I confess that I get annoyed when people attribute changes to sales or profitability to technology investments. Technology is a process enabler, not the process itself. Crediting the shovel for digging a hole in the right place sounds silly, as does blaming the hammer for the bent nail.

But I didn’t have this opinion earlier in my career – rather, I learned it from another CIO, Ron Griffin of The Home Depot, sometime in the mid-1990’s. Ron (who is now SVP/CIO at Autozone) gave a talk at The Retail Systems Exposition in Chicago, and took the position that “in a perfect world, IT would have ‘zero’ budget “, and that all technology costs and benefits should be allocated to those business units are using technology to enable their processes. At the time I thought that he was engaging in a bit of hyperbole, but over time came to the same conclusion, especially when it comes to sales growth. The joke around the office used to be that if all the technologies we implemented had delivered all the sales growth that various pro-forma ROI calculations promised, the company would today be bigger than Walmart. That just ain’t what happened. Even today, RSR cautions technology providers not to promise sales growth from technology itself, but rather from the re-engineered processes that technology enables.

This bubbled to the top of my consciousness last Thursday as I was listening to CNBC over my morning cup of coffee; during the network’s morning roundtable discussion, one of the analysts commented on Bed Bath and Beyond’s (BBBY) disappointing earnings report, mentioning that the company had made significant investments in “omni-channel technologies “. The fact that the term “omni-channel ” had made it into the vernacular of Jim Cramer, et al, was interesting enough. The sideways references to technology investments, sales, and earnings got my attention.

The Truth Of The Matter

The true state of affairs is that BBBY is one of those specialty retailers that has been impacted by external factors such as the overall housing market and the recent port standstill. But the biggest factor is that the company is right in the crosshairs of pureplay retailers, most notably Amazon. RSR has commented from time to time about “sweet spot ” targets for the pureplays being those categories of merchandise for which a digital representation of a product is a reasonable alternative to the real thing (the obvious best example is… a book!). A lot of BBBY’s assortment falls into that category (such things as small appliances, bathroom accessories, dishes and stemware, etc.).

One of the better explanations of why an “omni-channel ” strategy is important for the kind of retailers that could easily find themselves competing with the pureplays is offered by Trefis, an investment research company. Here’s its take:

“Over the past few years, almost all U.S. retailers have seen substantial growth in their online revenues, but it has not turned into a big business for any of them. Currently, the direct-to-consumer channel accounts for less than 3% of Wal-Mart’s, Target’s and Bed Bath & Beyond’s revenues. While this figure is likely to increase going forward, growing competition from pure play online retailer Amazon will act as a repulsive force. To subdue this threat and translate e-commerce into a meaningful business, the U.S. retail industry is gradually shifting towards omni-channel retailing, which refers to providing a seamless shopping experience across stores and the online channel. This has become somewhat of an inevitable move for U.S. retailers, including home goods company Bed Bath & Beyond. ” (Why Is Omni-Channel Retailing So Important For Bed Bath & Beyond?, 2/11/15, Trefis Team)

The point of that explanation is exactly on-target: BBBY and similar companies are implementing a strategic response to the threat of disintermediation by developing an omni-channel experience for shoppers. Their hope is that consumers will continue to enjoy the social aspect of physical shopping but will also want to avail themselves of the digital channels for the information gathering part of the shopping experience. Another way to say this is that these retailers have put their hopes around the fact that people really enjoy shopping but don’t have the time to idly browse a store looking for ideas – they show up informed and ready to get down to the business of purchasing what they need.

Back To The Impact Of Technology On Earnings

One of the big problems for Wall-Streeters is that they continue to look at companies based on “same store sales “, and that (as far as I know) there are no generally accepted measures of the value of investments in the digital part of an omni-channel strategy on store sales. Retailers themselves struggle to answer that question. Last December, we asked retailers that question, and here’s what we learned:

A way to interpret this response is that over-performers ( “Winners “) think that the digital channels impact store sales “a lot ” while under-performers ( “Laggards “) think the impact is minimal. It’s probably a self-fulfilling prophecy.

So while it might be tempting to misinterpret investments in the digital space as distractions from focusing more on store performance, in fact that’s exactly what those investments are often about. And in the end, it’s all about the strategy, not the technology enablers. Focus on the business strategy!