When John Lewis's chief executive Andy Street refers to technology as an essential ingredient to the company’s success, he is serious. His company is ploughing £100m into technology initiatives in 2015 – compared with £20m average annual IT spending five years ago.
Technology is crucial to the company. Click-and-collect sales surpassed home deliveries at John Lewis over Christmas 2014. Online sales rose 19%, accounting for 36% of trade, with the click-and-collect delivery option representing more than half (56%) of those web orders.
One of the main goals for the company’s technology strategy, led by IT director Paul Coby, is the improvement of the omni-channel experience – the seamless customer experience across all retail channels.
The company is directing team resources and budgets towards not just front-end initiatives, but also the core systems that underpin operational performance.
“The increase in investment emphasises how important IT is as a part of the revolution in the way we channel retail. And that is being invested in a variety of programmes – for example, we are constantly launching and working on online releases to boost our online front-end capability,” Coby tells Computer Weekly.
“But we are also investing in things that are sometimes unfairly seen as less exciting, but are very, very important – such as supply chain systems.”
Planning and delivering large projects
The largest IT project for Coby’s team, Project Pioneer, aims to deliver supply chain agility and underpin processes to drive more efficient stock control. Oracle is supplying the enterprise resource planning (ERP) platform and the system integrator consortium comprises TCS Consulting, Online Retail and Oracle Retail Consulting.
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The implementation of Oracle's ERP technology will replace about 60 different legacy systems. Coby – a veteran of such massive implementations since his days at British Airways – jokes that these projects can easily give the impression they will never finish.
But the team is pressing ahead with the planning work – the high-level design phase is complete and the building work has just begun, with sequential releases going live from 2015 to 2019.
“It is an incremental body of work. It’s not a question of having an old supply chain platform one day and the next day you’ve got a new one – it is not as simple as that,” says Coby.
Other initiatives include improvements to the retailer’s IBM Sterling Order Management platform this year, which supports selling and order fulfillment processes for online and stores, as well as a case management system from Salesforce.com.
Other pieces of John Lewis’s core IT infrastructure are the e-commerce platform from Oracle ATG and web content management software from Adobe CQ5 for customer-facing aspects, which support the online business.
As well as the introduction of ATG – which replaced an internally customised site the company developed in 1999 – Coby’s team has introduced a point of sale system supplied by PCMS. That replaced another elderly set-up a couple of years ago, and will also be improved in 2015.
According to Coby, since the release of the new website in 2013 – a substantial milestone for the company, he says – a lot of the IT investment John Lewis is making in recent implementations are “major, but incremental”. For example, once every four weeks new functionality is introduced to the web and mobile front-end.
“We’ve got a series of releases around the other major programmes over the course of the next three or four years around the architecture, which is absolutely crucial, but there’s no one big change – thankfully!” he says.
Continued work on the website and back-end systems is crucial because of the various peaks of activity John Lewis handles, such as Black Friday, the run-up to Christmas and subsequent clearance sales.
Coby says the end of 2014 saw levels of demand on the website – and consequently the distribution systems – that were “completely unprecedented”. On Black Friday, John Lewis delivered sales of £179.1m, up 21.8% on last year, the biggest week for sales in its 150-year trading history.
We had the biggest week, the biggest day, the biggest hours and probably the biggest minute. All our systems performed very well
Paul Coby on John Lewis's Black Friday sales
“I think we had the biggest week, the biggest day, the biggest hours and probably the biggest minute as well on our business during that time. And the systems all performed very well, which I think was a great tribute to the teamwork of everyone that focused on the preparation,” Coby says.
“Having a very nice front end is not good enough – you need to have systems in place that can fulfil the market demand. So we made estimates of what the volumes coming through would be, and that work started in early summer, so a good six months before the peak. Then we invested in tuning the systems and ensuring sufficient capacity.”
The forward-planning exercise included intensive work with all of John Lewis’s IT suppliers to fully integrate the whole process during peak season.
“This preparation work was not just about our team – this is the whole business, a cross-departmental committee that came together everyday to ensure that all the elements were all functioning effectively. Not just IT, but distribution, marketing and the website,” Coby says.
“Understanding what the peak flows would be like was crucial. Then, in the morning when we were running at 16,000 orders per hour, it was essential to know exactly what was flowing through the website, understand what was flowing through to the distribution centres, what that means in terms of picking products and taking them to John Lewis and Waitrose stores, so customers could collect them.
