“I’ve believed for a long time that the supply chain and technology are what’s going to mark out winners and losers in retail for the next decade,” McNamara declared in a presentation at the National Retail Federation’s annual expo and convention on January 16. “Historically, our supply chains were configured to shift large boxes from distribution centers to stores; supply chains have to be reconfigured to deliver single units directly to guests’ homes. Technology plays a huge role in that reconfiguration of the supply chain.”
McNamara ushered in a new direction for Target’s IT operations by doing more with fewer people and less money than had been budgeted for the department at the time of his arrival from British grocer Tesco as a key outside appointment to chief executive officer Brian Cornell’s executive team.
One of McNamara’s first tasks at Target was convincing Cornell and other executive team members that the technology department should be more selective in the projects it undertakes, and do those projects on a grander scale. “What I saw that I need to do immediately was focus the team back down on the things that really matter,” he concluded. “At that time, we were running over 800 technology projects. Target is a big company, but no company, no matter how big, has 800 priorities.”
When McNamara arrived, Target had nearly 10,000 people working on tech projects, 7,000 of whom were third-party contractors. “Our priorities were being set by merchants and marketers, and our architecture, such as it was, was being written by a multitude of third parties,” he noted. Today, 70% of its engineers are in-house and 30% of the work is outsourced. McNamara changed the mind-set around technology by persuading his Target peers that “engineering is a strategic resource that shouldn’t be squandered and should be directed toward the strategic priorities of the business.”
McNamara recruits and hires engineers from around the globe, and he has provided a dedicated space in Minneapolis where they can experiment and learn. Target’s engineers are trusted to create the software and solutions suited to the customer offer and supply chain.
The results of the overhaul, according to McNamara, speak for themselves. “We’ve achieved a huge reduction in the workforce, our productivity has skyrocketed, and our overhead has tumbled, allowing us to make needed investments in our infrastructure and in our businesses. And, crucially, we’ve brought business decision making back where it belongs, and that is in-house.”
Target’s website experienced some of its busiest trading days yet during the recent holidays, with zero down time, he confided. Point-of-sale systems and handheld devices in stores are more stable then ever. “This has occurred against a backdrop of hundreds of millions of dollars of savings,” he asserted.
As Target has made its technology systems less prone to failure, it has built a “world class” cybersecurity capability designed to thwart cyberthieves, according to McNamara, who arrived at Target as the company was coping with the fallout from a massive data breach. Since then, the threat from cybercriminals has only intensified.
“There is a whole value chain out there for cybercriminals,” he remarked. It’s not just ne’er-do-wells using email to phish for credit card numbers; there’s an industry around the buying and selling of stolen data. “It’s organized crime, in a way that crosses borders. It’s a very hard threat to protect yourself against, and that’s why we have to invest so much money,” he observed.