…(and five ways that retail co-operatives haven’t)
KPMG’s report, Succeeding in disruptive times, lists some of the most common reasons that business transformations don’t succeed. One in three CEOs KPMG interviewed say their organisations have failed to achieve the value they anticipated from previous transformation initiatives. What were the reasons behind these failures? And what are retail co-operatives doing differently?
1. Failure to understand the complexity of the operating model: “The most commonly identified barrier to success (37% of executives) is underestimating the significance of operating model changes necessary to effect transformation across the organisation.”
At its 2016 AGM, the UK’s Co-operative Group unveiled radical changes to its membership, brand and digital output. The complexity of the co-operative model necessitates the successful balance of co-operative values and principles with a valuable, competitive output for its members. By recognising the importance of putting membership back at the heart of the society, the Group is basing its planned ‘Rebuild’ on what makes it different from other retail models. One of its targets is to increase business with members to 50%. Currently at Co-op Food, the figure is 25%.
To develop trade with members the Group is rolling out a scheme where members will receive a 5% reward on any purchases they make of Co-op own brand products and services, which will be paid into a membership account. A further 1% will benefit local causes through a new community reward scheme. The scheme is being tested with Co-op colleagues right now, before being expanded out to all members in the autumn.
2. Inability to innovate: “Nearly a third (31%) of executives say their organisations are incapable of implementing formal innovation processes, management, and budgets.”
At the recent IGD Convenience Retail Summit in London, Coop stores in Denmark were cited as being continually innovative retailers. Coop Denmark, a consumer co-op with more than 1.3 million members, has implemented initiatives specifically geared around its members. As an organic food store, there is a focus on healthy food, so ready-made recipe bags, for example, are now available in stores, containing a recipe along with all the necessary ingredients.
3. Missing the cultural connection: “28% of executives say their existing organisational culture is a barrier to execution.”
Recognising the value of co-operatives within the local community, Midcounties Co-operative set about reorganising its retail focus towards locally produced goods. At its redeveloped store in Chipping Norton, a ‘discovery zone’ contains local produce, services and a showcase of the work done by Midcounties in the community. The store forms the blueprint for future developments at the society in a bid to promote the cultural connection between the co-operative and its member.
4. Failure to take a “business value first” approach to technology: “30% of executives say their organisations’ legacy technology/ systems are a barrier to success.”
In December, Central England Co-op became the first retail enterprise, and the fourth organisation in the world, to attain all four Carbon Trust Standards. The society recognised that the definition of a ‘great’ business has changed, to now include issues of sustainability and ‘greenness’. The transformations have been broad – and not just focused on a specific technology. Initiatives such as solar PV and air-to-air heat pumps, glass doors to chiller cabinets, LED lighting, reduced packaging and specific targets for reduced water use have seen the society transformed into a world leader in eco-friendly retailing.
5. Transformations that begin with a specific technology (rather than with strategic objectives) are twice as likely to fail.
Radstock Co-operative Society recognised that its retail system needed to be simplified and improved in order to provide the best possible service to members and shoppers. The society teamed up with Dublin-based technology company Celtech and installed its ab-initio system – offering real time data on sales, stock and cash across its 15 Somerset stores. The information collected will allow Radstock to provide personalised offers such as click and collect options for members, streamlined loyalty programmes and smart- couponing initiatives. Chelmsford Star and East of England Co-operative societies also both employ the ab-initio system.