As technology changes, companies must determine how to incorporate the latest digital advances into their business. A recent article discussed how Walmart is revamping its digital strategy. Valuable lessons about digital strategy can emerge from analyzing and dissecting what this article presents.
The article, “Walmart’s Secret Weapon for the Digital Age: Stores” by Sarah Nassauer appeared in the December 21-22, 2019 issue of the Wall Street Journal. It reports that Walmart successfully took steps to compete in the digital era, but more recently put greater emphasis upon its stores and on integrating digital with those stores.
According to the article, Walmart “has largely weathered the shift to online shopping and the rise of Amazon. Sales from U.S. stores and websites open a year have risen for 20 straight quarters.” The article states, “Beginning in 2016, Walmart moved aggressively onto Amazon’s e-commerce turf.” The article goes on to say, “Online sales grew, but losses mounted amid the high costs.” The article points out that, for Walmart, “a bright spot in e-commerce was directly tied to its stores” since much growth “came from expanding online grocery pickup or delivery service.” The article reports that Walmart has been cutting costs in its e-commerce business and may shed its acquired tech business “Vudu, the video streaming service it bought in 2010”.
As I see it, Walmart’s plan to refocus on its stores is a step in the right direction. Based on my 25+ years researching business success and failure patterns, success comes from building on strengths and integrating the new with the old. Walmart has a strength in its physical stores. So, Walmart is bringing in new digital technology in ways that tie in with and support the stores, rather than pursuing digital that is less related to the company’s existing business strengths.
Initially, Walmart responded to e-commerce’s disruptive threats by investing heavily to build its digital expertise, according to the article. The company’s acquired e-commerce businesses were a source of tech learning. Yet, investing heavily led to losses while undergoing learning, so Walmart eventually decided to cut costs in its e-commerce units and to concentrate on digital tie in with its stores.
As I see it, incurring those learning losses can be beneficial to some extent, as long as the losses are not excessive, and as long the area of learning is not overemphasized to the point of fostering deterioration in core business strengths, such as Walmart’s stores. Companies often make the mistake of letting their existing business weaken while going after new pursuits. Success ultimately comes from applying the learning in ways that tie in with the existing business, not in trying to learn everything it takes to start something far removed from where the company is today. Along these lines, Walmart seems to be on the right track.
Could Walmart have been more selective when acquiring those e-commerce units to learn from? Perhaps. It is always worth asking whether and how new endeavors tie in with a company’s existing strengths. And, time after time, choosing to pursue what ties well with existing strengths proves to be a good approach.
Finally, the Wall Street Journal article about Walmart’s digital strategy mentions that Amazon gets much of its profit, not from e-commerce, but from its cloud computing business. The article says, “At Walmart, more leaders are asking ‘Where is our cloud?’” The article points out that “Walmart stores could also act as a base for potentially profit-making technology infrastructure or business-to-business services.” The article raises the possibility of Walmart going into the business of edge computing, which is where “computing power is physically close to where data is being collected—in contrast to cloud computing, in which computing power is in distant server farms, slowing down processing.” The article points out that the slight advantage edge computing has in processing time could be crucial when an autonomous vehicle tries to “recognize a ball rolling out in the street or a kid running behind the ball.”
As I see it, there are important questions for Walmart regarding any possible pursuit of an edge computing business. In addition to evaluating the demand for such a business, Walmart must assess its own suitability for offering it. Walmart must determine whether this is a viable opportunity versus whether this resembles more of a wishful attempt to copy Amazon’s success in cloud computing.
In conclusion, companies must consider important issues when mapping out digital strategies. And, tying digital strategy to the company’s existing strengths–as Walmart seems to be doing by tying digital to its stores–is generally a step in the right direction.