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Insights / Blog / Business

Composable Business: A holistic approach to sustainability in retailing

December 02, 2021
Steven BaileySteven BaileyChief Strategy Officer

The past year has demonstrated conclusively that retailers who can react quickly to unforeseen circumstances have an advantage. If retailers use the momentum from the COVID-19 crisis to advance strategy that builds on business initiatives, they can profit in the long run. Digitalization should not be understood as a stand-alone process that is completed with the set-up of an online shop. If the whole company is designed to exploit digital possibilities in order to act dynamically and in agile fashion, it is generally possible to react to changes faster and more effectively. The holistic approach is called composable business – and it also solves some of the industry’s very specific problems.

The requirements of e-commerce have changed – yet many retailers are lagging with regard to the adaptation of their systems and structures. There are many reasons for this, not all of which are related exclusively to IT. Composable business, a concept that was coined by the market research and consulting company Gartner, approaches this problem holistically in order to help retailers tackle industry-specific challenges.

1. Lacking “holistic” digital business strategy

The digital possibilities of e-commerce are many and varied – but individual measures don’t do much by themselves. What many retailers are lacking is a comprehensive business strategy with a clear goal, where all measures are interlocked.

2. Outdated IT architecture

Most retailers’ online platforms cannot serve the quickly growing and constantly changing requirements of the e-commerce market. They were designed based on the way things once were; outdated business systems cannot fulfill current market requirements. COVID-19 has now shown clearly how much of an obstacle such rigid systems can be when new functions have to be implemented quickly.

3. Diversification

Different verticals usually cannot be covered by one platform. If a retailer relies on diversification and operates several online shops, this will result in increased work. It may be necessary to exchange data manually between several systems; this slows down processes and increases the incidence of errors – and the costs, for software licenses, for example. In the worst case, it has negative effects on the end customers due to long delivery times or incorrect inventory figures.

4. Variable processes, pricing, and provisions

Precisely in the B2B sector, contracts, conditions, and pricing can vary from customer to customer. If a retailer is active internationally, there are additional requirements, for example, different languages, customs regulations, taxes, or price provisions. If these should be considered for order management, payment, and logistics, the e-commerce platform has to map different complex processes, rules, and dependencies and provide flexibility for individual offerings and pricing.

5. Different functions

Product information management, content management, payment gateways, customer support, tax management, order management, procurement, and fulfillment – there is simply no technological solution that can fulfill all of retailers’ individual requirements.

6. Front-end flexibility

Customer centricity is no longer optional today – users have high expectations of online shops and digital services. And this applies not only for the B2C segment, but also for business customers. In addition to pure functionality, therefore, the user friendliness of the front end is crucial: Can the requirements and expectations of customers and the market be fulfilled?

How can composable business solve these problems?

The conversion to a modular architecture is a step in the right direction, for there is no standard solution that fulfills all individual requirements. Modularity makes it possible to combine different solutions and functions individually as needed, for example proven open-source systems and custom developments.

However, everything does not rely on IT alone. The technical restructuring has to be done together with a continuous adaptation of the organizational structures. Only this way can market requirements be fulfilled constantly and the focus placed on users. For in addition to rigid IT structures, it is frequently cumbersome corporate structures that hinder the digital transformation.

Composable business therefore aims at the whole company, from the IT structures to the technological solutions to the business behavior, the ways of working and processes and use of information. The goal: to build the company with largely autonomous, exchangeable building blocks that give it greater flexibility and speed; that is, to make it fit for the future. This way, market developments, new technological possibilities, and shifts in behavior or the customers’ desires can be accommodated.

Gartner predicts that, by 2024, companies with a composable approach will be 80% faster than the competition when implementing new offerings.

So what are the benefits of composable business in retail?

  • Flexibility with regard to new functions, third-party providers, and integration of systems, front ends, pricing, etc.
  • Speed thanks to iterative implementation and modular structure
  • Scalability
  • Customer centricity
  • Centralization of all data, for example CRM, product data, customer data
  • Grow-as-you-go: successive expansion is possible, for example into a digital marketplace
  • Reduction of costs and effort

Here's how it works: 4 steps to composable business

Four steps are relevant for the implementation:

  1. (Re)design of the business model: Re-think even when developing the business model, consider agile principles, and work collaboratively and across functions 
  2. Information as decision-making basis: Use existing data optimally according to the business model and base business decisions on the insights
  3. Adaptive methods: Profit from collaborative and iterative methods and design techniques on interdisciplinary teams
  4. Modularization of the platform: Enable flexibility and adaptability of the technological platform, also for future requirements, with a modular structure

The combination of design thinking, lean start-up, and agile is a concept that has proven itself in this context. With this interdisciplinary process, solutions for complex problems and problems that seem insoluble are revealed – in a technically feasible, commercially sensible, and emotionally understandable manner.

The starting point is the market and its target groups: Which digital offerings will address customers’ specific needs and problems? The initial implementation begins with an “experiment” – that is, a MVP (minimum viable product). The focus of the MVP is on a go-live with the most necessary functions; this way, these can be tested directly on customers and improved and expanded accordingly. After that, additional adaptations are made in short, iterative, and agile cycles that are used for measurement, learning, and insights. The component architecture via APIs makes it possible to develop and scale individual services and elements independently of one another.

Here, the implementation teams act collaboratively, across functions, and with an eye on the business; they make decisions independently based on data, and always with an eye to the customer experience.

This is how retailers can advance the conversion to composable business step-by-step – and overcome their specific challenges in the long run.

This article first appeared in the magazine "etailment". We appreciate your feedback and sharing the article.

Original article on "etailment" (German)