Refreshing the Board for the Digital Era 2014

ReFReSHing tHe BoaRd FoR tHe digital eRa

GREEN PARK

Green Park is a multi-award winning supplier of executive search, interim management and business advisory solutions, operating from the UK across 52 countries. Green Park has consistently featured in the top four of the HOT 100 industry league tables by Recruiter magazine. We have a strong track record of resourcing at board level and for senior leadership teams both in the UK and internationally.

At Green Park, we care passionately about helping our customers change or grow their businesses. Our pioneering spirit and innovative approach gives us the dynamism and focus to consistently deliver new ideas and fresh solutions. Specialising in our core areas of experience and expertise is why our clients have helped the team at Green Park achieve continuous growth since conception and over 40 international award nominations.

About the Retail Practice

Green Park’s retail practice collectively boasts more than 50 years’ experience working with leadership teams across executive search, HR consultancy and interim services. We have longstanding partnerships with a number of UK and international retailers and private equity houses spanning geographies, categories and operating models. Our practice has a strong track record of working alongside these organisations at Board and operating Board level to build core leadership teams. We help them to acquire, develop and retain best-in-class talent across the leadership and core corporate functions as well as more specialist functions including digital, e-commerce, m-commerce and buying & merchandising.

In 2012 and 2013 we were proud to be corporate sponsors of the Retail Week Power list.

Steve Baggi has been a leading figure in the Consumer executive resourcing market for over 15 years. Steve co-founded Green Park and leads the Executive Search Practice with a particular focus on the Retail & Consumer practice, leveraging his extensive networks across the Private Equity and Corporate Recovery markets. Steve’s focus is on recruiting Chairs, CEOs and Chief Financial Officers.

Rachel Ford has over 13 years’ experience in international executive search. Her clients include FTSE 250, AIM and private equity backed retailers in the UK as well as listed and privately owned businesses internationally. With significant experience of board, NED and full C-suite appointments, Rachel’s specialist functional expertise is focused on sourcing Digital and International talent, in addition to core enabling functions such as HR, IT and Supply Chain.

© Green Park Group, 2014 All rights reserved. Unauthorised reproduction of any part of this publication is prohibited. London office: 15 Portland Place, London, W1B 1PT, UK www.green-park.co.uk

REFRESHiNG tHE BoARd FoR tHE diGitAl ERA

Steve Baggi and Rachel Ford

CoNtENtS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

EXECUTIVE SUMMARY AND METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1. THE EVOLUTION WILL BE DIGITISED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Five deepening omnichannel trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2. ARE YOUR LEADERS MADE FROM THE RIGHT STUFF? . . . . . . . . . . . . . . . . . . . . . 13

Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Non-Executive Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Chief Marketing Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chief Technology Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Multichannel Director (Group Sales Director) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Supply Chain Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

HR Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Temporary specialist roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

3. THINKING DIFFERENTLY WILL HELP YOU WIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Matrix working . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Cognitive diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Outside sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Mind-shifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

4. IT’S NOT AS COMPLEX AS IT SEEMS… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

THE GREEN PARK ACTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

WITH THANKS TO ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

noteS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

FURTHER BACKGROUND READING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

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iNtRodUCtioN

Bricks and clicks, online and offline, mobile and good old-fashioned customer service are joining up. If ever proof was needed that omnichannel – a single view of the customer, of sales and of the brand, regardless of channel – is driving new retailing,

then Christmas 2013 was it.

Changes in the way customers shop and behave reached a tipping point and online/offline hybrids like click-and-collect, as well as mobile commerce dominated the Christmas shopping landscape. The clear winners were those who captured the omnichannel zeitgeist, like Next and John Lewis Partnership, whose click-and-collect saw a 61.8 per cent increase in orders on last year.

Amazon also announced a record-setting holiday season, with 426 items per second ordered worldwide on Cyber Monday. Amazon Prime, the annual membership program offering unlimited free Two-Day Shipping, attracted more than a million new customers around the world in the third week of December.

And that’s just the tip of the iceberg. The first six weeks of 2014 has seen announcements from Tesco and Waitrose, entering into partnership with Transport for London to open grocery collection points at London underground stations. Stores are transforming – with a new innovation store in Preston for Morrisons and a ‘technology playground’ from Verizon providing just a couple of examples. Apple and Amazon are making inroads into the mobile payment market. And Amazon continues to play the role of retail pioneer, with new fulfilment initiatives that leave many of the high street stalwarts in its wake.

Nowhere is this transformation clearer than in the new talents and capabilities that top teams need to thrive, flourish and steer retail brands to success in today’s market. It is time to remove vertical silos and improve integration through cross-functional teams. Omnichannel’s need for increased collaboration, and shared information from a single, centralised knowledge base, goes right to the heart of organisational design.

Steve Baggi Rachel Ford

This is the shifting retail paradigm: the scale and

pace of change within the operating environment

requires retailers to be more agile and channel-agnostic than ever before. Digital is transforming every retail

function and department.

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EXECUtiVE SUMMARY ANd MEtHodoloGY

in this White Paper, we draw on in-depth, refreshingly honest interviews with influencers in the field to look at how the next stage in the digital revolution is reshaping the future for retail leadership.

To avoid looking narrowly at like-for-like examples within high street retail we have sought advice and input from leaders across a wide array of consumer-facing businesses, including media, technology, travel and financial services. All have had to adapt – some more quickly than others – to a more tech-savvy, more fickle and more demanding customer. And all share experiences in terms of how they interact with customers, regardless of channel.

Quick, bold and smart use of emerging technologies have played a very important part in some of the sector’s biggest success stories, but it is undoubtedly the people at the heart of a business that drive it. Regardless of operating model, product or customer, the balance of essential skills within retail leadership teams is shifting. We wanted to explore the DNA of this new wave of leaders to understand better what skills are transferable, and what skills need to be created and nurtured, particularly in the Board room and the ‘Big 5 – the CEO, CFO, CMO, CTO and Multichannel Director’.

Green Park interviewed, in confidence, more than 100 Chairs, NEDs, CEOs and C-suite leaders to garner their insights into the impact of these shifting sands as well as their own strategies and action plans; what they would regard as cross sector success stories and where they look for inspiration. We investigated with them the extent to which retailers are concerned with ‘finding a balance’ of commercial perspectives at Board level and also explored the level of comprehension; whether there is a true appreciation of the benefits and/or repercussions of an holistic digital strategy. Here is a summary of the take home messages from our interviews with leaders and influencers in the omnichannel space.

• The convergence of new technologies and multiple touch-points along a single shopping journey is pointing the direction of travel firmly towards an omnichannel strategy – a single view of customer, of stock and of sales.

• Mobile is the fastest-growing area of commerce and big retailers are investing heavily. With customer satisfaction on mobile transactions still fairly low, there is clearly an overall performance shortfall to make up. Retailers who get their location-based apps, scan codes and payment platforms right will win big.

• Omnichannel is increasingly driving Boards, Non-Executive Directors and Senior Management Teams to interrogate, question and challenge established ways of thinking and explore new operating models. Partnerships, for example, offer new routes to omnichannel profit, as well as helping retailers to be more creative and test out different approaches to the customer.

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E X E C U T I V E S U M M A R Y A N D M E T H O D O L O G Y

• For some CEos, rising to this challenge means embracing what they don’t necessarily understand, hiring people to cover their blind spots, seeking external counsel, asking disruptive questions, setting clear goals and having the narrative skills to inspire the whole organisation to work towards the end destination.

“ �People are recognising the need to change but it’s simply not the�bitter�pill�they’re�prepared�to�swallow.�CEOs�are�often�taking the easy route and should be challenged more robustly�by�the�Chair.”

Chair,�Digital�Agency

• It is agreed that this is a riskier proposition and as such bravery was a common theme in our interviews.

• Existing Chairs and Non-Executive Directors are at risk of being seen as out of touch with the customers of today. Traditionally recognised as finance and governance specialists, there is undoubtedly an issue of digital literacy at Board level.

• The remits of the retail C-suite are changing individually, and the orientation of the team is changing across the piece. New mandates fall under old functions and increasingly redundant structures and new functions are gaining in prominence.

