the dna of the retailers of tomorrow€¦ · ultimately, to produce a new global framework to help...

The DNA of the Retailers of Tomorrow

A ground-breaking global study into the race for retail transformation

Phase I Findings

S E R I E S

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The DNA oF The ReTAileRs oF TomoRRow2

oPeNiNG RemARKsAfter six months of concentrated research, Green Park, The World Retail Congress and our associates are delighted to present you phase one findings of The DNA of the Retailers of Tomorrow, the latest in our ground-breaking research-based series looking at the future of the retail industry.

It is well documented that the sector is going through tumultuous change and it has never been more difficult to be a leader in retail. However, it’s our mission that this report will help retailers all over the world better understand and deliver impactful, sustainable and transformational change.

Two years ago, Green Park and the World Retail Congress began a journey to engage with the global retail community to provide answers to the big strategic challenges facing the industry. This resulted in The DNA of the Future Retail CEO, which mapped out how to attain top retail CEOs and the characteristics that defined them. By working alongside a number of new firms, we have broadened this perspective to look at how organisations can best harness the transformation mindset and capabilities essential for retailers to thrive.

This document and its findings mark the end of phase one of The DNA of the Retailers of Tomorrow report. Phase two will focus on further engagement with the global retail community to develop a new global framework for retail transformation. For this to be successful, participation is essential, so please enjoy these preliminary findings and then see our “Next Steps” section to find out how you can get involved.

By steve Baggi, Author of DNA Series, Co-Founder of Green Park

ian mcGarrigle, Chair of World Retail Congress

The DNA oF The ReTAileRs oF TomoRRow 3

iNTRoDUCTioN

Understanding the complexity of transformation is the most difficult challenge retailers are facing.lord stuart RoseChair - Ocado Group plc, Fat Face Group Ltd

BACKGRoUNDFollowing the success of the thought-provoking and original study The DNA of the Future Retail CEO, Green Park and the World Retail Congress are collaborating with TrueStart, Planet Retail and EY1 to launch this ground-breaking global study into the retail transformation journey. Following publication of our earlier report, senior retailers from around the world urged us to move from focusing on the CEO as an individual to benchmarking organisational readiness for transformational change.

There is little doubt that radical change is required. Recent research from EY shows that over 8 in 10 (81%) of senior retail executives recognised the need for bolder measures, while the same number reported an increased pressure to change their operating models. This is why we created The DNA of the Retailers of Tomorrow.

Its purpose is to stimulate and frame a global conversation around retail transformation, identify the key building blocks underpinning successful retail transformation and ultimately, to produce a new global framework to help retailers understand and benchmark their progress.

The New Report Phase IThe new report has been split into two phases:-

Phase I (to April 2017)

• TogetherwithourAdvisory Forum,over thepast sixmonths we scoped out the key potential themes underlying retail transformation.

• We tested and expanded our themes with a widerconversation of global senior retailers and other key stakeholders through surveys conducted by both GreenParkandtheWorldRetailCongress,aswellasdozens of in-depth interviews.

• Wewillpresentourprogressandour10DNABLOCKSOFTRANSFORMATION™totheWorldRetailCongressinDubaiinApril2017.

The New Report Phase IIPhase II (April 2017 and beyond)

• To engage further with the global retail communityto look indepthateachof the 10DNABLOCKSOFTRANSFORMATION™.

• Tohighlightglobalbestpracticeandcasestudies.

• To provide a new global transformation frameworkagainst which retailers from across the world can assess themselves.

1 www.ey.com/balance


A VoiCe oF The GloBAl iNDUsTRY

AlthoughcommissionedbyGreenParkandtheWorldRetailCongress,thestrengthofthisreportliesintheopinionsandcomments of the highly influential peer group of senior global retailers who cooperated in its conception and delivery. It is based on a comprehensive survey and in-depth interviews with over 150 Chairs, CEOs and senior executives from the retail sector across the world – which we will refer to as our “global panel” for this report.

The DNA of the Retailers of Tomorrow is also being advised by an esteemed board of the world’s most senior retail professionals,whoarehelpingusidentify,defineandprioritisethekeycriteria–orDNABLOCKSOFTRANSFORMATION™– by which all future retail transformations should be assessed.

The report’s team has been carefully brought together to bring individual, unique and market leading perspectives to this research.

