How to navigate the Retail & Consumer "tipping point" – where scale threatens agility
Apr 06, 2018
Today’s Retail & Consumer (R&C) industry is renowned for many things – not least its strong track record of innovation around products and consumer experiences. But for outsiders to the sector, perhaps its most fascinating trait is the series of fast-growing, disruptive entrants who’ve burst onto the scene in recent years, often seemingly from nowhere.
After exploding into the public consciousness, some of these dynamic new entrants succeed in moving through the high-growth phase to achieve stability as mature businesses. In contrast, others crash and burn spectacularly, and disappear as quickly as they emerged.
Ever wondered why? To my mind, the dramatically varying fates of fast-growing businesses reflect how well or badly they respond to one key phase of their growth curve: the tipping point at which their rising scale starts to impact their agility.
To explain, let me begin with a bit of context. At root, a retail start-up can be a pretty straightforward business. Many of them are able to have their whole operation in a single mid-sized building. Add in some flexible supply contracts in a manufacturing location, for example in South East Asia, some space for stock, and a compelling, attractive and responsive front-end experience for consumers, and you’re away.
Get these elements right, and your sales volumes may well start to grow. Maybe quicker than you or anybody else expects. And that’s when the problems can start.
Why? Well, the agility that comes with being small – where everybody mucks in and just does what’s needed – can be an advantage in the initial stages of the growth curve. But as sales increase, so does complexity: more contracts, more customers, more personalisation, more returns.
The result: suddenly, you find there’s a void at the heart of the business. What it has is an ad hoc collection of people and processes pedalling away as fast as they can along their own tracks. What it needs is to get everything driving in the same direction by creating a digital core: a technology-enabled backbone that integrates and supports every element of its operating model – across planning, forecasting, merchandising, distribution, returns – and links these into its supply chain end to end.
The digital core needs to be standardised, scalable and open – including exposing application programming interfaces (APIs) that enable suppliers and consumers to use plug-and-play tools to link in with it. This blend of stability, flexibility and connectivity enables the digital back-end to keep the front-end up to scratch in terms of meeting consumer needs – while also supporting and enabling innovation across consumer, channel and product.
In my experience, the fast-growth R&C entrants that get safely past the scale-versus-agility tipping point are those that grasp the nettle and build such a core. But what about the established players looking to compete with these disruptive upstarts?
For them, as organisations that have traditionally been centrally-controlled, the challenge is related but different. To compete with more agile entrants, they need to simplify and standardise their complex array of legacy systems and operating model, while innovating around the customer experience. The result is a two-speed approach: creating an agile new digital core in parallel with legacy and innovating at pace while migrating from the outdated systems. This strategy is being embraced by more and more of the long-standing retail players.
To hear more on this subject, join us at the BRC & PwC Webinar: The Future of Work and Retail Technology on the 24th of May 2018. Click here to register.