For Tengelmann, smart shopping is important and customers and their needs are always the focus.
CIO-TALK

User experience – the key function of digitization.

Tengelmann CIO Riccardo Sperrle in an interview with T-Systems Account Executive Sahan Köroglu, about necessary digital competence, how shopping experiences will change in the future and the advantages of do-it-yourself customizing of innovative technology solutions.
Interview: Thomas van Zütphen
Photos: Oliver Krato

Mr. Sperrle, in these times of rapid, accelerating technological change, do you have a secret formula for digital competence?

Riccardo Sperrle, CIO Tengelmann
ALTERNATIVTEXT einsetzen (!)
Riccardo Serrle (58), a physicist by training, came to the Tengelmann Group in 2011 fromMedia-Saturn, where he had been the CIO. To never lose sight of the user experience, Tengelmann CIO Riccardo Sperrle believes IT needs “to serve our business’s interests, not the other way around.”
There is no one secret formula. You see, parents, schools, companies – all of us – need to make something very clear early on: digital competence is part and parcel of our daily lives. We’re too quick to demonize these issues instead of honestly and openly educating people about the risks and opportunities presented by the Internet or any other digital technology early on. The real question is, how do you manage digitization in a way that’s sensitive, but not naïve? Digital competence is absolutely essential – and it’s about more than coding software or downloading apps. It’s a question of cultivating healthy attitudes and awareness at home and school. Once we’ve reached that point, digitization will provide us with lots of exciting experiences.

Apropos experience – what makes shopping a special experience for you personally?

My shopping runs tend to fall into three categories. Sometimes I need something right away. I’m in a hurry – I don’t want to spend time hunting for a parking space or discovering that what I want isn’t in the aisle or on the shelf where I expect it to be. Now if I go out to buy something I’ve researched in advance on the Internet, I’ll add a few dimensions to my search: I’ll hold it and try it out to see how it feels. And I’ll talk to an employee about the product to get more information. In the third category, I just go browsing through stores. There’s nothing specific that I need. I just want to discover something exciting – it’s impulse shopping for entertainment. 
Inspiration, animation and vision are what matter most here. In each of these three categories, I expect a different kind of customer service. But if employees treat me the exact same way in all three categories, I’ll feel poorly served in at least two out of three situations. Since our communications with customers inform the overall user experience, they have to adapt – depending on whether I’m rushed or relaxed, purposeful or seeking inspiration.

How do you determine customers’ response to different types of communication?

We’re a bit skeptical about conventional psychological customer surveys. People tend to respond differently in those situations than in a “normal” conversation. That’s why we prefer to talk to customers directly, try things out, find out what works and then improve on it later. This approach lets us float a lot of trial balloons. And it’s quite easy for retailers like us to do. The hard part comes once we’ve found a winning solution and begin to roll it out. At that point, our biggest concerns are scalability and stability – timelines, employee training and ways to implement the solution for long-term impact with minimal waste.
In that sense, we’re not just retailers; we’re customers, too. We ask ourselves what would annoy us if we went out on a Saturday morning to buy beverages, clothing or groceries. Maybe it’s the time we spend in line at the check-outs. Maybe it’s packing up our purchases, bringing them out to the car or hauling them home. If I’ve just bought a large, bulky household item, I may not appreciate hearing the tip, “By the way, you can rent a trailer from us.” Some customers don’t have a trailer hitch or three strong sons at home. These are the issues we look at in order to identify and solve problems from the customer’s point of view.

If you’re a retailer set on being a cutting-edge innovator, how and where do you use IT to design your stores in the future?

