Just over a year ago, H&M’s IT department was heavily reduced as a result of cost restrictions. Originally there was talk of cutting 3,500 to 1,500, but in the end, it didn’t have to be that severe, according to H&M CDIO, Ellen Svanström.
“The cost efficiency program hit us, and this applied to both employees and consultants,” she says. “We had to make cuts.”
But after weathering the storm, the focus is now on something else.
“We’ve integrated tech into our business according to an exciting model, and this requires a lot of work, focus, and strength,” she adds. “Right now we’re on a very invigorating development curve.”
After working in a traditional IT organization until 2019, H&M switched to working agile. Both business and tech development occurred in these kinds of teams, but it quickly became too large and complex, says Svanström.
“It turned out to be more difficult to handle than was intended because the tech landscape wasn’t quite as agile as the organizational structure,” she says. “So then we entered the next phase, which is what we’re in now.”
Matrix of value streams
After assessing what was needed, it became a hybrid, with agile in product teams structured around larger platforms. The business capabilities have been mapped and value streams created to form a matrix coming from the business and the company’s tech center, each of which has different competence and delivery structures.
“You have the vertical in the form of value streams that come from the business, and then you have the horizontal, where we have our IT deliveries and tech deliveries,” says Svanström. “In this way, we really get the digital agenda shared between business and tech.”
The structure matches the platform deliverables that revolve around the company’s business system, and online and store platforms, and is also organized into a platform team, as well as a data and AI team.
“We’re still just at the start of a journey to get this together, but we’re already seeing clear results,” she says. “This is my first priority and although it’s been challenging, I feel the commitment and motivation where everyone is starting to feel and see the benefits.”
Omnichannel in focus
When it comes to the business development agenda that the new organization will support, omnichannel is another priority. And by introducing digital tools in stores, both those that customers have access to, as well as tools for the staff, the experience is projected to markedly improve.
Svanström says that H&M has developed such an effective digital concept that’s now used in two stores — one in Soho in New York, and one in Chelsea in London. Features include staff being able to serve customers more easily, being able to find products that might be in a nearby store or online, and getting better recommendations. It also means the store itself doesn’t need to be overloaded with stock, something that can be messy and difficult to manage.
“We’re very proud of this ‘digiphysical’ approach, and it’s a way for us to differentiate ourselves,” she says.
Choose the overall experience
At the same time, e-commerce is moving more toward ultra fast fashion, a development led by Chinese fashion retailer Shein. In this trend, there’s heavy pressure on social media to gauge interest in different garments, which are only then manufactured and sold at extremely low prices. It’s something that’s been criticized for driving overconsumption, but even if there are interesting parts in how they work, it’s not a sustainable path for H&M, says Svanström.
“We talk a lot about it and have followed that development,” she says. “But we see that what’s unique to us is not working with single garments. We believe in the range, to create a holistic experience for customers where we offer the best combination between fashion, quality, price, and sustainability. It requires a creative and planning processes. Then it’s a lot about optimizing so you don’t overproduce. It’s very important because we have the goal of halving our carbon footprint by 2030.”
Early out with AI
To ensure success, sharp market analysis and iron control of production is required. Luckily, H&M was attuned to using AI relatively early; it was around 2018 when the company started using the tech to optimize product flows.
“We’ve developed much of it ourselves and two years ago, we invested in becoming more modular and being able to scale more,” Svanström says. “It also means we become less dependent on self-development and can buy products on the market.”
In order to use AI effectively, the products must be connected and given as many attributes as possible. And when a product is digitized, you can follow it along the entire value chain, and read and understand where it’s produced, located, and so on, all in real time, which is something crucial to create new digital in-store opportunities.
Compounding interest
In terms of progress with gen AI, it’s becoming integral to H&M’s internal help desk, and strides are being made with the tech about how customers interact with the brand as well. “It’s producing great results,” says Svanström. “Now we’re looking at code development, and how we can come up with innovative ways to use generative AI in our product development and marketing, but that’s more exploratory.”
The interest in the organization has also led to the formation of organic forums around gen AI since it’s important to have clear rules and structures in place to ensure the business isn’t exposed. “We’ve also generally invested a lot in cybersecurity over the last two years, and are now at a level we think is good,” she says. “But it never ends, and we have to keep investing forward there.”
At the same time that the business tech department at H&M is pushing its development agenda, Svanström emphasizes that it’s not just about developing competence internally. She also sees external partners and ecosystems as very important going forward.
“Innovative collaborations give us competitive advantages,” she says. “It can be about both large established players and small innovative startups, and it’s crucial for us to catch up with technology development. We must find the areas where we should build ourselves and where we should not, but also learn to be innovative with others. I want to implement that culture internally.”
