Retail technology view from the top: SAP's Pat Bakey

As new systems and digital capability continue to evolve the way retailers run their businesses, Essential Retail will be gauging the views of the sector's main figureheads, via a series of exclusive interviews over the coming months. This week, it's the turn of SAP's general manager for retail, Pat Bakey.

Change in retail and the wider business world will continue to accelerate and retailers need to get used to it, prepare their organisations accordingly and learn from some of the agile eCommerce pure-plays in the sector, according to Pat Bakey, general manager for retail at global technology company SAP.

Talking exclusively to Essential Retail, the tech executive said the successful retail enterprises that have best adapted to recent changes in technology and new shopper behaviours – such as Amazon, Alibaba and eBay, who he describes as “super-aggregators” - work in an agile manner with an element of risk – and they are not afraid to fail.

These large digitally-focused companies have established a benchmark culture for the retail industry, Bakey argued, which is centred on innovation around product, limitless selection, unlimited categories and the endless aisle. Over time, they have also shown speed to move quickly into new categories and into new business models.

"IT is a culture focused on innovation – it's about accepting that you can't have innovation without accepting risk," he remarked.

"The goal is not to eliminate risk – it's to make intelligent decisions around what risks you'll take and make sure you have the right plans in place to deal with it. You must have the right culture in place to minimise that risk."

According to Bakey, the single point of origin stimulating the need for retailers to innovate is the consumer and, in his opinion, the likes of Amazon and eBay have been successful in viewing their customers' requirements, anticipating where their business is going to be in three years' time and "getting busy creating that environment".

"It's the biggest thing we can learn from them," he noted.

Scott Weavers-Wright, the co-founder of mother and baby product retailer which was sold to Morrisons for £70 million in 2011 prior to its much lower-value sale into private equity earlier this year, recently spoke of the need to be brave in retail.

In an interview with Essential Retail in March, he suggested the larger multichannel retailers are "scared" of change, and argued that the decision-makers within those companies are worried about the impact rolling out new systems and solutions will have on their individual careers.

There are, of course, exceptions to this chain of thought – with a number UK and US retail chains embracing omnichannel development and trialling new systems in recent years. John Lewis and Tesco, for example, have invested time in working with start-ups to learn about new technology, aiming to benefit from the agile systems they can offer. House of Fraser, meanwhile, is trialling a whole host of new innovations around mobile retailing, beacon tech and high street partnerships, and Macy's in the US recently announced an in-depth omnichannel strategy that included further research and development investment in mobile apps, mobile payment and interactive in-store tech.

Like Weavers-Wright, Bakey has also alluded to it being a "scary" time for retail (see the YouTube video, below), but he also believes that when there is evolution in a market, there is also potential for growth.

"It's only scary if you view what is happening right now from a certain lens and if you have a certain internal view of your capabilities," he acknowledged.

"The flip side of that is it should actually be viewed as a time of significant opportunity – for those who are prepared – because the connection between retailers and consumers is stronger than in any other business sector."

SAP sees the current situation in retail as "a reset moment" for the industry to use technology to get closer to their customers and become more relevant to the consumer. The tech firm's tools have recently received the backing of US retail research organisation RSR, with the group's managing partner Brian Kilcourse actually posing the question whether retailers are actually ready to absorb what SAP can enable.

At the heart of SAP's retail strategy is its own in-memory database system, HANA, and its Customer Activity Repository (CAR) solution, which in the words of Kilcourse "contains unstructured and structured data, rules and algorithms, and is used to provide information about product, inventory, and forecasts".

It can be used for various functions, including predictive analytics, loss prevention and to integrate components of SAP's retail portfolio, including its eCommerce offering, hybris.

Naturally, Bakey argues that these types of solutions will aid retailers in their quest to become more dynamic in their operations, but behind the sales pitch it is clear that he wants them to switch their attention from using technology simply to 'keep the lights on' and run their businesses, and more towards utilising it for meeting new consumer demands.

He predicts that there will be more change in business over the next five years than there has been in the last 50 years, and he wants organisations to set themselves up for this volatile environment.

"Around 75% of retail IT spend today is on running the business, and general maintenance – and this consumes a lot of time, labour and resources," he noted.

"They can only invest around 25% on the innovation or customer-centric agenda, and this needs to radically shift so that three-quarters of spend is on innovation."

The attributes required to succeed in today's retail environment are focused on speed and agility, according to the SAP man, who wants to "tip the scales" from business execs who are doubtful and concerned about the future to those who are much more optimistic. By changing this mind-set in a field that links so many sectors and employs more people than most other private sector industries, he believes it could have a major impact on the global economy.

"It's not about getting everything right, it's about getting the right things right – that's why the business strategy should be around creating options," he said.

"If there is one thing that business schools and working in business has taught us, it's that in times of great volatility the value of options increases. It's a fundamental principle."

According to Bakey, SAP's aim is to provide the core platform and systems and let its retailer partners focus their attention on offering the innovative options their customers now desire.

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