• CFos need to have a far more compelling narrative to communicate transformation agendas, investment plans and long-term strategies to analysts and investors.

• The Cto role is moving away from the back office function of yesteryear to be at the heart of transformation. It is becoming more commercial and innovative, about technological possibilities and not just ‘the guy that fixes my blackberry’.

• Future success in the evolving CMo role rests in the ability to blend the traditional ‘art’ of marketing with the new ‘science’ of digital and data.

• Multichannel roles whilst acknowledged as being increasingly important to the strategic direction of the retail business, are still the source of much confusion, expectation and disappointment in retail; who should it be, what should they look like and what should they own?

• Short-term, specific appointments with an 18-month timeframe are increasingly needed to get management and staff up to speed with new skills and knowledge. These roles include: Digital Director, Customer Director and Transformation Director. But with little precedent against which to benchmark this talent, recruiting for such roles can be a challenge.

R E F R E S H I N G T H E B O A R D F O R T H E D I G I T A L E R A

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• Executive teams need to rethink priorities, investments and performance metrics. Retailers have to ring-fence more for innovation and technology spend.

• Insights from outside the sector can be invaluable and some of the best hires are those that use perspectives from other sectors to invigorate company strategy.

• With consumer-facing businesses all battling similar pressures from changing customer behaviour and constantly evolving technology, Travel and FMCG, digital expertise from Technology and Telecoms, and customer insight from Financial Services and Social Media – can all offer new talent pipelines.

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R etailers have always had to adapt. From the rise of shopping centres and out of town supermarkets to the emergence of pure play retailers and mobile commerce; new formats, trends and technologies have constantly changed the shape of the

retail landscape.

But the pace is unrelenting. Since 2000, dozens of new technologies, devices and channels – online commerce, the smartphone and tablet, ever-evolving forms of social media – have burst upon the scene. With new technologies being adopted by consumers at breakneck speed retailers face big challenges in meeting the needs and keeping up with the future customer.

“ �Customers’�adoption�of�technology�and�new�ways�of� working�is�advanced,�particularly�compared�to�businesses!�We�used�to�be�on�the�front�foot�but�now�the�consumer� is�speeding�past�us. ”

MD�–�Online,�FTSE�100

By 2016, Forrester predicts that ‘connected retail’ will influence 44 per cent of retail sales1. This convergence of new technologies and multiple touchpoints along a single shopping journey is why omnichannel, according to year-end surveys, is where most retailers are going to be investing the most over the next twelve months.

There’s been a great deal of emphasis on the continued rise of new technology channels. Online and mobile have dominated the sector headlines, along with cries of the ‘death of the high street’ and the bleak future for traditional bricks and mortar retail. But a recurring theme during our discussions was that that the high street will remain an important part of the portfolio.

“ �Future�success�lies�in�investing�across�the�portfolio�rather�than�swinging�the�needle�in�one�direction�at�the�cost�of�another.�Those�making�big�investment�decisions�and�putting�their�money�where�their�mouth�is�are�emerging�as�the�real�contenders.”

Executive�Director,�Global�Property�Consultancy

1The evolution will be digitised

Change is in the DNA

of retail.


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Tesco, John Lewis and Next have all been brave in their investment strategies whether that be in multichannel initiatives, new experiential stores, dark stores or more innovative collection strategies, and they are to be congratulated for thinking laterally.

Five deepening omnichannel trends

1.�Mobile�commerce

“ �With�changing�customer�behaviours�and�people�more�likely�to�search�on�the�go,�we�need�to�accommodate�different�technologies�and�market�in�a�different�way. ”

COO,�Global�Pure-play

The UK is the European capital of m-commerce, with almost a quarter of British consumers using their phones to make purchases, compared to just four per cent in France and 14 per cent in Germany.2 And mobile is the fastest-growing retail channel. According to the IBM Digital Analytics Benchmark, online sales from mobiles on Boxing Day increased 63 per cent on the previous year. As widespread ownership of universal 4G devices brings a further surge, mobile is the next force to reinvent retail.

With almost half of those using mobiles to make purchases expressing disappointment that the experience falls short of their expectations and where data indicates that customer satisfaction with this channel can translate into a ten-fold rise in a retailer’s online revenues, there’s clearly an overall performance shortfall to make up on the mobile front. 3 4

Investment in m-commerce is hotly debated; Argos is trialling near field communication (NFC) technology in its stores and Spanish department store chain EL Corte Ingles is rolling out a contactless payment system that will mean shoppers can pay using contactless cards and NFC-enabled phones.

With so much to play for, those retailers who get right their location-based apps, mobile point of sale systems and payment platforms, QR and scan codes, as well as the real-time information that leads to compelling and relevant personalised offers, the gains will be big. And with multi-sensory developments – using touch and voice recognition, finger-printing and scanning, as well as more wearable technology – we are all moving in new and intriguing directions.

2.�Personalisation

Success for the retailer lies in engaging with each customer individually, however, wherever and whenever – online, through an app, or as they shop in store – and offering personalised service and promotions across all channels. Researchers at Forrester have speculated that the

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1 . T H E E V O L U T I O N W I L L B E D I G I T I S E D

future consumer will increasingly want ‘adaptive’ interaction, with content delivered in a way that best suits them as individuals, and their particular device.5

“ �With�regards�to�the�single�customer�view,�we’ve�invested�in�the�technology,�but�we�need�to�change�behaviours�and�learn�how�to�use�these�new�tools�and�work�in�a�new�way. ”

CEO,�FTSE�100

Big data is reaching new heights of sophistication. New systems can assimilate data gathered from everywhere – social media, geolocation, the physical till, and now also from mobile swipe terminals in the hands of sales associates – to enable retailers to target ever more precise micro-segments of their customer base.

Amazon has, of course, been leading the field; using collaborative filtering technology, which allows it to develop automatic recommendations for customers based on their

purchase history data. A pioneer of digital innovation in the luxury arena, Burberry is

proving that it understands its customers and is communicating with them

through the right channels with its ‘Smart Personalisation’ technology and ‘Made to Order’

service, and in the US, Target uses social sentiment data – insight gleaned from social networks – to monitor how shoppers respond to its designer collaborations.

Some consumers will also become more conscious of privacy and legislative developments in the US might inhibit some of the collection of data. Retailers should offer ‘do not track’ solutions, and may need to convince shoppers that personal data leads to a relevant and tangibly improved experience.

3.�Transformation�of�the�store

“ �We�have�to�accept�that�the�DNA�of�an�organisation� is�retail.�”

Chair,�Private�Equity�Fashion�Retailer

Despite the rise of online and mobile sales, retail stores remain at the heart of the customer relationship and have an irreplaceable role in the omnichannel world. As Kearney’s Future of Stores study in 2013 confirmed, shops still capture the majority of shopping time (61 per cent).6 The study also identified several emerging themes for the future use of stores, including:

• Discovery – to learn about and test products

With�the�proliferating�number�of�channels,�brands�also�need�to�manage�the�risk�of�redundant�or�inaccurate�customer�data.


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• Entertainment – the experiential and social element of stores

• Relationship – a personalised service, before, during and after the sale

Whether the call centre of the future, the digitally-enhanced playground or the new showroom, the traditional bricks and mortar store is evolving beyond recognition.

“ �There�are�technologies�that�are�definitely�changing�the� way�we�shop�in�store�as�well�as�online.�App�technologies�are�so�much�better�now.�QR�codes,�fashion�finder,�blippr�and�shoptwist�will�all�have�an�impact,�for�example�in�instant�digital�recognition. ”

Digital�Director,�FTSE�250

High-end fashion stores like Burberry’s flagship on Regent Street and Tommy Hilfiger have led the way, offering 3D hologram runway shows, screens that switch to mirrors, items chipped with identification technology triggering multimedia content, and interactive window display that captures and stylises customer profiles.

We can expect this integration of technology into the store to become more widespread and more immersive. Wal-Mart is testing ‘Scan and Go’ checkout systems that allow shoppers to skip checkout lines by using their mobile phones to scan items and pay at self-serve kiosks. John

Lewis Oxford Street is the first department store in the world to be fully mapped

using Google Street View.

