As Target Tops $100 Billion In Revenue, Meet The CIO Who Made That Possible Digitally

September 06, 2022
BY Peter High Founder and President of Metis Strategy
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In 2015, when Mike McNamara received a call from a headhunter that Target, a Minneapolis, Minnesota-based nearly $100 billion revenue retailer was interested in having him come aboard as the company’s next chief information officer, he had one question: where is Minneapolis? McNamara is a native of Ireland, and he received the call when he was in the throes of a distinguished tenure as the CIO of Tesco in the UK. As he delved deeper into this opportunity, he realized this was the same Target that had had a notorious cybersecurity breach. The company was also just coming off an unsuccessful entry into the Canadian market, as well. Given this introduction, what attracted McNamara to leave his company for another much farther from home?

“The downside when you looked at it was that there was a business that lacked confidence in itself, but the upside was that you have this phenomenal brand, and you had a business that was brilliantly run financially, so a balance sheet to die for,” said McNamara. “Then they had a tremendous body of highly capable people.” He reconned that this was a case of a company that had slightly lost its way, but the ingredients for a remarkable rebirth were there, given its human and financial resources.

Part of McNamara’s reputation was built based on a remarkable digital transformation at Tesco, which included industry leading ecommerce capabilities. As such, he knew that Target’s future also had to be digital. Target had under-invested in digital capabilities prior to his tenure, but the impetus for his hiring was a recognition that this needed to change.

Like so many companies in the middle of last decade, Target had outsourced significant parts of its IT. “When I began at Target, 70% of the team was outsourced… [First, we had to ensure that] we were only doing work that was of value strategically to the organization. Second, we [had to] build up our own engineering capability in-house with a focus on the team. Then third, [we had to modernize] our architecture.” McNamara underscored this last point noting that architecture was the key to his vision. “The reality is nobody can predict the future,” he noted. “I couldn’t predict what was going to happen over the ensuing six years when I joined and clearly, a lot of things did happen, including the pandemic, which nobody saw coming. What was important was to start building an architecture that would be scalable, stable, secure, but agile, [giving the company] speed.”

This began a journey that would take the IT team from being 70% outsourced to 93% insourced today. By developing a strong stable of technical talent, he had a much stronger foundation upon which to build. That included investing in data and analytics to a much greater degree. The journey that was created led to talent being attracted to join for the next phases. His team now boasts having roughly 400 engineers dedicated to data science, and another roughly 200 mathematicians. These talented technologists have been among the keys to Target’s success across the past six plus years.

Target can now us artificial intelligence (AI) to recommend products based on searches, to aid demand forecasting and ordering and all along the supply chain. AI is used for workload planning, assortment planning, pricing and promotion of products. It is also used for smaller initiatives such as investigating the quality of imagery that the company puts on the website, or to correct errors in item set up.

McNamara has been a CIO long enough that he has seen the role fundamentally change from an efficiency driver focused mostly on the internal operations to a money maker for the enterprise. “[Today, IT is] about selling stuff far more than it is about moving stuff, which it was in the past in retail,” McNamara said. “It has completely changed over the course of my career. That engineering capability was important to build that up.” He went on to say that DevOps and the migration from a project orientation to a product orientation have also been great growth catalysts for technology and digital divisions in retail and beyond.

Speaking of the product orientation, McNamara’s commitment to it was complete. “We moved the entire team into a product structure overnight,” he emphasized. “Then we burned our bridges behind us by releasing all the project managers, program managers, and business analysts. Then we got on with making it work, which might sound a wee bit cavalier, but it wasn’t. We backed it up with a ton of training.” Today, his team focuses on a couple of hundred products across the business, each of which has a release either daily or weekly. He noted that the only limit to the speed of these releases was the ability of the business and customers to absorb the change.

The pandemic changed the buying habits of many, and Target’s ability to lean on digital revenue streams and digital experiences proved to be a remarkable advantage. Here an analogy was helpful. McNamara was used to the need to scale up digital at the time of Cyber Monday, the biggest online shopping day of the year that falls on the Monday following Thanksgiving. “We already had the ability to scale our systems to that kind of capacity, so that was relatively straightforward,” noted McNamara. “We also had to produce new applications and new features and functions both for our guests and our business at a phenomenal rate.” In essence, McNamara ran the Cyber Monday playbook throughout the year.

An example of an innovation that was necessary due to the health concerns of the pandemic was the limited number of people allowed in a store at any one time. It was critical that the company remain compliant with this. Many companies resorted to having team members stand at the doors and take a manual tally using click counters to determine who was coming in and who was going out. McNamara and his team developed an app powered using artificial intelligence that was installed over the entrance and exit doors of stores. The app kept an up-to-date count of how many people were in stores. That app took a week to produce and two weeks to roll out nationally.

A key to this remarkably rapid response was having the engineering team in house. “Having that engineering team in house without the handoffs, having a product structure that manages the backlog, and then having an agile architecture [all made the difference],” said McNamara. “There is no way Target would have had the standout year we had last year had we not invested in the capability in the team and the definition of the architecture.”

It has been announced that McNamara is months away from his retirement from Target. This will bring to an end one of the more remarkable CIO careers, but his history of transforming a retail stalwart into a digital leader will live on as his legacy.

Peter High is President of  Metis Strategy, a business and IT advisory firm. He has written two bestselling books, and his third, Getting to Nimble, was recently released. He also moderates the Technovation podcast series and speaks at conferences around the world. Follow him on Twitter @PeterAHigh.

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