by Nicholas D. Evans

How the Walmart-Microsoft partnership builds on the four strategic themes for digital transformation

Jul 25, 2018
Digital TransformationTechnology Industry

Digital transformation insights from Microsoft's worldwide lead for retail strategy examining the strategies of their Walmart partnership.

leading digital transformation puppet
Credit: Thinkstock

Walmart and Microsoft recently announced a five-year strategic partnership to further accelerate digital innovation in retail. This comes as a major announcement both for observers of the cloud wars as well as observers of the continuing digital transformation in retail. The agreement will leverage a broad base of Microsoft’s cloud, AI and IoT solutions for Walmart’s enterprise-wide use – including a wide range of external customer-facing services and internal business applications.

To explore some of the details within this agreement, I recently spoke with Karen Garrette, Microsoft’s worldwide lead for retail strategy, to gain some first-hand insights and to examine how their strategy maps to the four strategic themes for digital transformation – a framework I researched and developed in ”Mastering Digital Business” to help decode the digital DNA of world-leading organizations.

A platform business model built on Azure

The first strategic theme for world-leading digital organizations relates to the use of platform business models to provide a digital core and to enable permissionless innovation across an ecosystem of constituents. These models also enable organizations to move from linear value chains to multi-dimensional value networks. At their core is a digital platform that provides a cloud foundation, security and governance, data and analytics, service catalog, service integration and management, and industry services and microservices.

In the five-year agreement, Walmart has selected the full range of Microsoft cloud solutions, including Microsoft Azure and Microsoft 365 to “further accelerate Walmart’s digital transformation in retail, empower its associates worldwide and make shopping faster and easier for millions of customers around the world.”

According to Microsoft’s Garrette, the Walmart-Microsoft team is taking a modular approach to building out capabilities and plans a broad set of cloud projects including customer-facing and internal applications that will utilize AI, analytics, data platform, machine learning, IoT and many other capabilities in support of and as well as in-store and associate applications.

Building on the Azure platform will provide the flexibility, security and scalability that Walmart needs to serve its nearly 270 million customers and approximately 2.3 million associates worldwide. While Microsoft is not yet sharing details on the partner ecosystem, it’s clear this will play a key part in the future model as well.

Leading practices in corporate innovation

Leading practices in innovation are critical to help align the corporate innovation engine with the goals and objectives of digital transformation and to support the notion of moving from idea-centricity to exploring “where to play” and “how to scale” to maximize results.

According to Garrette, Microsoft has changed the way it brings innovation to customers considerably in recent years and focuses heavily on client co-innovation and collaboration. The Walmart-Microsoft teams will be focused on topics such as how to make shopping faster and easier for customers, how to empower employees with the latest tools, how to leverage the cloud to deliver functionality into new markets (as opposed to van-delivery), how to leverage IoT to reduce energy usage for connected HVAC and refrigeration units in thousands of U.S. stores, and how to apply machine learning when routing thousands of trucks in the supply chain.

To conduct this co-innovation, Microsoft will leverage its on-site engineers to work through use cases and scenarios with Walmart associates and subject matter experts and will utilize a number of collaboration techniques including ideation workshops and access to a “full range of tools including Microsoft Workplace Analytics, Microsoft Stream and Microsoft OneDrive.”

The power of technology combinations

This strategic theme relates to the notion of moving from discrete technologies to the power of technology combinations to carve out innovative value propositions for customers.

The benefit of the Walmart-Microsoft partnerships’ platform approach via Azure is that all these technology components can work seamlessly together and can tie in to a common data platform for insights and analytics. This helps to speed development and deployment and will allow the team to focus on the optimization of their technology-enabled use cases as opposed to working on the plumbing and integration.

As an example, in applying its machine learning algorithms to Walmart’s use cases, Microsoft already has the algorithms, so its extensive R&D team will be focused on working together with Walmart to optimize these algorithms, so the models get smarter and learn to recognize physical items, people and so on. The learning time depends on the complexity of each use case but is typically achieved in days or weeks as opposed to months.

Digital services mastery

Digital services mastery is about the notion of moving from discrete techniques to digital assembly lines to accelerate digital service development and deployment. The goal is to iterate rapidly and continuously to get new functionality in the hands of end users to continually advance your digital value proposition and the digital customer experience.

Microsoft is taking this agile and iterative approach even towards large-scale, multi-year digital transformations. According to Anand Eswaran, Corporate Vice President, Enterprise, in one of his recent blogs, “Digital transformation isn’t about a single large complex project. You start small, which not only starts the process, but has the potential to shape your journey.”

He notes that “the most important thing to remember is that you’ve got to get going on this series of micro-revolutions today. Every revolution is a step that accrues to the broader goal of digitally transforming the product, changing the way you work and connecting with your customers differently. And before you know it, you’ve embarked on your perennial journey of positive disruption.”

Overall, I believe this combination of a world-leading retailer and a world-leading software company will yield powerful benefits for the partnership in the years ahead. The partnership is taking the long-view around digital transformation with a five-year deal that will enable them to transform both the customer experience as well as the experience for associates.

Beyond the Azure platform and the enabling technologies such as AI, machine learning and IoT, the partnership has also put into place the right capabilities for success including a collaborative approach to continuous innovation and an agile and iterative approach to rolling out new applications and services. With the cloud wars and digital disruption of retail in full swing, it will be interesting to see what’s around the corner.