So while there’s a downsizing of shop space, there’s also more

investment in the customer experience, part of which is expertise of sales staff. Apple pioneered this, with its Genius Bar, where customers can get expert service or sign up for free lessons and advice sessions. Verizon has recently opened a flagship store, a ‘technology playground’, where you can test and customise products as well as get advice.

4.�Social�media

At the National Retail Federation BIG Show in New York in January, Infosys released the results of an extensive survey of consumers and revealed that 89 per cent of shoppers said interacting with a retailer via social media affected their final purchasing decision.7 While it sometimes comes under pressure to generate new streams of revenue, Facebook is still the main forum for consumers to interact with brands. Interestingly, the survey data shows that younger consumers engage most on Facebook, women are more likely to be influenced by content on Pinterest, and men by YouTube.

The�growth�of�offline/online�hybrids�is�further�transforming�the�role�of�the�store,�with�most�retailers�now�offering�the�option�to�order�online�and�pick�up�in�

store,�or�order�online�in�store�and�deliver�to�home.�

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1 . T H E E V O L U T I O N W I L L B E D I G I T I S E D

Social media is moving into new territories beyond peer-to-peer recommendation. Top Shop is using Pinterest to develop products and decide how and where to display them, and they’ve just run a popular hook-up with Instagram and Facebook to generate a buzz around styling in store. Twitter is mulling a venture with US e-commerce site Fancy which could allow users to buy products directly from the site.

5.�Globalisation

The UK is one of the largest export economies for e-commerce in the world, with latest figures showing annual overseas online trade of £720m in 2013.8 According to the BRC-Google Online

Retail Monitor for the fourth quarter of 2013, UK retailers have experienced a surge in online searches from the Netherlands, France, Germany and the US. Shoppers in Russia, Argentina and India also visited UK sites in droves, with particular interest in the home and garden, beauty and leisure sectors.9

The Chinese consumer, for example, has very high expectations of same-day delivery, and cash-on-delivery is the norm. Meanwhile in Russia the courier waits outside while customers try on purchases, and Ozon, the Amazon of Russia, takes payment in cash for

80 per cent of its transactions from customers still uncomfortable about online transactions. And drive-thru click and collect is growing in popularity in France – offered by the majority of grocery hypermarket groups.

Speaking at the recent NRF conference in New York, Claire’s Accessories CEO Jim Fielding asserted that e-commerce is a “relatively low risk way” of testing whether a retail brand will translate successfully abroad,

“ �If�the�brand�and�product�effort�is�compelling�and�differentiated,you�can�dip�your�toe�in�the�market�with� a�digital�strategy.�The�ever-changing�channel� provides�wonderful�expansion�opportunities�and� is�relatively�low�risk.”

CMO,�Mid-cap�retailer

The globalised online retail market could also challenge the dominant players. The Chinese site Tmall is poised to become the world’s largest e-commerce retailer in the next two years, with sales projected to hit $120 bn (£79.1bn) by 2017, some $20 billion more than Amazon, according to analysts Euromonitor.10

With the growth of overseas online trade

comes a need to understand the nuances

attached to particular international markets.

A robust digital strategy can be an invaluable part of a traditional retailer’s investigation of new

international markets.

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a s the retail landscape transforms, so too must traditional Board and senior management roles – and the right blend of experience, talent and perspectives within top teams is more important now than ever.

“ �When�I�realised�just�how�big�this�transformation�was�going� to�be�I�made�two�crucial�changes;�my�first�was�to�bring�in�the best�possible�NED�I�could�find�that�could�talk�directly�to�me�and�teach�me.�Secondly,�when�I�needed�to�appoint�a�new�digital�lead�to�my�operating�board,�I�decided�not�to�appoint�like�for�like�but�went�for�the�person�that�was�going�to�eventually�replace�me,�that�would�be�the�next�CEO�in�waiting.”

CEO,�FTSE�250

The first requirement is a meticulous people audit. Assess the skills of your current leaders and benchmark these against future requirements. Ask pertinent questions. What competencies do we require to lead the organisation in the short, mid and long-term? How does our existing

talent and pipeline compare with the external market? And as the sector evolves, how future-proof and resilient is that talent?

A thorough skills audit should look both at non-executive and executive directors. Although the need for governance and rigour has not abated, there is increasingly a demand for Chairs and non-executives to have a better appreciation of the digital agenda and the commercial impact on operations and strategy. We gained a fascinating insight into the extent to which serving executives and non-executives are freely admitting to these particular skills gaps, but are not yet aware how to supplement or

build on meagre digital nous.

“ �Although�I’m�the�only�person�on�the�operating�Board�really�with�digital�experience,�we’ve�made�a�concerted�effort�to�make�sure�that�digital�business�and�digital�marketing�is�at� the�heart�of�our�business.”

Group�Development�Director,�FTSE�100�Supermarket

2 Are your leaders made from the right stuff?

For many we spoke to, it is a time for

reflection: who amongst us will be the catalyst for change and who

will drive the strategy forward?

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2 . A R E Y O U R L E A D E R S M A D E F R O M T H E R I G H T S T U F F ?

The second imperative is a reconsideration and, in many cases, reconfiguration of key roles. A number of themes emerged from our conversations regarding the recalibration of strategic leadership skills and accountabilities, in particular the prospect of the ‘Big 5’; CEO, CFO, CTO, CMO and Multichannel Director.

Thirdly, there is the need for further education and training – which our interviewees agreed upon almost unanimously. This may be through the hiring of new talent, through external advisory support, third party training programmes or a more proactive exercise of ‘horizon scanning’ that can help create innovation evangelists amongst us.

And finally, it was also agreed that some great pockets of innovative talent are currently hidden three or four rungs below the top team, and therefore often unable to exert an explicit influence, therefore better succession planning and more robust management training programmes need to be developed to nurture this talent.

Chair

The�remit.�To set strategy and vision in partnership with the CEO. The Chair ensures the resources are available to achieve objectives; reviews management performance; ensures that the Board operates as an effective working group at the head of the company; and is accountable to shareholders.

“ �Driving�change�should�start�with�the�chairman.�Although�supermarkets�are�130�years�old;�online�food�is�only�7�years�old.�No-one�has�really�been�there�and�done�it�–�there’s�so�much�fresh�ground�to�cover,�mistakes�to�be�made,�but� also�successes�to�be�celebrated.”

MD,�FTSE�100�Supermarket

How�the�role�is�changing. Increasingly Boards need to interrogate, question and challenge established ways of thinking, attitudes towards investment and performance metrics. Chairs have a tangible prerogative as the leading interrogator – challenging both the executive team and Board colleagues.

“ �We�are�still�measuring�success�by�the�same�old�metrics,�which�aren’t�relevant�anymore.�But�no�Board�wants�to�rock�the�boat�…�it�might�take�one�or�two�pioneers�to�lead�the�way�before�we�start�to�see�real�change.”

CEO,�FTSE�250

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Commercial questions, particularly concerning governance and risk, have always been the mainstay of the Chair’s remit. But the Chair of today also needs to be in a position to seek answers to new questions.

“ �Is�the�customer�being�adequately�championed�at�the� Board�table? ”

NED,�PLC�specialist�retailer

How can we translate technological advancements into business benefits? Does our three to five year strategy provide the platform for sustainable growth across all platforms? Do we have the skills to go on that journey and deliver that strategy?

“ �You�need�to�build�a�culture�around�you�that�embraces�risk.�Who�can�mandate�these�things?�The�Chairman�–�he�has�the�power�to�be�disruptive.�You�need�confidence�and�bravery�in�these�roles�without�question. ”

CMO,�FTSE�100�Digital/media�organisation

The role of a Chair will differ greatly according to the ownership and operating structure of an organisation. Boards that are heavily PE-influenced will have different expectations of their Chairs. PE shareholders, it was agreed, require much more relevant, hands-on

experience from their Chairs than the more strictly governance-oriented PLC Chair

with regular City interaction. PE firms are inclined to appoint Chairs that will work in close partnership with

them, particularly in setting the strategic agenda and direction.

