Building a world-class omni business

Building a world-class omni business

Building a world-class omni business requires a completely integrated front- and back-end, centered around the customer, and powered by advanced technology and analytics.

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Getting there requires a clear business case and full support across the business and supply chain.

“Is omni business going to be the future?” asks Julio Hernandez, Head of the Global Customer Center of Excellence at KPMG in the US. “Absolutely. In fact, the future is already here. The more important question is, to what degree is the future here?”

Hernandez says that companies are still early in their omni business journeys. This is supported by our survey of consumer executives, only 7 percent of whom said they had fully integrated omni businesses. In Hernandez’s view, “Most of the emphasis has been on getting the front-end integrated. Companies have focused on developing a common look and feel across the different channels so the brand can come alive. And some companies are making progress on the supply chain piece.” However, most companies have not yet made the organizational transformation. “They are still struggling with teaching their people new roles and how to interact with customers in an omni business way.”

Finding the right omni business approach depends on some basic business fundamentals. Where is the company on the journey to becoming an omni business? What is its place in the value chain? Did it start as a bricks-and-mortar or a digital business? What is its financial status and appetite for change?

Colleen Drummond, Head of the Innovation Lab at KPMG in the US, says an omni business approach will likely differ for retailers and consumer-packaged-goods (CPG) companies. “Retailers need a strong digital customer experience or people are going to stop shopping there. Consumers are increasing their use of mobile commerce, and if you have a poor mobile experience, they will get frustrated and stop buying from you,” she says.

“For most manufacturers, on the other hand, providing a strong digital experience may not be as important”, according to Drummond. “However, they will want to know what channels their end customers are using, and be sure they have determined the best way to fit into these channels.”

Mark Larson, Global Head of Retail at KPMG International, emphasizes that. “A clear plan on how the company will make progress toward an omni business strategy will ensure the buy-in of the entire organization.” Given both the potential financial and operational costs involved with any business transformation, being able to measure and understand the ROI of adopting an omni business model is critical to getting the essential top-level support.

Indeed, 39 percent of the omni business leaders ranked the ability to measure and understand omni-channel ROI as a top success factor. The other key factors cited were developing agile, demand driven supply chains (33 percent), fully integrating the back- and front-end of the business (31 percent), setting the right pricing across channels (30 percent), driving digital innovation (29 percent), leveraging analytics (28 percent), and cultivating good relations with partners (27 percent).

Success factors for building an omni business

In Hernandez’s view, it is the combination of these success factors that sets an omni business apart from its competitors. “The old model was more about the user interface,” he says. “Companies would put up websites and mobile platforms and integrate some components, such as online ordering with instore pickup, but an omni business model goes much further. It entails the complete integration from the front to the back of the house — and even to outside partners.”

"In complex, emerging markets such as China, teaming up with the rightbusiness partners can be particularly important."

The success factors also vary by the dynamics of the local market. For example, in complex, emerging markets such as China, teaming up with the right business partners can be particularly important, according to Jessie Qian, Head of Consumer Markets for KPMG in China. “Consumer companies coming to China often create strategic alliances with innovative companies that can help them penetrate the market. For companies without the in-house talent, a partnership can be a valuable strategy, because it can be difficult to change the DNA of your own company. Partnerships can help bring in new ideas and business concepts, and help a traditional manufacturer or retailer make the omni business transformation.”

Overcoming the obstacles

Of course, building a cohesive omni business is not easy. The omni business leaders surveyed said the biggest challenges they face revolve around having the right technology (32 percent), a culture that embraces innovation (31 percent), and integrated front- and back-end systems (30 percent).

“If your partners don’t connect to your omni organizational model, then no matter what you promise your customers and consumers, you wont be able to deliver.”


According to Duncan Avis, an Advisor on Digital, Social and Mobile at KPMG in the US, “Developing the capabilities to become an omni business is hard work, and companies routinely underestimate the complexity and the cost.” The task is made harder because companies must rely on partnerships and alliances. “There are very few organizations these days that manufacture, manage and serve the entire product or experience,” says Avis. “Everything is delivered through a set of vendors, distributors and logistics providers. If those partners don’t connect to your omni organizational model, then no matter what you promise your customers and consumers, you won’t be able to deliver.”

Hernandez thinks the path to becoming an omni business is simpler for retailers. “Other than cost, retailers have less downside to becoming an omni business. But manufacturers are facing some difficult decisions. For example, ‘If we go direct, how much do I put my retail distribution at risk?’ If you are a CPG executive, you know you need to do it, but you may not want to disrupt your traditional retail channels in the process.”

Using analytics to power an omni business model

To improve the performance of business functions and tie them together into a smooth functioning omni business, consumer companies will need to make a step-change in their use of advanced analytics over the next two years. Less than a third of the companies surveyed already use advanced analytics, but in two-year’s time, about half of respondents said their organizations will leverage advanced analytics.

