Walmart’s Transformation into a Digital Commerce Leader

 

 

Transforming an iconic company while faced with technological disruption is one of the toughest challenges a leader can face. For Walmart, the world’s largest physical retailer, and one of seven consumer goods transformers noteworthy for outperforming the sector, according to recent Innosight research, it had to mean staying focused on customers in its stores while also embracing the next wave of digital commerce in the cloud, shopping via AR and VR, and incorporating machine learning and AI.

To lead this transformation, Walmart CEO Doug McMillon in 2019 hired Suresh Kumar, a renowned tech leader who had learned key lessons about transformation strategy from his mentor at Microsoft, Satya Nadella. Kumar’s role helping Microsoft triple its cloud capacity is part of a 25-year career that also included key positions at Google and Amazon.

Under Kumar, Walmart embarked on a dual transformation strategy that he calls the company’s “powering the present, while enabling the future.” For this video series, Innosight spoke with Mr. Kumar for his perspectives on where tech is taking retail. As Kumar tells the story, he reveals how this required forging “a new relationship” with the customer who now has more choices than ever, and how that too can disrupt the experience of shopping.

 

On Building New Capabilities

“Technology can have a very disruptive effect in many industries. In retail, Walmart was actually the original disruptor when it introduced the supercenter format, everyday low price, customers could get access to a wide variety of products at really great value. That was enabled by the technology that was available at that time.

But e-commerce was another big disruptive force. Now we are in the middle of another disruptive cycle. Technology advancements, whether it is AR and VR, whether it is machine learning and AI, even inside the supply chain around IOT, blockchain, all of these things are creating disruptions in the way in which customers are shopping, in the way in which we serve our customers, in the way in which business itself functions.

Much of what we do today is actually still guided by Sam Walton’s core principles and values. The customer is really at the center of everything, along with our mission to help people save money so that they can live better. Each of the points in the 10 guideposts for building a better business is actually quite relevant. But two that really speak to me in regard to our digital transformation are exceed your customers’ expectations and second, swim upstream. We aim to disrupt, to innovate towards the goal of creating exceptional experiences at every touch point.

We formed Walmart Global Tech to bring together all aspects of technology within Walmart about 40 years back. We already had a presence obviously in our headquarters in Bentonville. We had gone to Silicon Valley to go after the talent that is present in Silicon Valley, which was a great place to get started. We also are in multiple different locations in India and on the East Coast as well.

Now, from an acquisition perspective, we continue to invest in organically growing our own talent, on the team internally, but also bringing in deep domain expertise. Acquisitions are really often about acceleration. Very recently, we acquired Zeekit. And this uses algorithms and machine learning models to create an accurate image of how an item of clothing is actually going to look on someone.

So, when we look at our business model, the talent and the technology that is required to actually support the business model, we feel that acquisition should be built upon and complement the foundational work that’s already in place as we serve our customers and members online and inside the store.”

 

On Envisioning Dual Transformation

“Within Walmart, we are looking at this transformation along two dimensions. One is around how do we use technology to power the present. That is one part of the digital transformation.

The second part of it is how do we future proof the company, and how do we enable the future in ways in which the technology advancements that are happening today will power the businesses for the future.

So when I joined in 2019, we set out on a digital transformation journey where we wanted to make sure that we power the present and innovate and enable the future.

We focused on our transformation across multiple areas, around talent, around culture, the way in which we were organized, the way in which we worked between technology, business, product and operations.

So, we like to think of the core digital transformation that we have embarked on and we are well underway, really to serve two purposes.

One is that our existing business continues to scale and increase in volume and increase in complexity. The customer is changing in terms of their needs, in terms of how they want to be served.

We are enabling the future through technology, and our investments are driven in such a way that we do both of these at the same time, whether it is around talent, whether it is around our investments, whether it is around how we work, all of these things are geared toward achieving both of them.”

 

On Innovating around the Customer Experience

“The relationship with the customer or the consumer has really changed. It’s no longer about getting the consumer to come to us. We should also go to them wherever they are; however they want to engage with us.

I was fortunate enough to be at Microsoft during a period of great transformation. Satya Nadella had just become the CEO when I joined. One of the things that both of the companies are aligned on is that they put the customer at the center.

So when I was at Microsoft, empathy was something that Satya Nadella focused on quite a bit. It was something that I took away that I still deeply resonate with. Empathy in terms of putting yourself in the customer’s shoes, right? So really understanding what is the customer going through?

Today, more and more millennials, including my own daughters, they rely on products coming to them, whether they are in their social media feed, whether they are on TikTok or Pinterest or Instagram or whatever. And that’s where they get inspired.

We know that customers want a short path between inspiration and purchase. So, we introduced Walmart Creator, which is a one-stop portal that makes it easy for creators to monetize shoppable products and allows customers to be able to see something from the favorite influencer and then be able to buy it with a single click.”

 

On Showcasing Success & Results

“Clearly, at the scale of Walmart, we have a huge number of metrics to help guide everything that we do. One of the most important things that we look at are various aspects of NPS (Net Promoter Score), customer NPS for various parts of the way in which our customers interact with us.

Then there are other types of metrics which are really around, you can think of them as sort of the leading indicators of what NPS is going to do. In-store is a great example. So we want to make sure that our products are in-store at the right location when our customers want them.

One area where we focused on in terms of Net Promoter Score was around our pickup and delivery business. So when we started out, we were doing a lot of substitutions on behalf of our customers. Because we might run out of one particular type of milk. We might substitute it with a different milk because we didn’t want to disappoint our customers.

But what we learned over a period of time is that what you substitute with becomes really, really important. Some customers were reporting really good NPS. Others did not like it at all. And so the overall average NPS actually turned out to be not that great. So we focused on really understanding our customer. What is the type of customer that likes our substitution process? What are the types of customers that don’t like what we substitute?

What can we learn from them? So we started using machine learning to really understand where our customers were telling us at scale that the substitutions that we were offering them worked and where they did not work. So using technology and using the data that we had about the insights that we learned about our customers, we could continuously tune our substitution algorithms.

Then the NPS went up quite significantly, 10, 15 points at a time.

We will look back at this time and we will say that this was a critical period in the retail industry and how Walmart actually transformed itself to better serve the customer through that.”

 

Lessons from Transformation

“From our own perspective, we focused on our transformation across multiple areas, around talent, around culture, the way in which we were organized, the way in which we worked between technology, business, product and operations, and also making sure that we have a very strong foundation on which we can build for the future and also continue to scale the present.

So from a technical perspective, we structured everything in such a way where we wanted to make sure that we were common where it is possible and we could leverage our technology across multiple different areas, but we wanted to make sure that individual teams, individual areas can move as fast as possible.

I call this being highly aligned, but loosely coupled, highly aligned in terms of where we are trying to go, what is the vision, what does the customer really want, start with the customer at the center. Be mindful of the outcomes that you want to drive. The execution part of it, try to make it as loosely coupled as possible so that multiple teams can work on different initiatives in parallel.

So this is very, very important. It’s important also to empower the teams to be able to find the most optimal ways in which they can deliver the outcomes that they need to deliver.

And that is also about attracting and retaining the best talent that you can find, giving them a clear vision, a strategy to achieve that vision, but then letting them go in terms of figuring out the details of the execution.”