Innovation and transformation in disruptive times

Last month auditor KPMG published a report titled ‘Succeeding in disruptive times: Three critical factors for business transformation success’. Little could they have predicted just how disruptive those...

A cheese counter at Midcounties Co-operative. The UK imports 38% of the food it eats – of that, 71% is from EU nations. Post-Brexit, retailers must now adapt to disruptive times

Last month auditor KPMG published a report titled ‘Succeeding in disruptive times: Three critical factors for business transformation success’. Little could they have predicted just how disruptive those times ahead would become.

The business case around Brexit was ill-articulated on both sides. The Leave campaign said that outside the EU, the UK would be able to put in place its own policies and laws on industry, and would emerge “in a position to dictate our own trade agreements with the rest of the world”. The Stronger In campaign focused on jobs, prices and workers’ rights. “Competition between businesses across the EU single market means lower prices on the goods you buy,” it said.

But what became increasingly clear in the days after the referendum result was that neither side had a plan. Nobody could address the business concerns invoked by the UK public declaring a preference to leave the EU.

KPMG’s ‘Succeeding in disruptive times’ report
KPMG’s ‘Succeeding in disruptive times’ report

With the markets, sterling and the future of trade thrown into disarray, this is one more headache for a retail sector operating in an already gruelling market. Uncertainty around access to the single market – and potential price inflation – will be of huge concern for a country that imports 38% of the food it eats. Of the £36.3bn the UK spent on grocery imports in 2015, over 71% of that was with partners in the EU.

Following the referendum results, Richard Pennycook, chief executive of the Group, wrote to The Times seeking clarity and reassurance for EU citizens already working in the UK. “Those EU citizens living in the UK, and indeed ours living elsewhere in the EU, face particular worry,” he wrote.

“In the Co-op, we have many thousands of valued colleagues who find themselves in this position. The free movement of people will be a key area of negotiation between our government and other member states, and we would urge the negotiators to draw a distinction, rapidly, between those already here and those who may wish to come in the future.”

Mr Pennycook followed this with an open letter to European co-operators written jointly with Ed Mayo (secretary general of Co-operatives UK, and a board member of Cooperatives Europe) and Colin Macleod (chief executive of Channel Islands Co-operative Society and a board member of Euro Coop), appealing for support for  “the concerns of those EU nationals working in co-operatives”. “As political structures undergo change, now is the time for co-operatives in the UK, and internationally, to show the importance of communities working together, and that we stand united against any xenophobic behaviour,” reads the letter.

They must use the latest technologies as business innovation enablers and create an agile culture, organisation, and asset base to thrive in an environment of change

“The values and principles of the international co-op movement transcend national borders. At this crucial time they can be a powerful force in uniting and strengthening communities.”

In this context, the ‘three critical factors’ outlined in KPMG’s report have particular resonance. After surveying more than 1,600 senior executives across industries in 16 countries, it says the triple-pronged key to success is to focus on the customer; embed continual innovation into the business; and learn to thrive on change.

“To succeed in today’s environment, organisations need to improve their ability to capture and analyse an immense amount of data to develop timely customer, competitive, and operational insights,” says Robert T. Vanderwerf, global transform strategy leader at KPMG.

Retail innovation: How technology can help retail co-ops thrive

“They need to embed innovation within their core business to continually develop new ways of creating and delivering value to customers in the most cost effective way. And finally, they must use the latest technologies as business innovation enablers and create an agile culture, organisation, and asset base to thrive in an environment of change.”

Focus on the customer

The UK’s co-operative retail societies are member-led organisations – and many of those members are customers, and vice versa. So there is an inherent focus on customer experience. But this does not mean that co-ops can afford to take this focus for granted.

“To remain relevant to their customers as market change accelerates, organisations need to understand the value customers attach to particular products, services, and delivery models,” says Margaret Cowle, KPMG’s Asia Pacific transformation leader.

“From there, the key is to understand and quantify the competitive value that transforming customer experience will bring to the organisation, and then align the necessary changes to the business and operating models around that.”

A typical Co-op Food store from the sixties self-service revolution
A typical Co-op Food store from the sixties self-service revolution

For co-operatives, member engagement and satisfaction must be monitored and developed while balancing being a competitive business with the values and principles they were founded on, and it is here that data-led technology really comes into its own. “Leveraging technology fuelled capability can help organisations derive real, meaningful value from transformation initiatives, especially as the next-generation of ‘always on’ customers provide real-time insights of their preferences through connected devices,” says Christian A. Rast, KPMG’s global data and analytics leader.

Embed continual innovation into the business

Such initiatives should be a continuous process, says KPMG’s report. Co-operatives were the original retail innovators – in 1942, for example, the London Co-operative Society opened the UK’s first self-service shop, which sparked a self-service revolution over the following decades. But they need to stay ahead of the game.

“Business leaders must embed continuous innovation into the culture and structure of their organisations in order to build enduring competitive advantages,” says KPMG.

“To do so, they must have insights into what customers today and in the future truly value, and must follow a ‘business value first’ approach to technology. Such an effort calls for enabling the organisation to work smarter and faster so it can create return on investment even as it continues to innovate.”

Learn to thrive on change

As the lifespan of strategies shrinks, organisations “need to respond by increasing agility, innovation, and efficiency”, says KPMG’s report.

But, adds Nicholas Griffin, a KPMG global strategy leader, “a combination of the complexity, need for speed, and wide range of options” means organisations are realising that they do not have the resources, capabilities, agility, and risk appetite to act alone.

Read more on co-ops, retail and technology in our Retail Innovation Hub

“In this environment, the ability to collaborate with other organisations to access markets and channels, create compelling offers, and create more engaging relationships with customers will become a far more prevalent strategy.”

Principle six, co-operation among co-operatives, is of vital importance here. Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

Post-Brexit, this will be more vital than ever for the country’s retail co-operatives as they look at what comes next for the sector and plan for an uncertain future.

“Current business structures and processes have been shaped by decades of [EU] membership,” wrote James Walton, chief economist at IGD, in an insight paper following the EU referendum.

“This applies to the grocery industry in particular – a key objective of the EU since its earliest days was the provision of abundant, sustainable food supplies”.

“As the UK begins to extricate itself from the EU, the grocery industry will be at the forefront of change.”

Co-operative retailers should be leading that change.

  • This focus on retail innovation is authored by Co-operative News, with support from Celtech – a world-class retail technology company that is renowned for pioneering true real-time retail management systems.

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