“It’s all about understanding the volumes throughout the system, and making sure everybody is prepared for and supporting those processes.”
The “three-lane motorway” of IT strategy
When explaining major architecture changes to the business, Coby uses the analogy of a three-lane motorway. The large programmes that take several years to deliver and change the fundamental architecture sit on the “slow lane”, while the “middle-lane” has a variety of investments and individual subjects.
Such projects exploit the major improvements made in the back-end and aim at capturing what customers currently need and want, such as incremental improvements for the website and the retailer’s gift card launched last year.
“And then, on the fast lane, you’ve got the fun part – dare I say it – the innovation and testing projects around ways in which shopping is going to develop over the next five years,” Coby says.
The type of “fast lane” projects Coby refers to are related to innovation, carried out at John Lewis’s tech startup incubator, JLab. Examples include the work developed by companies such as Localz, a startup specialising in micro-location technology, which was awarded backing of £100,000 in September 2014, with the opportunity to trial its technology with the retailer.
Localz uses Apple's iBeacons – coupled with positioning technologies such as Wi-Fi, GPS, QR codes and near-field communication (NFC) – to calculate the shopper's precise location in store. iBeacons is one technology in particular that John Lewis is exploiting in limited trials and one that Coby is excited about, as it could have a substantial impact on the business.
“I think 2015 will be an interesting year. We all know that the Apple Watch is coming, so it will be interesting to see how that goes, but there are quite a few other wearables in the market, so that’s something we’ll be looking at with interest, as well as the much-hyped internet of things,” he says.
Handling innovation challenges
Coby says his team has just completed what he defines as “effectively a data warehouse” – an IBM DB2 implementation that provides insight into customers' buying history. However, the IT chief is cautious on the subject of data analytics.
“One of my takeaways from the New York retail conference NRF was that everybody was rushing ahead in being able to match these sorts of ideas to customers. But I think that. given John Lewis’s values and our relationship with customers, it’s absolutely essential that we proceed very, very carefully in this area,” says Coby.
“I think it’s a good idea to understand what our customers want at a generic level and make sure we give them the right sort of offers. But it’s also imperative we listen to what they want in how their data is used.
“I hear some people getting very excited about data analytics and all that - and I understand why. However, it’s really important those intentions are linked to recognising that customers have individual concerns about how their personal information is used by businesses.”
According to Coby, the current data warehousing set-up at John Lewis is relatively simple in its goals. It uses online analytic processing models to examine information from multiple angles, so the business can understand sales patterns at a generic level.
“We have just set this up, so I wouldn’t claim that we’re advanced in data analytics. Again, we are very mindful of how we use this data, hence the generic approach. It is quite early days.”
Spinning the fun plates
Despite being careful about industry hype, Coby is a self-professed techie and clearly interested in trends and how emerging technology can benefit the business. However, he needs to keep the “fun” plates spinning along with the not-so-exciting projects in the back end, so how does the IT director handle the constant requirements for innovation, with the need to improve the fundamentals?
The answer, says Coby, lies in having a good team and structuring the way in which people contribute with new ideas. In addition, there’s Room Y, a small room at the company’s London headquarters, where the team can “knock out some things to death” and develop projects. One such is the recent pilot at the Oxford Street store using 3D printing and RFID tagging, to allow customers to test different fabric patterns and colours on furniture items.
“I think the combination of JLab, Room Y and a great team with fantastic ideas is key to helping us keep our ear close to the ground,” says Coby.
Conversely, he stresses that the focus on the fundamentals does not mean he should be distracted from his duty of driving innovation or delegating it to someone else. Rather, he must navigate through all the three lanes of IT strategy.
“That’s why I talk about these three lanes – in a way, none of them would have really delivered without the others. What would be the point of making all those big investments, if they were not focused on delivering benefits to customers and supporting our partners in the business?” says Coby.
“So to do the job, it’s really important you actually have the perspective from the big programmes and just running the business, to be able to get the vision of where it’s at and what’s going to, or could happen in 2020 or even further ahead.
“But we are judged in terms of enabling the business to do its absolute best for customers and partners to do their jobs to the best of their ability. I can talk about IT until I’m blue in the face, but if our operational performance is not up to scratch, then no-one is going to listen to all the other stuff. It’s as simple as that. ”