“ �The�PE�view�on�Chairs�and�CEOs�is�starkly�different�to�that�of�a�PLC.�We�want�to�work�with�the�Chair�to�set�the�overall�strategy�after�investment�and�the�CEOs�role�is�to�implement�that�strategy.�The�Chair�needs�to�ensure�that�the�Board�is�structured�correctly�and�that�the�organisation�has�the�right�resources�for�the�CEO�to�lead�the�team�to�a�successful�implementation.�Therefore�we�prefer�our�Chairs�to�be�relevant�and�more�current�than�a�PLC�Chair.�”

Investor�Director,�PE�house

Many�in�our�network�suggested�that�the�risk-averse�practice�of�hiring�time-served,�

experienced�Chairs�may�be�on�the�wane,�with�more�first-time�Chairs�being�appointed�on�

the�basis�of�recent�experience�as�CEOs�or�high�performing,�successful�business�leaders.�

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Non-Executive Directors

The�remit. To scrutinise the performance of the executive team and to act as custodians of the risk and governance process.

How�the�role�is�changing. NEDs traditionally come from financial or legal backgrounds, but there is an increasing demand for retail NEDs to offer creative criticisms through different lenses. It is precisely the balance and miscellany of the NEDs’ backgrounds, skills and perspectives that will enable a Board to gain an advantage in today’s fast-paced, highly competitive omnichannel operating environment.

“ �As�each�business�is�different,�so�is�each�Board;�there�is� no�one�set�mould.�We�must�build�on�flexibility�and�learn�to�adapt�quickly.”

NED,�FTSE�100�retailer

Certain specific business functions – such as international operations and supply chain – are becoming more prominent, and these may also need to become more influential in the Boardroom through the appointment of relevant NEDs. And with the overwhelming majority of Board members having little or no hands-on expertise of digital and new technology, NEDs can greatly increase a Board’s focus on the digital agenda.

For NEDs to really help set this agenda, our interviewees agreed that, like the Chair, they have to be current, with a deep understanding of what is happening today – particularly in technology and customer journey. Sainsbury’s appointment of Google’s Matthew Brittin to the Board offers a great example.

It was also suggested that healthy commercial challenge sits very comfortably in the Non-Executive Director’s remit, and that a disruptive NED can be a very positive element within the Board structure:

“ �A�disruptive�NED�is�a�very�good�idea,�it’s�very�hard�to� say�unpalatable�things�when�in�an�executive�role�–�that’s�often�best�left�to�the�confident�NED.�In�addition,�a�bold� NED�can�steer�the�Board�away�from�group�mentality�–� which�can�otherwise�make�for�a�conservative�group. ”

Divisional�MD,�£Multi-billion�retailer

But�where�‘current’�often�means�‘younger’,�the�challenge�is�for�Boards�to�instil�the�right�culture�in�order�to�elicit�these�NEDs’�best�contributions.

16


There can be no doubt that the value of the low engagement but high profile NED is under scrutiny; it is no longer sufficient to read the papers and present oneself each month for the Board meeting without having a tangible contribution to add to the table.

“ �If�we�hire�these�new�up�and�comers�to�the�Board�how�can�we�expect�them�to�exist�and�operate�in�the�NED�governance�jungle?�Often�this�person�will�either�become�the�stroppy�character�on�the�Board�or�the�quiet�one�who�doesn’t�actually�impact�the�way�we�hire�him/her. ”

NED,�FTSE�100�fashion�retailer

Advisory Boards

The�remit. To share knowledge and insight, help the Executive Board, and advise on core strategic priorities, particularly where there are specific skills gaps.

How�the�role�is�changing. Our network’s views were divided regarding the efficacy and power of Advisory Boards and whether they contribute positively to the evolving omnichannel agenda. A number felt they were of limited, even negative, value, linking up neither to the Senior Management Team nor the Board. But when we examined these views further, we discovered that Advisory Boards have in many circumstances been presented as the panacea to issues that are not being addressed directly within an organisation. When tasked with answering questions that the Board has yet to define clearly, it is not surprising that their impact is reduced.

“ �When�I�hear�talk�about�digital�shadow�Boards�I�roll�my�eyes,�these�actions�need�to�be�at�executive�level�otherwise�you�won’t�get�listened�to! ”

MD�-�Online,�FTSE�100

In contrast, where Advisory Boards have been set a precise brief, with quantitative and/or qualitative objectives, their operational and strategic influence and ultimately their output can be tangible – and they were seen as successful additions to an organisation.

Specifically, they can offer targeted support in areas of organisational weakness, and can typically boast a wealth of experience and expertise that outweighs the skill-set of a single full-time executive – providing a vital tool for transformation as a business develops its strategy without the risk, lead time or cost of an individual executive hire.

Beyond this, examples were put forward of shadow youth and digital Boards providing useful feedback and representing the ‘conscience’ of the customer – an invaluable

17


perspective into what products and trends are taking hold. B&Q and Co-op are among the retailers that have used shadow Boards to advise their top teams to positive acclaim.

Chief Executive Officer

The�remit. To be the visible executive leader of the company, to internal and external audiences. Working with the Chair, the CEO needs both to add shareholder value and create a sustainable strategy, as well as lead its implementation.

How�the�role�is�changing. The challenge for the CEO is to implement a more creative, innovative and digitally-savvy culture without losing sight of the commercial imperatives of retail trading. The CEO of today is far less focused on ‘business as usual’ and is now regarded as the guardian of the transformation agenda.

Historically, retail leaders have been promoted through the ranks of operations, store management, marketing or trading roles. And credence has mostly been given to a general management, P&L-focused track record. But far too many CEOs have singular views and very few have experienced the benefits of working across more than one of these functions.

CEOs who have been tested not only in their core area of expertise, but who have also earned their stripes in areas such as digital, marketing, supply chain and technology, will undoubtedly have a more rounded commercial perspective and are therefore more likely to be able to build businesses that are cohesive, with holistic views of trading and customer interaction. They will have a better understanding of the risk implications of large capital investments such as technology. They will have an appreciation of the evolving role of stores as retail theatres rather than merely places to transact. And ultimately, they are more likely to have their finger on the pulse of what their customer is saying and doing and how they’re doing it.

This additional knowledge can be gained through a number of channels and need not come from a series of full-time executive appointments – periods of secondment, international assignments, the use of mentors and the allocation of key strategic initiatives will all allow high potential

executives to add strings to their bow, standing them in good stead for a

future CEO appointment.

For some CEOs today taking on the new broader

remit and setting the direc-tion of transformation will mean

embracing what they don’t necessarily understand, hiring people to cover their blind spots, seeking external counsel, asking disruptive questions, setting clear goals and having the narrative skills to inspire the whole organisation to work towards the end destination. A strong Chair or a confident, experienced NED can be the necessary influence to say “Come on, let’s be brave.”

We�are�beginning�to�see�examples�of�retailers�that�have�recognised�the�need�to�nurture�and�grow�their�

own�talent.�Kingfisher�has�established�its�Talent�Marketplace scheme and other large retailers such as�Asda�Walmart,�the�Morrisons�Academy�and�the�

Co-operative�Group�are�all�going�to�great�lengths�to�develop�the�leaders�of�tomorrow.��

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Chief Financial Officer

The�remit. To manage the financial risks, planning and reporting. The CFO directly assists the CEO on all strategic and tactical matters as they relate to budget management, cost benefit analysis, forecasting needs and, in some circumstances, the securing of new funding.

How�the�role�is�changing. The role of the CFO has been changing for some time with the remit now as much about external strategy as internal operations. Although long regarded as the right-hand man to the CEO, the CFO has in recent years become a true commercial partner with a breadth of responsibilities, particularly relating to the transformation agenda. While CFOs must still attend closely to cash flows, controls, costs and risk, it has also become a big picture strategic function, about balancing the empirical with the creative.

In November 2013 American Express undertook a global study of over 500 CFOs, which uncovered ‘fascinating insights into how the CFO’s role and responsibilities have evolved since the onset of the recession.’ It found that ‘the CFO has become more of a catalyst, spurring the wider organisation to execute necessary changes’.11 As agents for change, CFOs are being relied upon to help facilitate growth by, for example, encouraging innovation, or by feeding insight to management on under-utilised company assets in order to provide new avenues for development.

