As part of a series of interviews, we have been asking “what lessons retail should have learnt or should be learning as we deal with the ongoing pandemic?” This interview is with Retail Remedy Partner James McGregor and looks at operational simplification.
Before you discuss business simplification what are your thoughts on ‘the new normal’?
Those retailers fortunate enough to have emerged out of lockdown find themselves in a very different trading environment and have an endless list of tactical issues facing them. My watch out for business leaders is that the whole leadership team don’t absorb themselves in the ‘here and now’ thinking they have done a great job at the end of each week because they’ve extinguished some fires.
What advice would you give?
Take one of your most detailed transactional leaders (normally the retail director) out of the day job to lead a cross functional working party who are solely responsible for resolving or escalating the tactical issues the business is facing on a daily basis. Keeping the lights on whilst allowing the rest of the business to recalibrate itself.
What are the key questions you are asking retailers when you talk about business simplification?
“Are you just kicking the can further down the road?” or “Are you really committed to reshaping and simplifying how your business operates?”
It sounds harsh, but, we have seen so many retailers go through the pain of CVAs, debt write-downs or pre-packs with the intent of making radical changes to how they operate only to be in the same position again a few years later, because they have simply not been bold enough in reshaping the operation.
I am still amazed at the level of complexity and bureaucracy that exists within so many organisations. Retailers need to become far more agile and simplify how they operate if they are going to compete in the medium/long term. New entrants who are dominating the market do not have the structural baggage that legacy retailers are shackled to. Leaders need to be thinking differently, operating differently and challenging their operations differently.
What do you mean by businesses need to simplify their operation?
We have spoken with a number of retailers who have trimmed a little organisational fat, halted rent payments and reduced their immediate cost lines, in truth, this is about staying afloat, not simplification.
What advice would you give?
Of course I would cut all immediately obvious inefficiencies from the business, it’s about staying afloat after all. Beyond that the focus needs to be on shaping the operation for the future, not simply applying a plaster to a bleeding artery.
- Build the burning platform, set the direction and over communicate it – Trust me every retailer has a burning platform right now, but I guarantee the majority of leaders will keep it in the boardroom. Major organisational and mind set change cannot be delivered in silo [or through a small group of leaders], once the direction of travel has been agreed everyone within the business needs to be brought in on the journey and play their part in its delivery.
- Remove Structural complexity – Have you ever sat in a meeting and really questioned what value the other +10 functions are adding? Guaranteed if a leadership team has been in play for more than 12 months they will find it very difficult to challenge their own operating model and cost lines. If you are unable to see how your business can operate more effectively with 40% less central resource you are probably asking the wrong people the wrong questions.
- Challenge all of your cost and margin blocks – This is not simply a justification exercise, it’s about objectively challenging all major cost and margin blocks, start by looking at the end and make sure you scenario some radical propositions;
I would start with some very simple questions;
- What is the tangible ROI these functions/cost bring to the business?
- What measured impact would they have on the bottom line if we removed them?
- Can it be completed more effectively by a 3rd party partner, therefore reducing fixed cost?
- If the function is business critical how do we simplify and streamline activities?
- Will investment into the function achieve any of the above quicker?
Any final comments?
The next 24 months are going to be filled with uncertainty, distraction and major fallout within the industry. Seek external support on things that are not part of the business’ day job recognising that shared learning and support from your wider partners will be paramount if you are going to mitigate risk and drive opportunity in the future.