Generally, whenever you’re dealing with base technology. For a long time, IT was viewed as a cost driver, and all the business units organized themselves into silos. There wasn’t a lot of coordination. Those days are long gone. Today, if you want to create an in-store customer experience from the ground up, you need integrated IT and networked data. Take barcodes, for example: if we replace one of the 60,000 items in our product range, the new barcode has to be stored and readable at all the check-outs in all the stores at the same time. If not, the entire process will break down. And the result? Frustrated employees, frustrated customers – and suddenly we have to call in resource factor X to fix the sales process. We have to work as precisely and sustainably in our stores as pure-play online retailers do. Especially since there’s no longer any such thing as “offline-only shopping.” Without IT, many of the processes just don’t work anymore.

How do you identify technology trends and how quickly do you adopt them on over 4 million square meters of retail space worldwide?

For people like me who work in retail, shopping is a form of field research. Of course, that requires us to train ourselves to look at everything through a customer filter, not a technology one. Otherwise, we’ll quickly lose sight of the user experience. To put it another way, IT needs to serve our business’s interests, not the other way around. We slip into this role when we scout stores to discover new trends and ask ourselves how we could make a trend work at our store, and whether our customers would accept it. And then come the big IT questions: can we build it with our architecture? Can it be operated scalably and efficiently? You can’t take everything that works in a flagship store and apply it wholesale to other locations, brands and strategies.
„Innovation – even when it’s driving growth – is an evolutionary process that requires the IT department to keep a lot of balls in the air.“
RICCARDO SPERRLE,
Tengelmann CIO

Is this backwards thinking a problem?

It’s a cultural problem, at least for us Germans. The Geldkarte e-cash card, personal ID cards with PINs, near-field communication for paying with cell phones – these are all ideas whose design was dictated by technology, not by the customer experience or the benefits to the customer. And – let’s be honest now – none of them have taken off. Successful ideas begin by asking, “How do customers perceive this? Is there a technology that could help us?” Only then do you go on to the next step: building a quick and dirty prototype in order to try out the idea.
If it works, great. If not, shut it down immediately. Both experiences are equally valuable. These kinds of experiments can be initiated locally by a store manager or centrally by the marketing department. Both options should be possible.

So trial and error isn’t the worst method you could use?

Not at all. I’m a scientist; trial and error is a basic tenet of science that involves an extremely high frustration tolerance. If I’m in a lab, 99 of 100 experiments will fail. And that’s a good thing! Anything you dream up has to stand up to scientific scrutiny. It’s a lot like evolution. Mother Nature constantly changed numerous variables a tiny bit. Whatever worked best in the real world was scaled up. In the corporate world, that means you need to experiment and try out new things with a certain frequency. Often, you’re tweaking small details that don’t immediately jump out at you. The problem is when your survival depends on a single idea. Innovation – even when it’s driving growth – is an evolutionary process that requires the IT department, in particular, to keep all these balls in the air. It has to be able to constantly support all these tiny adaptations.

When your group’s subsidiaries scout other countries, what ICT show stoppers do they find for, say, new store locations?

ALTERNATIVTEXT einsetzen (!)
The Tengelmann Group is an international retailer with subsidiaries such as OBI, KiK, TEDi, babymarkt.de and over 70 holdings. The group, now operated by the fifth generation of the shareholding family, does business in 20 European countries and generated 9.0 billion euros in net annual revenues in the 2016 financial year. The family business was established in Mülheim an der Ruhr in 1867 and is celebrating its 150th anniversary this year.
Network availability and connectivity – including redundant connectivity in many cases – are key considerations that are always tied to two big questions: a) How accessible is the country itself and b) How accessible is the actual physical location? Here’s just one example: two to four Mbps connections used to be sufficient for our check-out systems, product exchanges etc. in many locations worldwide. In the future, our connectivity requirements will rise significantly – up to tens or hundreds of Mpbs, up to fiber optic levels. It’s already happening in many areas of Germany that we serve with stores. We’re bumping up against bandwidth limits, particularly once we get away from central locations.
Internationally, joint ventures or alliances like ngena are attractive alternatives. I can remember one case where we had moved into new headquarters in a particular country. We didn’t have network access yet, but were told it would be up the next day. Half a year later, we still hadn’t gotten access and ended up abandoning the site. These things happen; they’re frustrating, slow you down and rack up costs. We’ve encountered other obstacles such as differences in data protection, especially outside the EU. In Russia, for example, we’re required to keep all personal data in Russia. Then you have to ask: what quality of service can I purchase for each site in order to manage my traffic if, say, video conferencing becomes important? No one is going to put up with choppy video or packet loss. Latency, bandwidth and guaranteed availability – that’s what matters. And that, too – I can’t repeat it enough – is a question of user experience. It fulfills a key function on our path to digitization. 

