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The Ultimate Digital Transformation: Microsoft Helps Kroger Become Tech Company

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In a superb example of true digital transformation, grocery giant Kroger is morphing into a technology company that develops and sells modern cloud-based solutions and services to other retail companies while also remaining America’s largest grocery retailer.

Digital transformation always involves the overhaul and optimization of internal processes, but its true potential is realized when companies break through traditional barriers of industries and categories so they can capitalize on emerging ways of doing business in a world increasingly dominated by digitally enhanced behaviors.

For Kroger, that means going beyond improving the experiences of the 9 million shoppers it serves each week—it also means becoming a full-fledged technology vendor that develops and sells leading-edge digital solutions to every type of retailer.

The Microsoft-Kroger Partnership

As its core technology partner in this effort, Kroger has selected Microsoft and its Azure cloud technologies and solutions, and the companies recently outlined what this new suite of jointly developed “Retail as a Service” offerings can do, which I’ll describe in just a moment.

But first it’s important to note that for Microsoft, this transformative engagement with Kroger marks another huge step in a remarkable series of wins in the retail sector, which I analyzed recently in While Amazon Battles with Retailers, Microsoft Leads Them into the Cloud.

Amazon continues to be the unquestioned leader in the public-cloud IaaS sector of the rapidly growing enterprise-cloud business—but Microsoft’s recent retail romp shows the vast potential that exists in the other layers of the cloud—PaaS and SaaS—where the differentiating power of software is driving huge value and innovation.

“Our partnership brings together Kroger’s world-class expertise in the grocery industry with the power of Azure and Azure AI,” Microsoft CEO Satya Nadella said in a press release announcing the new venture.

CEO Satya Nadella shares his thoughts on The Microsoft-Kroger Partnership
Satya Nadella

“Together, we will redefine the shopping experience for millions of customers at both Kroger and other retailers around the world, setting a new standard for innovation in the industry.”

The Retail as a Service Offerings

Two Kroger stores will showcase the first round of RaaS digital technology, developed by the Kroger Technology team around Microsoft Azure and IoT sensors.

“By using Microsoft Azure to store and process the data generated in stores, near the smart shelves and on Kroger’s app, the digital stores will introduce never-before-seen shopping experiences,” the companies said.

The paperless smart shelves are called EDGE, for Enhanced Display for Grocery Environment, and use digital displays to showcase pricing, promotions, and nutritional and dietary information. And soon, the companies said, the EDGE shelves will use Azure AI to connect with Kroger’s Scan, Bag, Go app.

Noting that Microsoft and Kroger will jointly take the new RaaS cloud solutions to market, the companies said the new cloud services are “enablement software built by a retailer for retailers, supporting modern retail experiences and harmonizing customers’ digital and physical shopping experiences.” The companies said RaaS will drive business value in the following ways:

  • support KPIs and merchandising plans;
  • collect customer insights;
  • enhance employee productivity;
  • reduce out-of-stocks; and
  • deliver “hyper-personalization” using proprietary technology.

And Kroger and Microsoft offered this future look at what RaaS will offer:

 

  • Scan, Bag, Go;
  • Virtual Store Manager; and
  • connectors to corporate systems like those for point-of-sale and also for inventory management, tagging and merchandising.

 

 

The Big Picture

Again, what I find so compelling about this type of development is that Kroger is not just using the cloud to simplify processes or automate some steps. While those are certainly vital elements in digital transformation, the real breakthroughs happen when companies radically change how they use data, information, and new digital technologies to create revenue opportunities that never existed before, and to alter and enhance the value they offer to existing customers, and also create innovative products and services for entirely new sets of customers.

Well done, Kroger and Microsoft!

 

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