It might seem counter-intuitive to invest in digital when times are tough but taking that risk might be crucial to survival. Things have been tough for several years now. Tightening those purse strings and waiting for better times might prove to be too long to wait.
According to a recent survey of over 1000 CXOs across 7 industries, in 2023, 62% say digital transformation is a high priority and 64% plan to invest in composable ERP. Gartner predicts that global IT spending will grow by 2.4%. Kearney says that although pausing digital projects to preserve capital seems a rational response, it could affect customer loyalty and lose you talent. So, there is a definite trend towards investing in digital. From improved operational efficiency and productivity through automation, and enhanced data analytics capabilities for better decision-making, to interdepartmental collaboration through digital tools and platforms, and better visibility to adapt to market changes swiftly, the benefits of digital transformation for an enterprise are numerous. The ROI of digital transformation is not just internal but can also help improve customer experiences, expand market reach, boost brand awareness and help the organization innovate its product and service offerings.
Digitization, digitalization or digital transformation?
Today, Digitalization is used synonymously with eCommerce, but it is so much more than that. You could digitize your invoices by sending them electronically. Or digitalizing communications with a supplier by using a collaborative vendor platform. Digital transformation is an overarching approach that covers multiple dimensions, challenging the broader business strategy to fully capitalize on digital advantage.
Digital Transformation allows you to see what’s working and what’s not. It allows you to know where to focus your energy and when you should cut your losses and adapt. And it allows you to do those things faster, but systemically. Your company is a vast network of employees, customers, partners, products, services, and everything else in-between. Learning from mistakes, modifying methodologies, and trying again isn’t easy. Digital Transformation gives you a massive edge.
Start with your data
You need to identify market trends, see your own mistakes, and simulate the outcomes of new strategies. This requires visibility of every aspect of your business as well as unbiased objective analytics to provide insights from vast amounts of data in meaningful ways. You need reliable truths upon which to base your decisions. Digital data and analytics give you those truths.
Take the example of the fashion shift from formal to casual. To get on top of it, you need to see the trend, adapt your product catalogue to cater to it, then watch the performance of the change, day by day, week by week. If it isn’t panning out, then you need to be able to tweak and shift the catalogue until it does. You need a data analytics system perfectly integrated with your Product Lifecycle Management (PLM) system and Retail Planning systems.
Revamping your methodology involves a complex process of redesigning, re-implementing, and retraining.. Inflexible processes are terribly resistive to change. You might have some great ideas, but getting the gargantuan thing that is your organisation to adopt those ideas might take too long. Digitalized processes are quicker to monitor and modify.
Take the example of sustainability. The fashion supply chain is monstrously long. Transforming the entire length of it, from cotton to retail store, allows the implementation of sustainable policies and monitoring that was heretofore unimaginable. Once the processes identified for change are simplified and standardized, organizations can look towards automation and composable ERP systems and vendor platforms to transform their processes.
Digital for the long term
Organisations that have thrived in recent years have continued to pursue long-term goals, adaptively yet passionately. Louis Vuitton, for example, didn’t slash prices to survive covid. Leveraging on their digital capabilities, they modified their product range to cater to the evolving market trends by having fewer dressy shoes and more sneakers. But they stuck to their commitment to sustainability, like with the Charlie sneaker which is made of 90% recycled material, and maintained brand integrity and significant growth post-pandemic.
To successfully navigate through challenging times, it is crucial to remain vigilant and closely monitor the market, continually modify strategies and approaches, learn from mistakes, and be adaptable to changing circumstances. Ignoring the warnings and advice of experts who may be cautioning against potential risks could prove detrimental to your organization. Therefore, it is essential to remain open-minded and receptive to constructive criticism, in order to make informed decisions and mitigate potential threats.
The storm is coming
So, don’t spend your money on an expensive watch, spend it on weather-proofing your home. Then whilst the storm is raging outside, you can diligently continue your work, instead of wasting time strategically placing rusty buckets to catch the multitude of raindrops cascading from your faulty roof. Plenty of companies had the ideas that Louis Vuitton did, but they either had them too late or they didn’t have the infrastructure in place to act on them.
Executing a digital strategy aligned to the business vision is the equivalent of weatherproofing your home. Having the right digital technologies in place, could significantly cut costs in the long term.
If in doubt, don’t be. Go digital to survive the storm.