“ �The�role�of�the�CFO�has�already�transformed.�The�financial�engineering�of�a�retail�organisation�has�fundamentally�changed�and�is�now�far�more�complex.�How�do�we�now�assess�profitability,�stock�and�store�performance�in�an�omnichannel�world?�From�a�shareholder�point�of�view�we�need�a�far�more�detailed�understanding�of�how�these�issues�affect�investment,�cash�and�profitability.�Many�CFOs�are�struggling�to�grasp�this�and�therefore�we’re�seeing�a�higher�turnover�in�CFOs�of�late,�as�they’re�simply�ill-equipped�to� deal�with�these�demands. ”

Partner,�Private�Equity�Group

Part of the complexity of this new financial engineering is that consumers are switching channels throughout the buying journey, bringing the challenge of apportioning profitability and revenue streams to traffic via individual channels. But within an omnichannel strategy this separation is becoming obsolete: a single view of sales, stock and customer is the new imperative for enhanced financial performance and efficiency. Increasingly, the CFO needs to have intellectual agility, as well as concrete reliability, in order to act as the link between financial rigour and strategic insight.

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Omnichannel also requires a level of risky investment – in innovation and new technologies – that retail firms are not typically used to. Similarly, it is harder to demonstrate clear and absolute definition of profit and return on these investments when their timeframes and equity are now under such different terms and there aren’t any precedents to observe and follow.

With this in mind, CFOs also increasingly need strong communication skills to create a compelling narrative that satisfies diverse stakeholders’ calls for both immediate and long-term sustainable profitability, as well as champion specific, often disruptive initiatives internally.

“ �The�elephant�in�the�room�is�that�in�most�cases�the�commercial�return�on�this�is�thin�and�long.�So�the�biggest�issue�is�the�economics.�It’s�still�possible�to�get�quicker�better�returns�in�other�areas.”

COO,�FTSE�100�retailer

Chief Marketing Officer

The�remit. To build the brand while fuelling business growth, co-ordinating efforts across digital and traditional channels. In partnership with the CEO, the CMO has an innate understanding of a retailer’s current and potential customers. In addition, they act as a crucial internal business partner, disseminating that information to drive commercial decisions, from range selection to pricing to new proposition development.

“ �The�CMO�should�be�the�custodian�of�the�brand,�the�data,� the�pulse�of�the�customer. ”

Chairman,�Private�Equity�backed�retailer

How�the�role�is�changing. For many retailers, it is the CMO who has to date absorbed a large part of the omnichannel brief, with an increasing emphasis in this role on market orientation, customer intimacy, customer loyalty, customer experience and journey.

In contrast to many retail functions, which have evolved almost in isolation, the profound transformation within marketing has been multi-faceted and all-encompassing. Big data has precipitated a proliferation of more powerful analytics, and new digital forms of marketing have emerged.

Ensuring that the customer is at the front and centre of an organisation’s thinking is imperative for the CMO; setting the agenda, compiling the necessary financial evidence that show the return on investment from marketing and customer-oriented activity, furthermore the partnership with the CTO is fundamental to perfect the forensic analysis and creative implementation of complex data and customer intelligence.

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“�The�Marketing�role�is�morphing�into�that�of�Customer�Director,�but�it’s�possible�that�might�be�too�broad�a�function�for�just�one;�having�tried�in�the�past�its�been�one�of�the�hardest�roles�to�fill�in�retail�–�there�just�aren’t�that�many�good�people�out�there�that�boast�the�skills�in�that�specific�combination ”

CFO,�Specialist�multichannel�retailer

The future success of this evolving role rests in the ability to blend the traditional ‘art’ of marketing with the new ‘science’ of digital and data. As marketing moves beyond imagery towards analytics, effective CMOs will understand both dimensions.

Chief Technology Officer

The�remit. To provide the vision and leadership for developing and implementing technology systems.

How�the�role�is�changing. This role is moving from the back office and now underpins and informs business strategy. It is becoming more commercial and innovative, about technological possibilities and not just the supporting infrastructure.

“ �There�is�a�breed�of�IT�people�that�are�now�far�more�commercial�than�ever�before�–�they�really�grasp�the�art�of� the�possible�–�and�these�could�be�the�leaders�of�tomorrow. ”


Speaking at the NRF conference in New York IBM chief executive Ginni Rometty asserted that the foundation of retailers’ competitive advantage in 2014 will be information and how they analyse it, claiming that thinking strategically about big data “will determine the winners and losers” of the retail industry. Retailers who use hybrid clouds will benefit from “speed, agility, security and privacy”, that the retail industry is “facing a new cognitive era of computing – this is not a new era of technology; this will be a new era of commerce,” she said.

The successful CTO must also be a broker for change, as part of the transformation team leading the organisation. They must possess both the commercial foresight and specialist expertise to look ahead and build a proactive technology strategy that can withstand a constantly evolving landscape. As they become a far more business-centric function – working in partnership with other departments as the most important enabler of operational change – the CTO’s interpersonal skills will also be in high demand.

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With an increasingly influential voice at the Board table, we will see CTOs contribute more to commercial discussions, including setting the roadmap and future-proofing the business; investigating in detail certain investment programmes; and the subsequent risk analysis. According to research by MGI and McKinsey’s Business Technology Office, ‘big data is fast becoming the key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus.’12 And if, as predicted by Gartner, there will be nearly 26 billion devices on the Internet of Things by 2020, we have to assume that the CTO can not only adapt to, but somehow harness and optimise the tools available in this new world that will increase in value exponentially.13

In the world of the single customer view, the CTO needs to push for better integration. This means rolling out the technology that best supports cross-channel collaboration, implementing effective systems to mine big data, establishing POS systems across multiple touch points, as well as enabling mobile commerce. The CTO is now required to create a high-quality, adaptive technology infrastructure.

Multichannel Director (Group Sales Director)

The�remit. To manage all customer sales points – primarily stores, online and mobile – in a role that bridges marketing, sales and technology. Without question this is the divergent role of the ‘Big 5’, varying in title and structure from organisation to organisation. This was also, surprisingly, the role that drew the most consensus from our network.

“ �Don’t�let�the�minutiae�and�the�differences�distract�you�–� a�sale�is�a�sale�regardless�of�channel�let’s�stop�thinking�in�slices�and�think�about�the�whole�cake! ”

CEO,�FTSE�250�retailer

How�the�role�is�changing. The Multichannel Director must work very closely with, and hold significant matrix relationships within, the top team. With the CTO, they investigate innovative technologies and new means of engaging their customers. With the CMO they focus on the single customer journey, making every experience, transaction and conversation seamless. And with the CFO, the Multichannel Director manages the sales and profitability across all channels, including store, web, mobile and international.

“ �The�Omnichannel�or�Multichannel�Trading�Director�role� has�to�be�soon,�it’s�long�overdue.�Joining�up�electronic� and�physical�shops�is�a�no�brainer,�the�customer�did� it�ages�ago! ”

Director,�Digital�Consultancy�

22


Multichannel roles are becoming more senior, and some are even saying that this is the new route to Chief Executive, as the combined experience and skills gained in this role become increasingly important to the strategic direction of the retailer. However until now, it is undeniable that few businesses have Multichannel Directors who are truly operating across the channels and incorporating retail stores: there are handfuls of Online Directors, and there are still Retail Directors, but there are very few examples of individuals owning all sales channels. This has led to a plethora of job titles, confusing semantics and disjointed organisational structures that are counter-intuitive to the very ‘single customer view’ that has been lauded as the future of retail. The majority of our interviewees agreed,

“ �Ignore�the�semantics�and�job�titles�and�focus�on�the�task�–�integrating�sales.”

Strategy�Director,�International�Specialist�Retailer

The overriding need is to look holistically at the sales, and be less emotional about the point of transaction.

“� One�startling�statistic�to�be�aware�of�is�that�whilst�grocery�online�is�5%�of�the�market,�actually�much�more�importantly,�40%�of�our�shoppers�use�groceries�online,�so�it’s�not�5%�of�your�business�but�40%�of�your�customers,�that’s�the�way� to�look�at�it. ”

Group�Development�Director,�FTSE�100�Supermarket

Supply Chain Director

The�Remit. To manage the logistics of moving products identifying efficiencies in the supply chain across the network strategy and inventory management through buying and monitoring systems.

