An Inside Look at Target's Technology Evolution

For traditional brick-and-mortar retailers like Target, shifting consumer behavior to more online shopping has caused them to have to re-evaluate their business models. No longer can stores be the single point of interaction between retailers and customers. Leveraging technology to meet the needs of today's digitally savvy consumers has become essential to retail success.

In a session yesterday at the National Retail Federation's Big Show in New York City, Mike McNamara, executive vice president and chief information and digital officer for Target, discussed how the retailer has embraced technology — and how that commitment is integral to the company's future.

Less Money, Fewer People
On the job for about 18 months, McNamara told a story of his first meeting with Target's board of directors. When asked by one of the directors what he needed to be successful in his new position, McNamara had a most unusual answer: less money and fewer people.

At that time, Target had nearly 10,000 people — 70 percent outsourced contractors, 30 percent in-house engineers — working on close to 800 technology projects. That was too many projects for any organization, even one the size of Target, McNamara said. With that many projects going on at once, nothing is prioritized, and what really matters and makes a difference gets lost amid all the other initiatives. McNamara opted to scale back and have the technology team focus on a few priorities and do them well rather than cast such a wide net.

“In technology, doing less is often more,” McNamara said.

Putting that belief into practice, McNamara developed Target's tech agenda by asking the company's leadership team to list out their technology goals and priorities on no more than five Post-it notes. Despite grumblings from his colleagues that they couldn't list all they wanted and needed in such a concise manner, the exercise helped to narrow the focus and provide clarity on Target's technology road map. Retailers need “ruthless prioritization” when it comes to technology initiatives, advised McNamara.

Developing Tech Talent, Culture
“I believe supply chain and technology will mark the winners in the retail industry in the next 10 years,” McNamara said, “and technology is reconfiguring the supply chain.” Therefore, acquiring and developing engineering talent in-house has become a priority at Target. McNamara noted that in the last 18 months, the ratio of in-house engineers to outsourced contractors has flipped; now roughly 70 percent of the engineers are in-house, the other 30 percent outsourced contractors.

“You need a really great engineering team — the best you can afford,” McNamara said. “Decisions need to be made in-house.”

As part of its tech recruitment effort, Target has set the goal of making its engineering team 50 percent women. To help it reach that goal, the company has instituted a graduate training program to help develop junior engineers right out of school. In addition, Target has partnered with organizations such as Girls Who Code to help get young girls interested in technology.

“Diversity is no longer an option; it's a priority,” McNamara said.

Agile Business Model
When McNamara joined Target, the company was using a waterfall software development process. He quickly changed that, noting that the retail industry is evolving too quickly for the sequential (i.e., non-iterative) business process. Target's technology team now operates in a much more agile manner, with a test, learn, iterate approach.

“We've adopted an agile approach that's not trying to build perfection,” noted McNamara, adding that speed and time to market has taken precedence. “Set top-down priorities, and then let the engineers have at it.”

‘Our No. 1 Competitor’
McNamara wasn't hesitant to take the question everyone in the room was thinking: How do you compete with Amazon.com?

“Amazon is fanatic, there's no way around it,” McNamara said. “It played against a different set of financial rules, but it was proven right. It's Target's No. 1 competitor.”

Where McNamara does see a potential advantage for Target in its battle with Amazon is its nationwide distribution network — i.e., nearly 2,000 brick-and-mortar stores nationwide.

“Amazon is building out a nationwide distribution network; we already have that with our network of stores. So we have a lead time advantage, and a potential cost advantage because our last leg of the supply chain is cheaper.”