What leaders think
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Down with the Kids!

We are seeing the continued evolution of digital impacting on all sectors to varying degrees. This is resulting in changing customer behaviour, value chains and ‘softer’ sectoral boundaries. Those organisations that don’t adapt or become more agile run the risk of becoming less competitive. Recent news of multiple retailers going into administration is a case in point and could be a lesson for other sectors.

At the latest in our series of CEO lunches we asked our wide ranging sector guests how their industries and specifically their organisations are optimising new technology to reach more customers, increasing market share and driving increased profitablility.

The CEO of an office supplies retailer opened the discussion saying they had recently refinanced and were now underway on a turnaround process.

Today customers don’t shop online. They live online.

“We launched our first website 10 days ago. Retailing is currently riven with anxiety, with issues arising from not understanding the modern customer and how they shop. Today customers don’t shop online. They live online. During the last seven to eight years technology has fundamentally changed what retail customers can expect. Ideas about what customers want should translate into sound business ideas and provide the necessary focus to adapt and adopt. Those business ideas should not forget old lessons. Don’t forget who your customer is and that you have three costs – stock, people and rent.”

In Financial Services technology is driving the strategy, but there is a concern that the customer is getting left behind.

Next we heard from the Chairman of an international energy company that generates and trades power.

“In our business it is important to assess and test technology to make things easier for our customers. The biggest question for us at present is which platform to use. What will emerge as the dominant power trading platform? There is a clear opportunity for the industry to take out cost and facilitate different markets if only the main players could agree to harmonise their technology. Unfortunately, at present different companies are trying to develop different platforms. At the moment we hedge our bets and use several platforms as we don’t want to back the wrong horse”

With the discussion well underway, we returned to the retail sector. The CEO of a major food retailer and wholesaler, began by exclaiming that technology has led to a lot of carnage in the world of retail. However, we were reminded that retail is constantly evolving and despite the feeling that there is “carnage” today, over the years many retailers have come and gone. “Today it is about bringing product to consumer not store to consumer and the idea that people are sometimes online and sometimes not, is outdated. The customer is always connected and we need to be interconnected so physical retail spaces become experiences and not just shops.

“It is essential to embrace the digital world, the pace of change and plan how to get in front. It is now all about the experience for customers and the challenge is how to encourage them to take leaps with technology. Food is certainly not as evolved from an experience point-of-view as non-food. However, for a food business, such as ourselves, it represents a big opportunity to re-define what and how we are selling. For example, in our case we have brought the butchers and fish mongers in-store.”

The CEO of a speciality food business asked “How do you adapt traditional category management skills for this new connected world? The biggest challenge for us is with traditional category management and launching new products. On the shelf is one thing but how do you engage the customer with a new product when the family food shop is done by pressing the favourites button when shopping online? We have not got our head around this yet!”

Retailing is currently riven with anxiety, with issues arising from not understanding the modern customer and how they shop.

The MD of a book wholesaler reminded us of the impact that the digital revolution has had on the book sector and informed us that they are constantly dealing with that impact. Some salient lessons from the journey imparted were:

  • Remember why you are in business.
  • Remind yourself that you do not have a right to succeed.
  • Meet the future without holding onto the past.
  • Remember what your customer wants from you.

“People like to criticise Amazon but essentially they get things to the customer quicker, easier and cheaper. What are we doing to meet these demands?”

The CEO of a bank, created to help the UK’s growth businesses and entrepreneurs, responded with an interesting perspective.

“Technology for us has been about doing things faster and more efficiently. However, we now need to do things more cheaply. Amazon are driven by volume, whereas for us it is about creating a more bespoke service for our customers. In Financial Services technology is driving the strategy, but there is a concern that the customer is getting left behind. For instance, small businesses generally want to talk to somebody about lending, debt funding etc., whereas deposit taking is a more automated journey. Technology will determine the services provided, but should not do so at the expense of the customer. Generally the customer is on board and wants the technology to deliver efficiency, but they do not want to be confounded by it.” The CEO of a large dairy producer told us, they“are spending a considerable amount of time and cost to assess technological developments from all over the world. We predict dairy, like many other sectors, will go through major technology changes.”

“At a producer [farm] level there is an increasing shift to use technology to support the traditional ‘experience’ based ways of working. The biggest of these is “Datafication” at farm level. Volatility, globalisation and transparency in the sector are compelling farmers to use data to drive productivity. Many experts see differences of up to 30% in cost between inefficient and efficient farms.

“As well as this, there is also what we term ‘keeping cows happier’. This is driven by social attitudes and is leading to rapid advances around face recognition, controlled feeding, robotics etc. Technology based farming will continue to evolve to drive better productivity.

Customers want technology to deliver efficiency, but they do not want to be confounded by it.

“At a processor [manufacturer] level demand for functional foods is driving rapid innovation. Protein is a good example of a category which is expected to grow at 6% CAGR. Dairy is the biggest part of this and technology and analytics provide rapid, meaningful access to insights which speed up innovation.

“Security and control of supply chain is more important than it has ever been. Dairy scandals such as the Melamine crisis in China where 54,000 children had to seek medical attention have heightened this. Manufacturers need to ensure production systems and supply chains are safe, secure and agile. Technology and systems play a major role in this and will continue to evolve.

“Traditional purchase drivers based on price taste and convenience are now supplemented by health, wellness, social impact, safety and experience. Increasingly, consumers are wanting to trace the full supply chain to see where their food originates from, down to the farms and animals. To achieve this manufacturers must invest in technology to increase visibility of their supply chain.”

The CEO of a large component manufacturer supplying the automotive industry felt that the pace of change in the digital market place had confused the consumer.

“For us it is all about getting onto the right platforms. In the UK Just-In-Time is making way for electronic transfer to sites all over the world. Digital enables manufacturers to pull together to make better purchasing decisions and use buying power.”

We then heard from the CEO of a direct food business, who stated that they had shifted to become a subscription based business. Other parts of the supply chain, comprising growers and small businesses, had come together to leverage scale and become more competitive.

Manufacturers must invest in technology to increase visibility of their supply chain.

The final word in our discussion came from a food manufacturer. Their CEO stated that technology has enabled them not only to create more brands but over the past 12 months, open up their world to be more networked for business to business opportunities.

As an executive search firm, we are often asked to find the talent which will enable businesses to make the most of technology as an enabler and opportunity provider. The afore mentioned advice to remember who and where your customer is and what it is you do, is salient in today’s world where so many new platforms are emerging and sectors that are seeing technological convergence.

There is always opportunity to learn from different sectors and their sub sectors, who may be at a different stage of evolution to your own.

In summary, the prevailing discussions provided a good opportunity to understand how digitisation and technology are evolving across different sectors and how organisations are adapting to meet these challenges.