From personalizing customer experiences to targeted marketing and predicting market demand, today’s omni businesses could not function without the use of smart technology and advanced analytics. “Digital technology is the key enabler for any omni business,” says Larson. “The necessity of digital technology no longer stops at a company’s online or mobile platforms, but it is rapidly becoming integral in the physical store as well as in support of increasingly dynamic supply chains.”

“The trouble is,” says Hernandez, “organizations have invested in a lot of disparate technologies, some for supply chain, some or the customer, some for the contact center, the mobile app and the e-commerce site. They’ve made all these investments and now they have to connect all these systems to give their customers a seamlessly integrated experience.”

“The infrastructure needs to be harmonized and it must work together, which is going to be a significant undertaking,” Hernandez says. “And it’s not cheap. Companies have to think about how to earn a profit on their technology investments.”

Bill Nowacki, Managing Director, Data & Analytics, KPMG in the UK, says that optimizing the customer journey across channels requires the best analytics. But he believes that companies can use these same analytics for different purposes. Real-time analytics is one example. “Retailers typically use real-time tracking for pushing marketing and making product recommendations. But in manufacturing, especially with bonded items like cigarettes and alcoholic beverages, real-time analytics is used to identify leakage and theft,” explains Nowacki.

Drummond thinks that digital leaders are in a better position to leverage advanced analytics. “Digital leaders already have the analytics and algorithms built into their business models; it’s how they were constructed,” says Drummond. “Omni business leaders that are trying to become digital leaders must figure out what to do with analytics and how to weave it in.”

Converging models, blurring lines

Indeed, consumer companies that compete against each other can be at very different places along the digital and omni business curve. The KPMG survey results indicated that there are two paths to building a digital-first omni business. At one end of the spectrum are digital-first businesses—those organizations born digital—that build their organizations into integrated omni businesses with both a digital and physical presence. At the other end of the spectrum are the companies that start out as bricks-and- mortar businesses, and then apply digital technology to create new channels and transform their business models.

"As companies progress toward the nirvana of becoming an omni business, the distinction between digital and physical businesses will continue to blur."

Ten percent of the digital leaders surveyed are already omni business leaders, and 46 percent expect to be omni business leaders within two years. This aggressive growth rate shows that digital leaders understand the importance of extending the number of channels they use to compete and grow their business. 

“The process of becoming an omni business is easier for digital-first companies than for traditional and even omni-channel companies,” says Hernandez. “Omni-channel companies have to invest in integrating their digital channels with their physical channels. Because digital-first companies don’t have the physical channels, it is relatively easier for them to integrate their back- and front-end systems, allowing them to move faster.”

“We’re seeing digital-only companies coming into the bricks-and-mortar space using a flipped business model,” says Drummond. “They build their e-commerce platforms and then selectively put up physical stores. At the same time, many traditional retailers develop their digital capabilities through partnerships and acquisitions. In both cases—bricks-and-mortar going digital and digital going bricks-and-mortar—there’s a lot of frenetic activity and massive amounts of money going into the space as consumer behavior continues to tip.”

Drummond sees large digital-first companies converging on the omni business model. But there will also be variations on the theme that include digital-only niche companies that focus on the customer experience, where the value proposition is the service rather than the product. “If the value proposition resonates with the target audience, the results can be very disruptive,” she says.

Retailers and manufacturers need to work together

"Disruption has a habit of triggering change that may turn out to have far reaching unintended consequences.”

Nicholas Griffin, Global Head of Strategy at KPMG suggests that, “the CEOs of manufacturers, retailers and distributors should consider options to work together more closely rather than competing.Companies creating technology-enabled omni businesses should bear this in mind.

He reminds companies that “the technologies and tools being deployed are widely available and coupled with the emerging trend of sector convergence. It is possible for players from other sectors to enter markets and disintermediate existing relationships because they bring a different mindset, resources, approaches and offers. Collaboration has several benefits. It enhances innovation and stimulates experimentation because it leverages the strengths of each party. The pace may well be faster and the costs can be lower than going it alone. Collaborations are easier to unwind and multiple collaborations create optionality.”

In Hernandez’s view, manufacturers are justified in having their own retail stores. “If they don’t sell direct, how will they get those rich consumer insights? But to avoid alienating their retailers, they have to find an equilibrium point where their direct channel is not too large and the benefits of selling directly flow through to their channel partners.”

Larson expects increasing channel conflicts in the next several years between manufacturers and their retail customers. “For many branded consumer product companies or branded food manufacturers, their largest customers are the big box retailers,” says Larson. “These manufacturers also want to access the growing online channel. They’re forging agreements with online retailers in order to get their products into that channel, but the online retailers are at the same time becoming the bricks-and-mortar retailers’ biggest competitors. We’re seeing this dynamic developing with the large branded companies today, particularly in the US.”

As companies evolve their omni business models, the tensions will wax and wane between manufacturers and retailers, and between digital and traditional retailers. “The equilibrium point will change over time,” says Hernandez. “If you’re a big-box retailer, and people are buying more and more online, you have to start closing stores. If a customer really wants to engage with your product or brand, they’ll drive the extra few miles.”

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