How�the�role�is�changing. Customer expectations of fast, reliable delivery and free shipping are growing. Fulfilment will continue to be a battleground. We can expect to see an increase

in what Forrester analyst Sucharita Mulparu calls ‘the last mile wars’14.

The need for speed is unquestionably one of the priorities for Boards in 2014,

while Amazon’s prototype delivery drones caused some mirth amongst the cynics, they also point to a future in which people purchasing online expect virtually instant – and personalised – fulfilment. Their next initiative is to ship before you buy, which Amazon calls

Within�the�need�for�speed,�the�supply�chain�will�increasingly�become�part�of�the�personal�

dimension�of�the�retail�business�model.�

23


‘anticipatory shipping’. By analysing a wealth of user data including wish-lists, shopping cart contents, previous orders and even how long a mouse cursor pauses over an item, Amazon is confident it can predict individual sales and further slim its already impressively small gap between receiving an order and delivering to the customer.

Fulfilment efficiency is also transforming the use and type of warehouse space. Tesco, Asda and Waitrose are all building more unmanned, ‘dark stores’ as distribution centres for online orders, to ensure better availability and a faster, more efficient service.

HR director

Last in this section, but paramount to the organisational, structural and cultural change discussed in this paper, the HR Director will play

The�remit. To administer the company’s personnel and training strategy, in addition to contributing to overall company strategy and policy making by advising the board on the personnel and/or human resource implications of its decisions.

How�the�role�is�changing. Volatility, Unpredictability, Complexity and Ambiguity (known as VUCA) – a phrase originally coined by the US Army War College – are now considered by many as an apt description of today’s business environment. Yet many of the structures, systems and processes that underpin organisations are unsuited to this turbulent backdrop, and HR professionals have an important role in helping their organisations to navigate VUCA territory. In terms of the HR remit, the days of ‘straight line’ job descriptions within highly structured, ordered HR departments are almost over, with more fluid models required to match the speed and scale of change. This means that recruitment, retention and talent management have to be sufficiently agile to adapt to continually changing requirements and skill demands.

Last year, in partnership with Henley Business School, we undertook research which identified a need for pragmatic commercialism from HR professionals. HR departments must be realistic and flexible – now is not the time for rigid five-year plans. This is essential if they are learning how to operate in an environment where there are constantly shifting priorities. A key question is whether or not HR professionals are equipped with the experience, skills and expertise to deal with such an environment. If the HR department is not able to navigate this ‘new normal’ environment then it is unlikely that it will be able to help the rest of the business to do so. We are finding that HR professionals with previous experience of a change environment such as a restructure are better suited to dealing with volatility and complexity than many of their peers. These individuals are also more likely to demonstrate a

An over-reliance on processes and historically

popular models by HR can also hinder the

flexibility, adaptability and entrepreneurialism required to design, implement and embed

change in a more risky and unpredictable environment.

24


greater diversity of thought, an important capability when it comes to problem-solving in an unpredictable business environment. These days it is essential to be inquisitive, open-minded and able to shift perspectives when a complicated situation or challenge manifests.

Temporary, specialist roles

In addition to the roles above, our leaders and influencers acknowledged that as the retail sector finds itself in times of change, there is a general shortage of specific skills in particular disciplines, and that retailers need to make some short term appointments to ramp up momentum. A war for some highly prized and commercially viable talent is being waged.

Several of those suggested include:

• digital director Many regard the Digital Director as a transitional role as businesses begin to adapt to the new digital epoch. In the short term, this director can act as facilitator – the digital evangelist, to educate colleagues in the fuller potential of digital working, and to help get knowledge of emerging technologies disseminated across, and embedded within, the organisation. Our network predict that within a few years the UK retail sector will have adjusted to the point that it is fully digital and there will be collective responsibility – for

“ �Digital�is�not�and�should�not�be�just�one�person’s�responsibility. ”

Commercial�&�Ecommerce�Director,�International�specialist�retailer

• Customer Director The Customer Director can act as the central guardian of the customer experience – driving coherence and connectivity across all customer points of interaction. It is more than three years since Forrester heralded the importance of this new role.15

“ �So�many�organisational�structures�are�still�in�transition.�I�suspect�that�we’re�heading�towards�there�being�a�‘Customer�Director’�rather�than�channel-centric�roles.”

CEO,�Mid-cap�PLC

The UK is now beginning to see the trend emerge from Shop Direct and Morrisons. This could be regarded as a short to mid-term solution while more traditional CMOs acquire the new specialisms that will refresh their own expertise.

25


“ �We�have�just�appointed�a�new�Chief�Customer�Officer�(first�job),�we�needed�someone�to�own�the�customer�experience�and�the�customer�journey.�Owning�the�customer�touchpoints�whether�physical�or�digital.�But�I�was�so�surprised,�when�I�appointed�him�and�announced�it,�none�of�the�trade�press�made�a�fuss,�simply�because�they�didn’t�recognise�this�role! ”

MD,�Digital/Media�organisation

• Transformation Director By definition, this is a temporary role that supports organisations through change, whether cultural, structural or, more specifically, focusing on functional areas such as technology. This role could be a fundamental part of reviewing and assessing the relevance of the ‘Big 5’ as it drives the organisational phase of reflection and adapts to this new world. The Transformation Director could equally be a member of the change implementation team, incorporating project management skills rather than strategic analysis. Irrespective, it should be an agile role albeit with fixed objectives, of determinate nature.

Recruiting these specialist roles can be challenging – particularly in retail, as there is such little precedent against which to benchmark practical experience and capability in some of these areas. We believe therefore that talent should be sourced from more wide a field; exploring sectors beyond retail – such as travel, FMCG, financial services or technology – will introduce fresh perspectives and test critical thinking.

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Whereas in the previous chapter we looked at the talent issues – hiring the right people in the right place and within the right timeframes, here we look at the impact on the wider business – the organisational and cultural changes needed to

support an effective omnichannel strategy.

“ �Surely�the�objective�and�end�point�for�an�organisation�is� full�integration.”

CTO,�International�Luxury�Goods�Group

Matrix working

Nearly all of the leaders we spoke to said it was time to remove vertical silos and improve integration through cross-functional teams, “with people writing code sitting next to commercial”.

“ �Remove�the�vertical�silos.�Culturally�things�are�still�very�hierarchical,�don’t�operate�seamlessly,�teamwork�is�therefore�difficult,�we�need�to�fundamentally�change�behaviours�and�want�to�learn.”

MD�-�Online,�FTSE�100

An omnichannel strategy brings the need for increased collaboration, and shared information from a single, centralised knowledgebase, and this goes right to the heart of organisational design. It touches every business function from supply chain to inventory, marketing to merchandising. It is therefore acknowledged by many that

“ �We�need�to�turn�the�organogram�completely�upside�down.There�is�a�significant�piece�of�work�to�be�done�around�culture,�organisational�design,�incentive�programmes�and�technology.”

NED,�FTSE�100�fashion�retailer

3Thinking differently will help you win

27

3 . T H I N K I N G D I F F E R E N T L Y W I L L H E L P Y O U W I N

An omnichannel approach enables bricks and mortar retailers to use digital innovation to enhance the customer’s experience in store. It also offers opportunities to develop attractive offline/online hybrids like ‘click-and-collect’, or inversions of this such as Ikea’s new stores that function more like a showroom than warehouses, with customers purchasing on tablets in the store for home delivery. Collaborative matrix working between the store and online, supported by good staff incentives to sell and up-sell regardless of channel, should increase the number of these profitable hybrids. However,

“ �people�don’t�like�what�they�don’t�know,�and�as�such�this� is�pretty�threatening�for�many�traditional�retailers.”

COO,�FTSE�100�retailer

Cognitive diversity

Cognitive diversity means having people who bring fresh perspective and different ways of thinking. Leaders who bring greater cognitive diversity to the team tend to ‘embrace disruption’ and may be more tempted to ask the difficult questions that get to the heart of the customer’s experience. And the more diverse the thinkers and perspectives involved in problem-solving, the more connections are made, sparking vital innovation.