• GreenParkdeliversleadershipandseniortalentmanagementsolutionsacrosstheretailsectorinternationally

• WorldRetailCongresshasanunmatchedglobalnetworkofseniorretailexecutives

• TrueStartgivesaninvaluablelinktothenewworldofretaildisruptorsandinnovators

• PlanetRetailbringstheirunmatchedanalyticalinsightintothedriversaroundretailtransformation

• EYbringsthestrategicinsights,industryexperienceandglobalcapabilitiesneededtotransformretailcompaniesatthe scale, depth and pace that success now demands

Globally over 150 Chairs, Ceos and senior executives have contributed to this report to date.

Steve BaggiCo-Founder,Green Park


how ReADY ARe YoU FoR TRANsFoRmATioN?

To understand the state of readiness for transformation we started by asking our global panel a series of questions around their understanding of the need for transformation, how ready they are to begin and their organisations’ capabilities to transform.

• 80%ofretailersunderstandtheneedfortransformation• Only60%feeltheir leadershipunderstandshowdisruptiveforces

are impacting their organisations• Only24%knowwhattransformationmeanstotheirbusinessona

day-to-day basis• 62%areyettostarttheirjourneyorareattheverybeginning• Only7%saidtheywerewheretheyneedtobetostarttheirjourney

The retail sector is in a period of radical transformation. Understanding who is leading this change and how are of utmost importance.Sir Ian CheshireChairofDebenhamsplc, SIDofWhitbreadplc,LeadNon-ExecutiveDirectorofUKGovernment

1


FiG 1: Do YoU AGRee oR DisAGRee wiTh The FollowiNG sTATemeNTs?

TRANSFORMING FORCES ARE

DISRUPTING THE RETAIL SECTOR

OUR ORGANISATION UNDERSTANDS THE NEED FOR

TRANSFORMATION

OUR LEADERS UNDERSTAND HOW

THESE FORCES IMPACT OUR ORGANISATION

98% AGREE

80% AGREE

60% AGREE

2% DISAGREE

18% DISAGREE

27% DISAGREE

(Diagramexcludesthosewhoneitheragreednordisagreed)

The TRoUBle wiTh TRANsFoRmATioN

FAlTeRiNG TRANsFoRmATioN: The “AwAReNess iNTo ACTioN” GAPThere is a near unanimous sense of transformative disruption within the retail sector. Our global panel’s responses revealed a stark gap between understanding the need for action and the ability to deliver.

AwAReNess: iT’s oNe ThiNG To UNDeRsTAND The NeeD To TRANsFoRm Anoverwhelmingmajority (98%)of theglobalpanelbelieved that transformativeforces are disrupting the retail sector. Four in five (80%) recognise the need for transformation in their business while 3 in 5 (60%) claim their leaders understand how transformation is impacting what they do.

98%OftheglObAlpAnelAcceptedThAT TRANsFoRmATiVe FoRCes ARe DisRUPTiNG The ReTAil seCToR


ACTioN: BUT iT’s ANoTheR To Do someThiNG ABoUT iT

moRe CoNCReTe ACTioN is ReQUiReDWhen it comes to turning understanding into concrete transformational actions, the results are less sanguine. While 3 in 5 (60%) have a plan to transform, less than half (44%) know the capabilities they need to get going, while less than 1 in 4 (24%) claim to know what transformation looks like on a day-to-day basis.

our organisation has a plan in place to transform our business

our leaders have identified the capabilities needed to transform

our business knows what transformation looks like day-to-day

Only44%OfrespOndentsknOwThe CAPABiliTies TheY NeeD To BeGiN trAnsfOrmAtiOndespiteOver60%hAViNG PlANs iN PlACe

DISAGREE 29%

NEITHER 10% NEITHER

18%NEITHER

16%

DISAGREE 38%

DISAGREE 60%

AGREE 61%

AGREE 44%

AGREE 24%

FiG 2: Do YoU AGRee oR DisAGRee wiTh The FollowiNG sTATemeNTs?


We asked retailers how far along they were on their transformation journey. The answers were not encouraging. Nearly two thirds (62%) had not even started or were at the start of the process, while less than 1 in 10 (7%) were where they thought they needed to be.

Retail businesses see change all around them and know they need to respond. They claim to have plans in place, but far fewer have the capabilities to change or even know what change looks like.

It is no surprise therefore that for many the transformation journey is yet to begin. To look more deeply at the reasons why, we need to look at their strategic drivers and operational capabilities.

NOTSTARTED/ATBEGINNINGINPROGRESSMATURE/COMPLETED

7%

62%

31%

mosT ARe BARelY AT The sTART oF TheiR TRANsFoRmATioN JoURNeY

FiG 3: how mATURe is YoUR oRGANisATioN’s TRANsFoRmATioN?

