What Amazon's acquisition of Whole Foods means for enterprise IT operations

Apparently any business can be reinvented with technology and software.

shopping cart aisle groceries
Caden Crawford (CC BY-ND 2.0)

Amazon has announced that it is buying Whole Foods for $13.7 billion. The implications of this upon the grocery business have been widely written about in a variety of publications including Forbes, and Business Insider. The point of this post is not to rehash what Amazon will or will not do to the grocery business but rather to focus upon the lessons of this acquisition for Enterprise IT Operations.

Every business is a digital business

At the recent IT Operations Strategies Summit, Gartner released the results of a survey that it had done with the CEO’s of its clients. The results were that by 2020 these CEO’s expected the following:

  • 50 percent of the CEO’s expected their industries to be digitally transformed
  • 84 percent of the CEO’s expected their digitization initiatives to increase profit margins
  • These CEO’s expected 46 percent of product value to be digital

The challenge for IT Operations

May enterprises today are embarking upon “digitization” initiatives designed to implement more and more of the key processes of the company in software. The target processes generally include:

  • Software to manage interactions with prospects and customers
  • Software to manage interactions with suppliers
  • Software to manage interactions with partners
  • Software to manage the delivery chain of products and services to customers
  • Software to support customers
  • Software to manage the interaction with employees and contractors

Notice that the word “software” appeared in every one of the bullets above. This was not by accident. This was intended to make a crucial point. Embarking upon digitization initiatives means that enterprises must become competent at software. In fact it means that enterprises must become competent software companies in the same sense the vendors of software have to be competent at building, delivering, and selling software to survive.

The role of IT Operations is that for many companies, IT is the only place in the company where software and hardware competencies exist. Therefore it is incumbent upon IT Operations to transform itself into the “software factory” for the enterprise.

Operating like a software company

The key distinction between a software company and any other kind of enterprise is that for a software company the software IS the product or the service. But if the products and services of an enterprise become “digitized,” meaning that they are either delivered in software or delivered with the support of software, then that enterprise has to acquire the same competencies in software that define a successful software company. This requires the following challenging attributes:

  • Software needs a strategy and a vision. Someone (a Product Manager) needs to lay out exactly what problems the software is expected to solve over time.
  • Software is a journey. The software is never done. It needs continuous and uninterrupted Product Management (not Project Management).
  • Software requires an architecture. Someone has to think through where this software is going to go over time and design things up front so that future goals can be easily attained.
  • Software needs to be agile. As soon as you get the first release of the software (or the software supported products and services) into the hands of the customers, the need for improvements will be painfully obvious.  
  • Software needs to be reliable and resilient to failure. How many stories have you read in the press this year about companies that have had embarrassing failures in their online operations?
  • Software needs to perform well and deliver a great user experience. After you get it working this is the single biggest challenge. Because your online and software supported products and services are going to compete with those from software companies large and small, who have mastered this art. Consider that you are going to be competing with Microsoft, Apple, Google, Amazon and Netflix in this regard.

Summary

If Amazon can digitize the grocery business, then every business should be subject to improvement through digitization. However this will require every business to acquire and build the skills required to an effective software company. IT Operations can and should play a crucial role in helping businesses succeed in their digitization efforts.

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