Moreover, while most of the information that enables retailers to understand and predict customer patterns comes from big data, team members from diverse perspectives and backgrounds can also offer insights on the way customers behave. Depending on the unique demands and pressures on a retail firm, this may mean, for example, bringing on talent from Generation X and Y to balance out the perspective of older, more experienced senior directors.

“ �If�our�customer�is�significantly�younger�and�from�a� different�perspective�than�ours�and�with�different�expectations,�how�can�we�represent�them? ”

MD,�Global�Advertising�Digital�Business

Dimensions of diversity beyond differences in age can also play a vital role. At Green Park we have made a detailed study of the gender balance, as well as the ethnic and cultural diversity, across the most senior roles within the FTSE 100. We found that retailers perform relatively well on gender diversity, ranking at fifth place in the sector league tables. But the retail industry is still lagging on ethnic and cultural diversity at the highest levels, with non-white executives accounting for just 1.7 per cent of retail sector Board members.16 Retailers may find that widening the diversity of backgrounds in their top teams may add a freshness, more angles of vision and valuable perspectives to their broader transformation agenda.

28


Outside of sector

“ �Look�outside�the�sector�to�see�how�radical�you�could� actually�be.”


Insights from outside the sector can be invaluable and some of the best hires are those that use perspectives from other sectors to invigorate company strategy. With consumer-facing businesses all facing similar pressures from changing customer behaviour and constantly evolving technology, there’s usually ‘massive crossover’ in what senior executives do. Travel and FMCG, digital expertise from technology and telecoms, can all offer new talent pipelines.

We have been encouraged by some of the more radical moves, and the considerable success in transferring talent from the likes of Accenture and IBM.

“ �There�is�massive�cross�over�in�what�we�all�do,�between�customer�groups,�the�power�of�brand,�delivering�our� brand�through�people�and�some�of�the�technical�elements�such�as�how�to�segment.�Moving�between�sectors� is�invaluable.”

Commercial�Director,�£Multi-billion�consumer�organisation

The only word of caution about importing people from other sectors with these highly desirable technical skills is the importance of cultural fit. The key is to ensure that there are shared values and a common approach.

Mind-shifts

One of the biggest shifts in outlook comes with changing approaches to investment in technology. Technology has come right from the back office to the very centre of retail growth.

In a constantly evolving landscape, retailers are having to ring-fence more for innovation and technology spend. But directors will need to articulate to the City, shareholders, the Board and staff that investment will be longer-term and more risky, following a model more like a technology company and less a traditional retail firm.

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3 . T H I N K I N G D I F F E R E N T L Y W I L L H E L P Y O U W I N

“ �You�have�to�accept�the�risk�associated�with�digital,�it�moves�so�quickly�that�you�might�spend�time�and�money�developing�something�that�you�don’t�actually�use,�whereas�traditionally�any�type�of�similar�investment�would�mean�that�you�have�to�use�it�and�you�have�to�get�it�right.”

CFO,�£Billion+�PE�fashion�retailer

Partnerships

Partnerships offer new routes to omnichannel profit, as well as helping retailers to be more creative and test out different approaches to the customer.

Ocado and Morrisons agreed a £216m partnership deal last year that involves Ocado operating a new online grocery service for Morrisons using its customer fulfilment centre in Warwickshire. Waitrose and Tesco have entered into a partnership with Transport for London to use underground stations as grocery collection points. And retail partnerships with major network operators are driving innovation in the development of the mobile wallet.

In order to compete with Amazon’s Locker delivery there was a Landmark tie-up in 2013 between Ebay and Argos, trialling a click-and-collect scheme, similar to the operations Ebay already runs in New York and San Francisco – the eBay Now service which works in partnership with ToysRUs, Urban Outfitters and The Home Depot.

Partnerships can also improve digital literacy. The Sainsbury’s Board for example, has been to Stanford and Google to understand and embrace new technology. And as another of our leaders said,

“ �We�did�a�digital�day�last�year�and�we�will�do�it�again.�We�invited�Google,�Amazon,�Forrester�and�others�to�get�a�better�external�view.”

Commercial�&�Ecommerce�Director,�Global�specialist�retailer

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the clear message from our research is that buying patterns of customers have changed irrevocably as a result of digital technology and the retail industry is for the most part still playing catch up in developing its approach to creating omnichannel strategies that

can offer an integrated approach to retaining and growing sales.

One of the key challenges is understanding the scale of the impact on retailers in terms of organisational structure, skills capability and design of their supply chain in responding to this new paradigm. For most it is going to require radical transformational change across the business, significant investment and an ongoing assessment of future buying trends that is radically different to past approaches.

“ �If�you�want�to�build�a�shiny�new�bathroom,�sometimes�you�need�to� change�the�plumbing�and�the�whole�system,�not�just�the�taps! ”

Chairman,�Specialist�Retailer

There are two elements to an effective transformation agenda: people in the right roles with the right skills; and an organisational design and culture that enables agility, encourages innovation, and supports integration and collaboration across business functions.

It has never been more essential to have the right people making the important decisions. To address the current imbalance of skills in many retail top teams – where finance and governance often outweighs digital and data-driven customer insight - Chairs and Board directors need to undertake formal reviews of their own blend of skills, talents and capabilities, as well as that of their Senior Management Team, particularly focusing on the ‘Big 5’ roles.

“ �Financial�performance�will�always�be�at�the�top�of�the�list,� but there needs to be an emphasis on deliver today and create�for�tomorrow.”

NED,�PLC�specialist�retailer

Honesty about what talent and expertise currently sits at the top table is critical. Bringing in specialist experts in the short and medium term may be the only option to add knowledge, pace

4 It’s not as complex as it seems…

Bring the best of the store

experience to the web and the best of the web experience

to stores.

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4 . I T ’ S N O T A S C O M P L E X A S I T S E E M S

and rigour. Although the CEO should always own the transformation, he/she may have to bring in expertise in the form of new, temporary roles to lead the certain operational aspects of the change.

“ �This�doesn’t�necessarily�mean�a�full�and�all-encompassing�change�of�the�Board,�but�a�less�risky�phased�approach,�focusing�initially�on�assessing�the�strength�of�digital�and�international�skills�at�Board�level,�these�go�hand�in�hand.”

Director,�Digital�Retail�Consultancy�

Appointing NEDs who are savvy in this new world can be a speedy action to provide some much needed expertise and questioning at Board level. This, together with other outside contributions such as Advisory Boards (if used in the right way and are seen as an addition not a replacement for executive expertise and ownership) can furnish some immediate solutions.

Other temporary appointments will also kick-start transformation. Precisely what these roles are will differ from organisation to organisation, depending on the skills already within the team - Digital Director, Transformation Director, Customer Director are all examples. But in the long term it is critical that no one individual is the “digital expert” or the “customer expert” around the Board table and that eventually the whole team has ownership of the digital agenda and it becomes the new way of working.

“ �This�means�training�the�whole�Board�–�a�Digital�101�to�improve�Board�literacy.�It�is�paramount�that�we’re�not�afraid,�that�we�don’t�abdicate�responsibility�and�that�we�avoid�window�dressing�and�tick-boxing.”

CMO,�Digital/Media�FTSE�100�organisation

The very shape and framework of the organisation must change, and reviewing organisational design will be critical to success. Again, this will be different for each retailer but all must ask: How can we make quicker decisions? How can we fully integrate digital knowledge into all areas of our business? How do we make sure we understand the data from our customers in order to influence all areas of decision-making?

Most retailers are discovering that the traditional silo model of organisational design is no longer fit for purpose. More collaboration across functions is central to the changing retail landscape, and sets the framework for more nimble, quickly responsive teams, that can also share insights to gain a much deeper understanding of customer expectations and patterns of behaviour.

The retail sector as a whole needs

to think differently about how to build its future leaders.

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The research brings into sharp relief the broader question of how retailers choose and develop their future leadership. It is clear that CEO’s will increasingly need to be more well-rounded, with the capability of understanding how to lead their senior teams in an increasingly volatile market, driven by better informed and technological enabled customers, in both their traditional and emerging markets.

Equally, Boards must have the experience, insight and robust management information to be able to judge whether their company has the capability to meet the new market dynamics with strong management teams that can work collaboratively and across traditional business silos.