62%OfrespOndentsAreAttheBeGiNNiNG oR hAVeN’T YeT sTARTeD TheiR TRANsFoRmATioN JoURNeY

Transformation is not a one or two-time thing. Now it’s happening many, many times.Andrea O-DonnellPresident of Fashion Lifestyle,DeckersBrands


2we gave our global panel a series of strategic and operational topics to discuss and rank by importance.

The most prevalent points to emerge from this analysis were:

• 47%believedthatkeepingupwith,meetingandunderstandingthechanging consumer was the key strategic priority

• 18%believed focusingonanddifferentiating thecustomervalueproposition was the most important factor

• A further 18% believed that identifying and attracting the rightleadership, skills and culture to drive successful transformation was a top priority

ARe we FoCUsiNG oN The RiGhT ThiNGs?

To me transformation means “survival by excelling”. And what we try to excel at is customer intimacy.James BirtwhistleMarketingDirector, The Cotswold Company


Together with our initial research and feedback from the advisory forum, we selected an original list of strategic imperativesandoperationalcapabilities.Wethenaskedtheglobalpanelanumberofquestionsontheirunderstandingof each of the imperatives and asked them to rank these by importance in relation to the transformation journey.

From this we derived five industry standard strategic imperatives and operational capabilities.

sTRATeGiC imPeRATiVes• Meetingchangingconsumerneedsandbehaviours• Differentiatingthevalueproposition• Identifyinganddevelopingtherightleadership,

skills and culture• Respondingtoanincreasingcompetitive

environment full of new entrants• Increasingmarketreachglobally

oPeRATioNAl CAPABiliTies• Developingdigitalandtechnologicalcapabilities• Optimisingproposition,range,priceand

promotions• Buildingbrandstrength• Optimisingandrationalisingthechannel/

format portfolio• Leveragingdataanalyticsstrategically

sTRATeGiC AND oPeRATioNAl FoCUs


IDENTIFYING AND ATTRACTING THE RIGHT

TALENT AND SkILLS

INCREASING MARkET REACH GLOBALLY

AN INCREASINGLY COMPETITIVE ENVIRONMENT

FULL OF NEW ENTRANTS

NET CONFIDENCE

SCORE*

*NET PERCENTAGE OF THOSE WHO ExPRESSED CONFIDENCE TO DELIVER IN THIS AREA LESS THOSE WHO DID NOT

DIFFERENTIATING THE VALUE PROPOSITION

MEETING CHANGING CONSUMER NEEDS AND

BEHAVIOURS

0 20 40 60 80 100

sTRATeGY DomiNATeD BY The ChANGiNG CoNsUmeR

Among our global panel, we found one key strategic driver – rapidly changing consumer behaviour. meeting changing consumer needs and behaviours was ranked most important byalmosthalf(47%),withnearly9in10(89%)puttingitintheirTop3ofthesevenchoiceslisted.Secondandthirdcamedifferentiatingthevalueproposition (18%) and identifying and attracting the right talent and skills (18%).

To hAVe A sTRATeGY is oNe ThiNG BUT hAViNG The CoNFiDeNCe To DeliVeR oN iT is ANoTheR.When we asked our global panel how confident theywere dealing with each of the strategic factors, we found a wide spread of results. Retailers’ biggest strategic challenge - the changing consumer - was also the area where retailers (+19) felt most confident in, at least, being able to tackle the challenge.

By contrast, there was less confidence that they couldrespond to the threat of an increasingly competitive environment full of new entrants (-5) and, least of all, in increasing market reach globally (-16).

International concerns were at the forefront of the minds of CEOs in forthcoming research for the World RetailCongress, which showed a clear focus for many in developing international strategy.

8947

6118

18

5

16

39

45

29

fig4:relAtiveimpOrtAnceOfstrAtegicbUildingblOcks(%OfrespOndents)

RANkED 1STRANkED IN TOP 3

+19

0

-7

-5

-16


DEvELOPINGDIGITALANDTEChNOLOGICALCAPABILITIES

BUILDINGBRANDSTRENGTh

OPTIMISINGPROPOSITION,RANGE,PRICEANDPROMOTIONS

OPTIMISINGANDRATIONALISINGChANNEL/FORMATPORTFOLIO

LEvERAGINGDATAANALYTICSSTRATEGICALLY

RANKED1STRANKEDINTOP3

oPeRATioNAl CAPABiliTies lACKiNG iN KeY New AReAs

A wide spread of operational capabilities is needed for any transformation journey, but our survey shows one key driver acting as an enabler for others. Developing digital and technological capabilities was ranked most important by almost aquarter(24%)intheTop3of9choicesbynearly6in10(57%).Also,featuringstronglywereoptimising proposition, range, price and promotions, building brand strength and optimising and rationalising the channel/format portfolio.

