Evidence of Digital Transformation at Home Depot
A weekend retail trip inspired a look at a great example of digital transformation.
As I’m cruising through Home Depot this weekend, looking for a new exterior door for my condo, I wondered about an organization that has evolved from the big box retailer I knew as a kid in Lakeland, FL. My high school friends would work there during the summer, and I always thought it was an overwhelming place.
I’ve noticed… More and more, I was able to skip visiting the massive warehouses of Home Depot’s retail locations and hire pros to install my home projects using apps and their website. My entire exterior door project was booked using their website, the call center and a measurement in-store. How did they become so good at creating a seamless experience across their different touchpoints?
The Answer: Digital Transformation.
Digital transformation is “fusing together the physical, biological, chemical and information worlds.” It’s considered the 4th Industrial Revolution by Tony Saldanha author of “Why Digital Transformations Fail” a highly successful text on the best practices of digital transformations.
Saldanha mentions that the “retail apocalypse” or the fact that many retailers who have primarily relied on bricks and mortar sales are filing for bankruptcy is a symptom that the 4th revolution is affecting businesses today. (Saldanha, 2019)
In this blog, I will introduce an example from Home Depot, a major U.S. home improvement retailer, and describe their in-progress digital transformation and its signs of success.
What makes digital transformation successful?
Successful digital transformation means enabling your business to create perpetual movement. It means you’re evolving to meet customers where they are, when they need your products/services, and delivering the value they are looking for in the most efficient ways. This means you’ve embraced technology, enabled all parts of the organization to leverage this technology, and created processes that allow you to adapt business models at the speed of your customers and potential customers.
In his second chapter, Saldanha describes a successful transformation as the culmination of five stages of development along a continuum. His fifth stage, “Living DNA,” is described as an organization that is in constant motion. They have employees that are digitally savvy, their systems are interconnected, they’ve adopted the most innovative business models, and will continue to do so as they are testing, learning and adapting with lean agility. (Saldanha, 2019) This idea describes successful digital transformation.
The Business Problem at Home Depot
Home Depot is a U.S. based retailer that was founded to serve the “do-it-yourselfer” with massive warehouse stores that dwarf local hardware stores with superior selection, helpful staff, and quality products in a one-stop-shop. (The Home Depot, 2021)
The model was highly successful, but over time new types of customers have emerged slowing their ability to grow. In 2016, Kevin Hoffman, the president of ecommerce at Home Depot, described the emerging “do-it-for-me” consumer that was looking for full-service installation, quality products and less hands-on home improvement experience. Providing this customer with the experience they wanted required Home Depot to address legacy technologies and embrace ecommerce and digital properties at the start of the shopping experience. (Lauchlan, 2015)
The Solution: One Home Depot
In 2018, Home Depot unveiled their plan to transform their retail experience to focus on a digital, single, interconnected experience across their ecommerce platforms and in-store. This system was introduced to provide consumers with a “frictionless, interconnected shopping experience.” (The Home Depot, 2019)
The idea of a frictionless shopping experience that attempts to connect different platforms and business models meets the requirements outlined by Saldanha of what it means to do digital transformation. In Home Depot’s case, it was translating the in-store shopping experience and the helpfulness of its staff to ecommerce and digital experiences. The transformation needed to reflect the brand in digital, and make sure suppliers/stores were able to deliver on services purchased in these new channels.
Key Systems Addressed, Technologies Used
To begin their transformation, the CEO of Home Depot unveiled One Home Depot, a major initiative to create an interconnected experience. This support from senior leadership with goals and progress discussed in quarterly conference calls, set the tone for the rest of the organization. Change needed to happen, and leadership was invested. (Bonde, et all, 2019)
To enable transformation, the organization made investments in their IT, developer, data, and analytics capabilities. In 2018, they hired approximately 1,000 technology professionals in technology hubs located throughout the U.S. This transformed the company’s capabilities, allowing them to develop new mobile and ecommerce customer experiences specially built for the new “do-it-for-me” segment. (The Home Depot, 2018)
Home Depot also updated its capabilities in continuous integration and ideas from agile software development. The “OrangeMethod” was the company’s way to educate employees in new ways of thinking and moving beyond their core competencies to make the digital transformation happen at their organization. It also set the process that enabled the new technology hires to build One Home Depot. (Home Depot Careers, 2018)
Impact to Home Depot
As a result of their proactive digital transformation, the company was well prepared for the impact of Covid-19. Despite store closings, the retailer had tremendous success in capitalizing on consumer trends that benefited home improvement retailers. According to their 2020 annual report, digital sales grew 86% versus the year prior, their digital properties had record traffic throughout the year, and overall sales increased 20%. (The Home Depot, 2020)
As the CEO states, “Retailers that create a seamless, interconnected experience, blending the physical and digital worlds, will be positioned well in the marketplace.” He credits his organizations 2020 success to the investments made to digital transformation as realized in their One Home Depot vision. (The Home Depot, 2020)
References:
Saldanha, T. (2019). In Why digital transformations fail: the surprising disciplines of how to take off and stay ahead (pp. 3–31). essay, Berrett-Koehler Publishers, a BK Business Book.
About Us. The Home Depot. (2021). https://corporate.homedepot.com/about.
Lauchlan, S. (2019, April 29). The Home Depot — building the Do-It-For-Me customer experience. diginomica. https://diginomica.com/the-home-depot-building-the-do-it-for-me-customer-experience.
The Home Depot to Provide Update on Transformational “One Home Depot” Investment Strategy to Extend Market Leadership. (2019, December 11). The Home Depot. https://ir.homedepot.com/~/media/Files/H/HomeDepot-IR/2019%20IAC/Press%20Release_vf.pdf.
Bonde, A., Chirokas, M., Shwerdlow, F., & Beeson, M. (2019, July 19). How The Home Depot Became A Digital Powerhouse. Evanston. https://www.forrester.com/go?objectid=RES155235.
The Home Depot to Hire 1,000 Technology Professionals. The Home Depot. (2018, April 18). https://ir.homedepot.com/news-releases/2018/04-18-2018-130228118.
Home Depot Careers. (2018). OrangeMethod at The Home Depot. Vimeo.com. https://vimeo.com/272596009.
The Home Depot. (2020). Annual report. Atlanta, GA: Home Depot Investor Relations.
