From catalogue to online platform

In August 1949, 40-year-old Werner Otto laid the foundation stone in the Hamburg district Schnelsen for the retail and service company that today operates Germany's largest online store with over 10 million items. At an early stage, awareness of the enormous potential of digitization was carried into the organization: As Chairman of the Executive Board, Michael Otto regularly made inspirational trips to the USA - including to Silicon Valley - as early as the 1980s and 1990s. Back to Hamburg he brought the realization that digitization is nothing less than "the greatest upheaval of mankind".

The leap into the online age

It was also certain that the digital transformation would change the retail business forever - and OTTO was to spearhead this. In 1995, we brought our entire product range onto the web - at a time when only 250,000 people in Germany even had a private Internet connection. The early lead into the net was to pay off. But despite many years of profitable growth, increased competition from overseas raised the question of how the linear retail model would have to evolve to remain relevant in the long term.

Transformation at the management level

In order to meet this challenge and give technological development at OTTO the necessary weight, the transformation was functionally anchored at the highest management level when Dr. Michael Müller-Wünsch took office in 2015: As Divisional Board Member for Technology, MüWü - as the CIO of 2022 is also known - was to initiate the next stage of the digital transformation. The computer scientist with a doctorate started his office with a clear mission: "We want to help shaping the future of digital retail and set standards as an innovative driver." To achieve this, the linear retail model was to open up to a two-sided eco-system in which partners could participate more easily and help shaping it - OTTO was to become an online platform.

The focus on people

Despite all the technological changes that the transformation process would require, MüWü put people at the center: The entire transformation was to be geared toward improving the user experiences of consumers, partners, suppliers, and employees. By anchoring the tech strategy in the business, OTTO employees were also given the necessary space so everyone could concentrate on the development of the platform business. The change in mindset as well as active feedback and change culture were and are essential elements of the transformation: "Transformation is made by people, not machines. It is important to take colleagues along with us on the journey and to bring the idea of a learning organization into the company that enjoys change," says Müller-Wünsch.

The path to a modern overall architecture

In the course of the systematic further development to a digital platform, the application architecture had to be overhauled. "Past architecture decisions are usually the right ones at the time they are made, but they may no longer fit the business today or tomorrow," MüWü recalls. Consequently, the tech teams developed system landscapes from scratch ("Greenfield" approach). Occasionally, existing software architectures were also optimized ("Brownfield" approach) and made fit for the future.
The first significant new and reconstruction project was the development of a digital marketplace that connects the old and new system worlds. The goal: Making OTTO's digital reach available to retail partners and retail companies. Marketplace participants were to be able to sell their own products on the digital platform for their own accounts. "Although we have thus let the competition off the street and into our own living room, our range of services and products has increased tenfold," MüWü explains.

Exponential growth

The marketplace was launched in the spring of 2020 with a small number of partners and only a few thousand products. In less than 18 months, OTTO was able to establish a relevant additional business alongside the traditional retail business through the marketplace logic and generated around one billion euros in additional revenue. The range of products and services increased tenfold, and at the same time, it was proof that old software architectures and new system landscapes could be brought together with a native greenfield cloud application architecture, and that an incremental architecture rebuild is possible in the ongoing transformation and with ongoing, operational business.

The transformation story continues

But with the successful transformation to a marketplace, OTTO's transformation is far from complete. Because market conditions are changing rapidly, MüWü decided not to modernize the architecture in a "big bang" for the next ten or 15 years. Instead, OTTO views the entire project as an MVP, a minimum viable product. The underlying agile approach provides for the constant iterative optimization of the system landscapes. As soon as a change occurs, the team considers whether the current structure still fits. If not, it will be changed. And since this continuous improvement also requires an ever-increasing level of expertise, the development and expansion of IT skills is also firmly anchored in OTTO's digital strategy. With various educational formats and initiatives, we support women and children in approaching technical topics and considering a career in IT. Offerings for teachers or advanced training opportunities in the field of artificial intelligence are also intended to contribute to the acquisition of digital skills. This ensures that one of the most successful transformation stories in Germany can be continued tomorrow.