AN iNsTiTUTioNAl FeAR oF New ReTAiliNG sKillsWhen we assessed the balance of confidence inoperational capabilities, we found retailers understandably more confident in handling areas with which they have more familiarity, such as optimising the proposition (+18) and building brand strength (+10). However, there was a large deficit (-10) in one area that came across very strongly in our surveys and interviews as an essential part of successful transformation - that of leveraging data analytics strategically.

0 20 40 60 80 100

5724

4119

43

14

8

16

43

41

fig5:relAtiveimpOrtAnceOfOperAtiOnAlbUildingblOcks(%OfrespOndents)

NET CONFIDENCE

SCORE*

*NET PERCENTAGE OF THOSE WHO ExPRESSED CONFIDENCE TO DELIVER IN THIS AREA LESS THOSE WHO DID NOT

-5

+18

+10

+8

-10


64%saythattheyaresolvingshort-term issues or optimising their current model, rather than attempting to change it

how woUlD YoU DesCRiBe The CURReNT PhAse oF YoUR oRGANisATioN’s DeVeloPmeNT?

TURNINGAROUND ShORT-TERMISSUES

REPOSITIONINGThEMODELFORThELONGTERM

OPTIMISINGPERFORMANCEOFThECURRENTBUSINESSMODEL

OTHER

24%

31%

40%

5%

ARe we BeiNG BRAVe eNoUGh?

The picture that emerges is that retailers are confidently discussing transformation but in many cases delivering little, in practice preferring to tinker with areas within their comfort zone.

Nearlytwo-thirds(64%)admitthat,inspiteofstrongrhetoricaroundtransformation,theyarein practice trying to either optimise their existing business model (40%) or are firefighting (24%).Lessthanathird(31%)areattemptingtochangethebusinessmodelitself.


DeliVeRiNG The 10 DNA BloCKs oF TRANsFoRmATioN™3Together with our global panel and experts we have identified the ten core building blocks of successful retail transformation.

These blocks will help retailers prioritise their relative importance for the transformation journeyahead.

when it comes to business transformation, there are now so many forces that could quickly tear an organisation apart.Paul CharronChairofUSInternationalEconomicPolicyCommittee,MemberoftheAdministrativeBoardofEscadaSE


10 DNA BloCKs oF TRANsFoRmATioN™

Throughourwide-ranginginterviewsandsurveys,wehaveidentifiedfivecorestrategicimperativesandfiveoperationalcapabilities–knowntogetherasthe10DNABLOCKSOFTRANSFORMATION™–whichareseenascriticaltothesuccessoforganisationaltransformation.Theseareacombinationoffactorswhich,basedontheevidencetodate,areeachagreed by our Global Panel to be either critically important and / or for which retailers need to improve radically in order to embark on a successful period of transformation.

MEETING CHANGING CONSUMER NEEDS AND BEHAVIOURS

DEVELOPING DIGITAL AND TECHNOLOGICAL CAPABILITIES

INCREASING MARkET REACH GLOBALLY

LEVERAGING DATA ANALYTICS STRATEGICALLY

DIFFERENTIATING THE VALUE PROPOSITION

OPTIMISING PROPOSITION, RANGE, PRICE AND PROMOTIONS

IDENTIFYING AND DEVELOPING THE

RIGHT LEADERSHIP, SkILLS AND

CULTURE

OPTIMISING AND RATIONALISING

CHANNEL/FORMAT

PORTFOLIO

RESPONDING TO THE INCREASINGLY COMPETITIVE ENVIRONMENT AND NEW ENTRANTS

BUILDING BRAND STRENGTH

The FiVe DNA sTRATeGiC

imPeRATiVes:

The FiVe DNA oPeRATioNAl CAPABiliTies:


NeXT sTePs - PhAse II

Thisreportcontainsourinitialfindingswhichwillpresentedatthe2017WorldRetailCongressinDubai.

This initial phase is essential for outlining which priorities must be considered so that transformation is possible. Phase two will focus on helping retailers understand how transformation can be achieved.

For phase two, we will be reaching out to the global retail community for help and opinion again to provide detailed insights and learnings around each of the identified DNAblocks.

The result of this will be to highlight the leading international best practices and case studies and to produce a new worldwide transformation framework, against which global retailers can assess themselves.

For this we now invite your participation. If you would like to get more involved in this innovative global debate, please find contact details in the back of this report.


