Walmart as “innovation company” – the CEO perspective on retail digital transformation

Walmart may be regarded as a retail giant, but there’s another title that CEO Doug McMillan wants to pitch:

We’re also an innovation company. Current and emerging technologies make it possible to serve customers better than ever before.

Innovation is something that is often a roll of the dice, of course. McMillon notes that to be genuinely innovative is a long game:

Sometimes we plant seeds and they grow quickly. Sometimes they take a while. Sometimes we start something, a 1.0 version, that doesn’t work, but by version 3.0 or 4.0, it does. Expect us to test a lot and fail sometimes. But along that journey, you should expect some successes and occasionally some big wins.

He cites the example of US grocery pick-up as a case in point:

We’ve scaled grocery pick-up from nothing four years ago to over 2,000 locations today, and by the end of the year, we’ll serve 70% of the U.S. population, and we haven’t sacrificed quality…Customers also love our Pickup Towers which we’re growing from zero two years ago to 700 by the end of this fiscal year.

Delivery services are also high on the agenda, he adds:

Now, that we’ve learned to do pick-up well, it unlocks our ability to provide delivery. By year-end, 800 of our US stores will offer delivery, covering 40% of the population. By the end of this month, 50% of our Sam’s Clubs in the US will offer delivery through Instacart.

In China, we have a minority investment in JD Daojia, which is a last-mile grocery delivery company. One-hour delivery from our stores through JD Daojia grew from 16 stores two years ago to almost 200 Walmart stores in 30 cities today. You can now see last-mile delivery capabilities being built in our key markets.

But there have been slip-ups on the way, admits McMillon:

Of course, some of the things we’ve tried didn’t work or haven’t worked yet. We tried grocery delivery with Uber and Lyft, but switched to others as we all learned it’s different to move a grocery basket than it is to move people or a restaurant order. We don’t have the right model to scale associate delivery yet, but it makes sense, so we’re working on the next iteration.

Transformative

Digital transformation is an ongoing journey. McMillon says:

The potential to gather data and put it to use more effectively is exciting. We’re learning how to work differently. We’re learning how to put product management, engineering and business leadership together to work in a more agile fashion. We’re improving many of our processes, and we’re empowering our associates with better tools and technology.

That empowerment is leading to positive feedback and engagement from employees, he adds:

Unsolicited on store visits, associates are saying thank you for the improved processes. That’s music to our ears. These processes are more intuitive, and we think associate experiences should be consumer-grade. So we’re making progress in stores, but it’s more than just that. Take our recent Buy the Room launch in the home section on Walmart.com. One product manager, one designer, and two engineers developed that from idea to launch in just two short sprints, that’s four weeks in total, that’s fast.

Tech is also being used to drive out costs and boost efficiency, says McMillon:

We rolled out a risk-and-casualty mobile claims app in our stores that eliminates paperwork and provides more timely information on customer or associate accident claims. Over time, we estimate that this will help us save $17 million through more efficient and effective claims management. We’re also implementing Intelligent Automation across the business with over 500 software automation bots using machine learning to complete manual and repetitive tasks in areas like accounts payable, payroll, benefits, logistics, and transportation. They allow our people to focus on more engaging work and also help reduce expenses. This is saving us an estimated $30 million a year.

Underpinning all of this is a vision of new retail environment, argues McMillon:

We’re investing in technology, especially cloud, data and analytics and in the supply chain of the future, including last-mile delivery. We see the big picture as it relates to an emerging retail business model that operates as an ecosystem. We see lots of natural adjacencies to our core business. It starts with the customer and what they want and need. We can serve them better by leveraging data and relationships to create a unique network of assets, capabilities and services that provide solutions for them in an integrated and seamless way.

Buying and selling merchandise is important, and it’s a competency that takes time to develop that scale. We are thankful it’s a core competency. Building on that from an omni-channel position with ideas like a third-party marketplace or an advertising business, for example, makes sense. As you saw from our recent announcement, we’re expanding our entertainment ecosystem to bring new interactive content to our customers. We’re in the pharmacy and optical business, but we can do more to help our customers when it comes to their health. We see a lot of opportunities.

As for next steps, Walmart is pressing ahead with new ideas, according to McMillon:

We’re planting more seeds for the future as we speak. We’re piloting our own open delivery platform in the US…We’re piloting Jetblack voice and text-based commerce in New York, and there’s a waitlist to join. We’re testing autonomous shelf-scanning technology to improve in-stock and modular accuracy and an autonomous floor cleaner. We’re also testing a Fast Unloader, a new technology for store-receiving that helps make it easier to unload trucks arriving from our distribution centers. And we’re learning how to automate picking groceries for online orders by testing Alphabot, which brings products to an associate more efficiently to pack the customer order. And there’s a lot more we’re working on that we can’t talk about just yet, so stay tuned.

Next up – Walmart’s passage to India with International President Judith McKenna. Image credit – Walmart Disclosure – McMillon was speaking at Walmart’s investor/analyst day.