Measuring Strategic Business Value Of Digital Transformations In The Retail Industry

Abstract

The Retail industry is going through a paradigm shift and the next generation of
customers are leaning towards purpose-driven retail, demanding new levels of value like
instant delivery, and seamless experiences at best prices. Retailers are enabling value
creation with differentiated physical and digital shopping experiences driven by innovative
business capabilities. CXOs are making significant investments in digital transformation
initiatives adopting technologies like artificial intelligence, cloud, Internet of Things, and
augmented reality.
Chief Financial Officers (CFOs) are challenged in evaluating the business case and
measuring success of these digital programs due to inadequate and inconsistent valuation
practices. Existing academic research indicates that traditional return on investment (ROI)
measurement frameworks are limited in their ability to deliver insights on true business
value achieved through digital investments. Traditional measurement methods of
transformation benefits like free cash flows or net present value involve long payback
cycles and typically have intangible outcomes. The value impact of digital technology
investments is a challenge at enterprise level and monitoring this performance extends
beyond traditional methods to non-financial metrics aligned to the business objectives of
the program.
The proposed study would examine the value provided by digital transformations
implemented in the global retail business. The study has a long-term goal of providing
CFOs the required tools to measure transformation benefits through a unified digital ROI
framework aligned to the retail business value chain. It assesses the business outcomes of
these initiatives, including their impact on financial performance, cash flows, and the
prospect of defining an all-encompassing business value framework.
A research approach involving a digital survey was conducted to gather insights
from practitioners of Digital technology transformations regarding their perspectives on
methodology, approach, challenges, and recommendations for evaluating and optimizing
ROI benefits.
The outcome of this research was a structured benefits evaluation framework,
Smart Gems, which is enriched by the fusion of real-world experiences and processional
wisdom. Smart Gems enables business metric definition and effective measurement across
the retail transformation value chain. CFOs should now be able to navigate confidently as
they evaluate and approve complex digital initiatives and design effective governance
practices for value management.