CoNTRiBUToRs

world Retail Congress wasfoundedin2007inresponsetoretailersseekingaplatformforseniorleaderstocometogethertodiscussthemajorissuesandtrendsaffectingtheindustry.Indeliveringthisagenda,theCongresshaswelcomedoveronethousandseniorretailspeakersfromsomeoftheworld’sbiggest,tothenewestbusinesses,aswellasleadingindustrystakeholdersfromglobaleconomics,politics,financeandNGOs.

Sinceitsinceptionin2006,Green Park has grown from challenger to become one of Europe’s fastest growing suppliers of executive resourcing and leadershipadvisoryservices.GreenPark’sRetailandConsumerPracticehasover50years’collectiveexperienceandisheadedbySteveBaggi,authoroftheRetailDNASeriesandaprominentthoughtleaderinretailexecutiveleadership.GreenPark’senviabletrackrecordincludesdeliveringexecutiveleadership,board consulting and senior talent solutions across all retail sector verticals.

Planet Retail partners with over 30,000 retail professionals around the world to drive dynamic strategies through an intuitive online platform and bespoke consultancy service. The world’s leading retailers, suppliers, banks and consultancies rely on Planet Retail’s expertise to power brilliant commercial decision-making.PlanetRetailprovidesglobaldataandinsightstoretailers,FMCGs,retailtechnologyvendorsandprofessionalservicesorganisationswithactionableretail insights that create competitive advantage.

Truestart connects the most innovative and disruptive startups with the most influential people in the retail and consumer industry. Its network enables it to enjoy daily access to entrepreneurs, retail and business executives, and industry experts. Through this - and the team’s skills in finding, funding, developing andgrowinginnovativeretailandconsumerbusinesses–enablesTrueStarttoleadandinfluencearapidlychangingsector.

eY is one of the world’s largest professional services firms. It has 18,000 people focused on the retail sector and works with over 90% of the retail and wholesalecompaniesintheS&PGlobal1200.EYhelpsretailclientstransformeveryaspectoftheirbusiness–sotheyprovidetheseamless,personalised,omni-channel experience customers demand, in a way that delivers profitable growth now and in the future.


ADVisoRY FoRUm

This new research will be advised by an esteemed board of the world’s most senior retail professionals. Chairs, CEOs and other senior executives willhelpusidentify,defineandprioritisethekeycriteria–orDNAblocks–bywhichallfutureretailtransformationshouldbejudged.Andasforourprevious report, over 150 global influential retailers are providing insight and advice, sharing new thinking and innovations and challenging many assumptions around the race for transformation.

Our Advisory Forum includes:

PAUl R ChARRoNChair - US International Economic Policy Committeemember - Administrative Board of Escada SE

loRD sTUART RoseChair - Ocado Group plc; Fat Face Group LimitedChair - Majid Al Futtaim RetailNon-executive Director - RM2 International S.A.;Woolworths Holdings Ltd

NeelA moNTGomeRYGroup executive Board member - Multichannel Retail, Otto GroupChair - Crate & Barrel, SportScheck

ChRisTiNe CRossNon-executive Director - Coca Cola European Partners plc, Sonae plc, Brambles plc, kathmandu plc, Fenwick Ltd, Hilton Food Group plc, The Pollen Estate

ANDReA o’DoNNellPresident of Fashion lifestyle - Deckers Brands

sARAh ANDRewshuman Resources & Retail Director - Harrods

JohN DURKANmanaging Director - Coles

BeTh BUTTeRwiCKCeo - karen Millen

loUise wilsoNGroup human Resources Director - The Body Shop

PhiliP moUNTFoRDCeo - Hunkemöller

ChRisToPheR mooReProfessor of Retail - Glasgow Caledonian University

mARK wesTCeo - LLx Global Business Services SA

DAViD hoBBsstrategy Director - Terra Firma Capital Partners

RiChARD PeNNYCooKChair - The Hut.com Ltd

DeBoRAh weiNswiGmanaging Director - Fung Global Retail & Technology

JoANNe FeRRisGroup Director, People, Culture & Communications - Primark


FoR moRe iNFoRmATioN

Thisreportcontainsourinterimfindings,presentedattheWorldRetailCongressinDubai2017 in which we revealed our progress, including our 10 DNA BUILDING BLOCK OFTRANSFORMATION™.

Next,wewant toengage furtherwith theglobal retail community toprovideadetailedanalysis of retail transformation - and to produce a new global transformation benchmark against which retailers can test themselves.

For that we now invite your participation. If you want to get involved in our innovative global debate, please contact:

SteveBaggi Co-founder, Green Park and Author of The DNA series

M:+44(0)7974726718E:[email protected]: www.futureretaildna.com

S E R I E S

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