Transformation Requires Choices

Author: Eelco Simon | Image: Yvonne Kroese | 12-03-2024

Change is the only constant, it is sometimes said. But change does not happen at the same pace for every company. Moreover, companies often also have a choice about how they respond to change. Valcon partner Eelco Simon draws some lessons from HEMA and Sligro.

In today's business world, stagnation is decline, it seems. Indeed, virtually all businesses must adapt to a variety of changes in their environment if they are to survive. But contrary to popular belief, the nature of that transition and the pace at which it can optimally occur, differ.
This is evident from the interviews with Chief Technology Officer Pieter Heij of HEMA and Gerrit Buitenhuis, Chief Supply Chain Officer of Sligro Food Group, done for Management Scope. Two companies that differ substantially. To name the most obvious differences: HEMA serves the consumer, Sligro the business customer. They do so through different channels: HEMA through many stores and an online store, Sligro through wholesalers and an extensive delivery service.

HEMA: tackling volatility
HEMA deals with a consumer market, and today’s consumers are vocal, demanding, fickle and can no longer be pigeonholed. Do you, as a company, want to serve these consumers with their changing needs well? Then it is important to be able to cope with this volatility. This is far from easy. Changes in the product range simply take time. Adjustments to other activities in retail even more so: whether it is the construction of new distribution centers, expansion of the number of transshipment points or the number of physical stores - the lead time easily runs into several years. What is decided today is not immediately a reality. It takes time. And you always run the risk that that reality will look very different in the future from what you envision today.

Agility
HEMA nevertheless succeeds well in preparing for the future and responding to change quickly. This is partly because the company has mastered the art of scenario planning to perfection. The company has developed a clear vision and formulated a strategy. At the same time, the company is sufficiently agile to deviate from plans if it appears that there is reason to do so.
A good example is the decision to reallocate a distribution center designed with overcapacity to accommodate future growth from online sales. When that growth turned out to be less than predicted, HEMA decided to use the excess space for the storage of pallets and not for mechanized distribution as originally intended.

Sligro: operational excellence
Sligro is an entirely different story. Sligro’s customers are extremely loyal. They come back again and again, and their orders are predictable. Of course, Sligro also needs to plan ahead. And, of course, Sligro is also preparing for the future. Because, as Gerrit Buitenhuis says so eloquently, ‘Without today, there is no tomorrow. This is something that our management team realizes very well. Our team consists entirely of people who enjoy being in business.’ However: ‘We are not the types who devise imposing scenarios or complicated strategic plans from an arm’s length. We are very much focused on today’s market. There is a lot of work to be done this and next year, and that is where our focus lies.’ The emphasis can therefore be less on the volatile customer and more on operational excellence. As indicated in the interview with Gerrit Buitenhuis, the company is exploring how it can save millions by reducing each driver’s time spent at a customer visit by a minute or by modifying the route, allowing that driver to visit an extra customer daily.

Both agile
The need to be agile is nowadays a conditio sine qua non for every company, whether it operates in the B2B market or the B2C market. In that respect, HEMA and Sligro are no different. However, HEMA’s need for agility is probably greater since it deals with inconstant consumers. That does not alter the fact that for Sligro too - despite its loyal customers, despite the great predictability of market developments - agility is a priority. This certainly applies when it comes to staffing. That is the lesson the company has learned from the Corona crisis: that with a larger flexible shell it can scale up and down more easily when demand varies.
Sligro’s choice is understandable, but it is not written in stone that you have to increase your flexible shell in order to become more agile. You can also choose to increase agility with your existing staff. This is the path HEMA is taking. The company has chosen to make extra efforts to attract a larger number of people with permanent contracts and good terms of employment during this time of persistent staff shortages.

Data minded
Another similarity lies in the importance of having the right data to make informed decisions. And what constitutes ‘the right data?’ It comes as no surprise that this varies considerably from company to company.
HEMA, for instance, relies heavily on external data derived from market research and data on macroeconomic developments for scenarios. Not only quantitative data but also qualitative insights can form a valuable asset as a cornerstone of the company’s vision and strategy. Additionally, data stemming from internal operations serves as a significant source of insight. For example, when the company wants to determine if it is worthwhile to establish a new store, to assess the impact of robotics on efficiency, or to choose the best location for a distribution center.
Similarly, Sligro makes extensive use of data. However, the data required for a thorough substantiation of a decision to deploy drivers more efficiently differs from the data needed to model scenarios. For these operational improvements, precise measurement data of driver arrival and departure times, and changes to it when their daily schedules are adjusted, are crucial.
In other words, each problem benefits from different sets of data. Nevertheless, a well-organized data structure is always necessary, along with a company culture that recognizes the value of data. Every company should be data-minded - meaning to understand the importance of data, comprehend the types of data the company should possess, and recognize how that data can contribute to better decision-making.

Know thyself - and your environment
The comparison between companies in the B2C and B2B sectors and the differences and similarities in their operations is not complete, but the conclusion is nevertheless clear: there is no one-size-fits-all solution when it comes to change. The best change model depends entirely on a wide range of factors. To start: in which market are you active? Or rather: in which market do you want to be active? Because that is, of course, a choice. What you choose is largely a matter of the company’s vision, the market positioning it seeks, the company culture, the people, and the available resources.
Ultimately, the choice revolves around two things: the environment and how volatile it is, and yourself and how innovative you can and want to be. Are you sensitive to what is happening around you, so that you have a good idea of when change is necessary? And do you know where your strengths lie and how best to implement a transformation? To paraphrase the ancient Greeks: ‘Know thyself and know thy environment’.

This essay was published in Management Scope 03 2024.