Finally, the Boards themselves need to assess as a matter of urgency whether they have the right blend of skills and experience to be able to challenge or support new business strategy and investment decisions on building digital and omnichannel capability for the future.

“ �Retail�is�full�of�trading,�product�and�financial�skills;�the�new�world�needs�leadership�teams�that�are�more�highly�analytical;�that’s�the�major�shift�from�old�skills�to�new.”

Director,�omnichannel/digital�consultancy

The prevailing question is who can we look to? Without the myriad of comparable success stories we cannot consult the usual competitor analysis, instead we have to use advisers, consultancies, third parties that give us a wider market perspective and new benchmarks for excellence. We have to be brave and remove the comfort blanket of what we’ve done before and what we know. The use of external partners does not necessary mean gargantuan fees or theoretical but impractical advice, certainly not if approached with a more creative and open mindset – experiment with new partnership models, test your assumptions and challenge your cynicisms.

We are grateful to those we interviewed for their candour and for the insight they provided across the sector from small PE backed businesses to luxury brands and large high street household names. Their contribution has enabled us to shed light on the journey much of the sector is on in trying to re align their business models and strategy to meet the challenges and opportunities they face in retaining and growing their customer base.

R U N N I N G H E A D

tHE GREEN PARK ACtioN PlANAs a quick, one-stop check for Boards embarking on the omnichannel journey, we present a SIX-POINT Green Park Action Plan:

1 tAlENt REViEW The Chair should lead a skills and competency talent review of the Board and Operating Board, or Senior Management Team, in relation to the new strategic direction of the firm. Key focus must be applied to the new, core skills that an omnichannel strategy requires: digital; data; customer insight; and transformation. This talent review should answer the question: Do we have the right ‘Big 5’? if not, what’s the plan? And what specialist skill sets in the short to medium term are in order to fast track progression?

2 BAlANCE tHE NEdS Review the balance of your non-executive directors and make changes quickly, focusing on the gaps of the executive team.

3 od REViEW Review your entire organisational design. Is it fit for purpose? How can you be better at integrating key skills, working across teams, and being more agile? What structural changes will help to ensure that new skills are being developed across all levels of the organisation?

4 iNVESt & EdUCAtE Invest in educating your Board and Senior Management Team. Whether through partnerships with experts, individual coaching and mentors, or the input of Advisory Boards – make sure you are seeking the views of experts and that your senior decision makers have more rounded views of what’s current and future trends.

5 looK oUtSidE Be brave when bringing in new skills. Look outside the sector to TMT, Retail Financial Services, FMCG and Travel – executives in these fields have relevant expertise in customer insight, big data, and technology. Focus on building more rounded teams.

6 BUild toMoRoW’S CEo Build better leaders from within. Spot your future stars at mid-level management and make sure they have a detailed talent development plan that involves them being rotated across different disciplines with particular focus on digital, marketing, and technology, as well as stores and commercial. Make sure they have access to expertise outside the organisation as well – invest in them to produce the next generation of CEO.

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WITH THANKS TO …

The team at Green Park would like to acknowledge and thank everybody that has contributed thoughts, commentary and feedback in support of this White Paper. We would like to give particular thanks to a number of individuals who have generously shared their time, experience and insights with us in our preparation and research.

• Christine Cross, NED, Next plc, NED, Sonae Group Ltd (Portugal), NED, Woolworths Limited (Australia), and NED, Kathmandu Limited (New Zealand), previously Chief Retail Advisor to PricewaterhouseCoopers and Director at Tesco plc

• Colin Holmes, Chairman, Go Outdoors, Non-Executive Director, Admiral Group plc and Non-Executive Director, Bovis Group plc

• Alan Jacobs, Founder and Principal Jacobs Capital, Chairman, Zoggs International Ltd, Non-Executive Director, Iceland Foods, Executive Director, Blue Inc, Non-Executive Director, ZeroC Holdings Ltd, Chairman, Redbus Media Group, Non-Executive Director, Reiss, Non-Executive Director, Austin Reed Group

• Iain MacRitchie, Founder & CEO, MCR Holdings, Former Chairman, Hobbs and Chairman, Institute For Turnaround and Transformation

• Norman Pickavance, Non-Executive Director, HM Revenue & Customs, ex Group HRD, WM Morrison Supermarket plc

• Darren Shapland, Non-Executive Director, Ladbrokes and Non-Executive Director, Poundland

• Amit Aggarwal, Director Corporate Finance, PWC

• Andrew Bisson, Omnichannel OD Consultant

• Tim Davies, Owner, Adwerth LLP

• Nick Martel, Chief Operating Officer & Head of Retail Strategy, CBRE

• Justin Maltz, Director UK Private Equity, 3i Group plc

• Finlay Clark, Industry Head - Retail, Google

• James Donaldson, Chief Operating Officer, Travelocity

• Martin George , Chief Marketing & Commercial Officer, The Post Office and Non-Executive Director, Thorntons plc

• Will Ghali, Group Director of Strategy, Clarks ltd

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W I T H T H A N K S T O . . .

• Shaun Gregory, Managing Director, Global Advertising, Telefonica Digital and Non-Executive Director, Tagman

• Luke Jensen, Group Development Director, J Sainsbury plc

• Alastair Miller, Chief Financial Officer, New Look

• Will O’Connor, Commercial and E-Commerce Director, The Body Shop

• Michael Sharp, Chief Executive Officer, Debenhams plc

• Michael Ross, Co-founder & Chief Scientist, Ecommera, NED, Abcam, NED, Wex Photographic, NED Board member, Spreadshirt.net

• Simon Thompson, Managing Director, Online – Food, Wm Morrison Supermarkets plc

• Michael Ward, Managing Director, Harrods

• Mark West, Chief Executive Officer, Labelux Global Business Services SA

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NotES

1 US Cross-Channel Retail Forecast, 2011 To 2016, Forrester, June 2012

2 “10% of UK consumers use smartphone as main method of shopping as UK becomes European leader of m-commerce”, www.thedrum.com, October 2013

3 “Retailers mobile sites lag behind as customer satisfaction gap between mobile and desktop retail sites widens”, www.theintegratedretailer.com, January 2014

4 “Half of Brits say m-commerce experience falls short of expectations”, www.thedrum.com, May 2013

5 2013 Customer Experience Predictions, Forrester, January 2013

6 Recasting the Retail Store in Today’s Omnichannel World, A.T. Kearney, October 2013

7 “Survey Shows Strong Demand for Omnichannel”, www.allanalytics.com, January 2014

8 “UK leads global e-commerce export market”, Retail Week, 20 January 2014

9 “Overseas online shopper numbers surge”, BRC report, Retail Week, 4 February 2014

10 “Analysis: Online oddities – how ecommerce changes country by country”, Retail Week, 5 April 2013

11 Supporting Growth with New Technologies, American Express Company and CFO Research, November 2013

12 “Big data: The next frontier for innovation, competition, and productivity”, McKinsey, May 2011

13 “Gartner Says the Internet of Things Installed Base Will Grow to 26 Billion Units By 2020”, Gartner, December 2013

14 “First Look: 2014 Outlook for Digital Retail”, presentation to NRF’s Big Show, January 2014

15 “The Rise of the Chief Customer Officer”, Forrester, January 2011

16 Green Park Leadership 10,000: a Review of Diversity Amongst the UK’s Most Influential Business Leaders, Green Park, February 2014

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FURtHER BACKGRoUNd REAdiNG

Digitizing the Store. The Next Wave of Online and Offline Convergence, National Retail Federation and the University of Arizona, January 2014

How Retailers can Keep Up with Consumers, McKinsey & Company, October 2013

“Competing in the Age of Omnichannel Retailing”, MIT Sloan Management Review, May 2013

Retail Supply Chain Management: the Omnichannel Revolution, LCP Consulting Report, May 2013

Omnichannel leadership: the hidden risk facing retailers, Green Park White Paper, February 2013

Retailing 2020: Winning in a polarized world, PWC and Kantar Retail, 2013

Omni-channel Vision, Cross-channel Reality: Meeting the Consumer Where they Want to Buy, Toshiba Report, 2012

Winning the Retail War, Accenture, 2012

www.green-park.co.uk

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Refreshing the Board for the Digital Era 2014

Retail

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