Nordstrom, Inc. is a $13 billion US-based fashion specialty retailer founded on the value of industry leading customer service delivered historically through its full-line store experience. About a decade ago, Nordstrom recognized that as the retail landscape changes they would need to incorporate new, innovative technologies into its multiple customer channels, including Nordstrom, Nordstrom Rack and Nordstrom.com, to support its commitment to the customer. Early on, Nordstrom recognized a greater need for a business-focused approach to assess technology investment, including measurement of goal attainment, return on investment, and value creation. The finance department played a critical role in enabling this approach.
Nordstrom has always had a reputation as an industry leader in customer service. In recent years, it noted that customers desire greater speed of delivery, convenience and technology enabled experiences that meet their expectations. Nordstrom recognized that its customers are diverse and require different shopping experiences—some want a fast, convenient in-store experience that maximizes their time, others desire a high-touch in-store experience that may take several hours, while others want a fully digital experience. In order to maintain a high-touch experience while competing with lower cost entrants into the retail market, the company needed to make theº investments in technology necessary to give their customers what they were asking for—and do so quickly and nimbly.
Jim Howell, Executive Vice President of Finance for Nordstrom explained that in late 2013, the Nordstrom senior leadership team responded to its evolving customer demands by going through a cross-functional strategic deep dive on how best to leverage technology. This initiative included goals around flexibility, reliability, productivity, business and technology alignment and measurement, spanning functions from retail business units to merchandising, sales, IT and finance. With public commitments to invest in technology, as well as business acquisitions such as HauteLook and Trunk Club, Nordstrom’s leadership sees the company’s future growth as being enabled by the success of its technology investments.
In order to successfully complete such a significant technological transformation, Nordstrom recognized that the business, finance, and technology teams all needed to be jointly committed and accountable, and in communication on a more regular basis. This approach required both finance and IT professionals to align closely with business units more than ever. These ‘three legs of the stool’ did not come without challenges, noted Jim Howell. First, the teams realized that in order to successfully initiate this degree of change, they would need to bring in new talent from outside the organization. They needed business people who were more comfortable with new technology, and IT people who knew how to work as business partners. Second, they needed a new operating model that would support a high level of business partnering among finance, IT, and the lines of business. And finally, they needed a better way to define the requirements, successfully engage with both internal and external customers throughout the change process, and to measure themselves before, during, and after their investments were made.
A more effective and collaborative technology finance organization was needed to support these organizational changes and offer a stronger focus on technology and business partnering. The journey has led to a more efficient and productive finance department that is able to move more nimbly and make faster decisions. Further, it has provided more opportunity for finance staff— who are coming from more diverse backgrounds as the business has expanded—to take advantage of rotations and project work for career development. Finally, acknowledging the need for tighter finance and IT integration, the Technology Business Office was created to run technology more like a business, and while that office reports directly to the CIO, its leader partners closely with Brian Cimprich, VP of Technology Finance, to ensure the finance integration happens.
As Nordstrom has adopted new technology, the group has been able to incorporate practices from its brick-and-mortar past into its technology governance. A focus on rigorous post-project reviews and measurement, a staple of the full-line store capital process, has allowed the group to ensure that new functionality and features have delivered value for the organization. Every technology investment over a certain threshold is rigorously post-tested. What was spent? Did the delivered project meet expectations? Were there scope changes? What are the financial and non-financial benefits? The finance department coordinates this process, working with IT and business lines as key contributors and committee members to ensure people are held accountable. This governance process is still evolving, occurring in a ‘lookback’ manner 12-18 months after project completion, but Nordstrom is continuously moving towards more real-time and on-going measurement of return on invested capital.
A year and a half after starting the initiative, Nordstrom is still moving through this enormous transformation, but is already seeing results, both in marketplace performance and internal effectiveness. Talent has been brought in from outside the company and rotated from other areas within to ensure the strongest possible team to lead this effort. Business partnering among technology, finance, and the lines of business is now the rule at Nordstrom rather than the exception. Most importantly, Nordstrom customers are seeing the benefits of this transformation. New mobile point-of-sale devices were tested and deployed in both the Nordstrom Rack and full-line stores, enabling a better customer experience through mobile checkout. With ongoing improvements to the online experience, customers can now view products with customer reviews including fit ratings to show how product sizing compares to actual fit (e.g. runs small, runs large, etc.), receive recommendations based on past purchases, and free shipping and free returns every day of the year. Nordstrom also developed a mobile application to make searching and purchasing on a mobile device easier. The experience has evolved in such a way that customers looking for a fast, convenient in-store experience are able to buy on-line and pick up in store, while those desiring a more personalized in store experience can be served by a salesperson or personal shopper. Jim Howell summarized the benefits: “The tighter integration of business units, IT, and finance teams working together on technology planning, development, and testing has enabled quicker evaluations and nimbler adjustments that maximize the positive impact on customers, better manage costs, and improve the Nordstrom brand in the marketplace.”