How does Tengelmann organize the rapid integration of new applications into its IT operations, processes and customer experience?

It depends. Tengelmann doesn’t have a central corporate IT department to handle everything. Our business units are fully autonomous with their technical expertise, and it’s important for them to have architecture-driven approaches. The main question is: what basic architecture will let me quickly swap, add and connect components? If your approach is “hodgepodge-driven” instead of architecture-driven, you’ll end up with a huge obstacle to rapid integration. Finally, you have to remember the different scales. Customer-facing applications need to be fast, flexible and entertaining. Gamification is pointless in the accounting department. But it’s great in the store. IT’s responsibility is to maintain the right balance.

Tengelmann has invested in over 70 start-ups over the years. What’s the selection process like?

Ten years ago, we put together an in-house venture capital team to evaluate what makes sense, what ideas are promising and need to be brought into the company. We were the first investors in Delivery Hero and are one of the biggest shareholders of Zalando. Assessing classic VC criteria has a lot to do with people and drive. 
„As far as the General Data Protection Regulation goes, I’m afraid that many companies have underestimated the work that lies ahead of them until May 2018.”
RICCARDO SPERRLE,
Tengelmann-CIO

When you consider the drive, speed and casualness that startups often exhibit – do you just shake your head in despair? Conventional corporations tend to be more organized, structured and rule-based in how they do business.

It’s an evolution that start-ups have to go through. In the beginning, they can and should cut a couple of corners. Young entrepreneurs tend to be pretty relaxed about security, internal processes and intellectual property. As they grow, though, they have to address issues that weren’t on their radar three years previously.

Including unwieldy things like the European General Data Protection Regulation, for example?

Exactly. Our view of this particular issue is very mature and professional. But there are some parts of our organization that haven’t acquired the maturity of our 150-year-old head office. They just point to their data protection officer and assume that’s enough. That’s where we come in with the necessary support and guidance. The GDPR will be a very interesting issue that a lot of organizations are still tackling in the wrong way. I’m afraid that many companies have underestimated the work that lies ahead of them until May 2018. I think our company, however, is in a good place.
„Security ought to be completely foolproof out of the box.“
RICCARDO SPERRLE,
Tengelmann-CIO

What role does security play for you?

A huge role. We’re facing an opponent with a billion-euro “market,” after all. That’s why security is high up on our corporate agenda. But security has a political dimension as well. Federal governments can’t just throw up their hands and shove off all the responsibility for device, hardware and software security onto users. That’s wrong. We’re not picking up that hot potato. Why isn’t there an automatic firmware update mechanism for routers? Household appliances have to pass an electrical safety test before going on sale. Why don’t we require something similar for IT products? Manufacturers should be barred from selling any device that isn’t guaranteed to receive regular security updates. It’s the manufacturers’ responsibility, not the users’. We need to demand more action from the EU, the federal government and, last but not least, Bitkom, Germany’s leading IT industry association.
At the same time, we need to foster awareness. For us, that includes securing everything that has an IP address and provides network access – for example, candy or coffee vending machines that accept chip cards as payment and are relatively easy to hack. Another thing: security ought to be completely foolproof out of the box. If we get customer e-mails with attachments, for example, the system needs to make sure that the attachment is safe. How is someone in the complaints department supposed to make that call? We need schemes and technologies that support system security. 

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