Risk & Economy » Disruption » Off the pace, on the menu

Last year Rodney McMullen, the chairman and CEO of grocery giant Kroger, America’s second largest retailer after Walmart, penned an upbeat letter to shareholders.

“We have the scale, data, physical assets and human connection to win with our customers today and into the future,” wrote McMullen. “We are energetically creating a seamless digital experience for our customers and providing personalized inspiration to help America decide what’s for dinner,” he added.

McMullen had every reason to feel optimistic. The previous year Kroger’s total sales reached $122.7 billion, and the company grew its digital sales by more than 90 percent as it expanded its ClickList offering to more than 1,000 stores.

Little did he have in mind that Kruger may ultimately be on the menu for Amazon, the beast at the very top of the food chain. But that is what some experts are saying.

Because although many corporate leaders have grasped the importance of technology, and the need to harvest as much data as possible- they still struggle to understand that there can be only one winner in the zero sum game of who has the biggest and best data.

Terry Kramer, former entrepreneur in residence at Harvard Business School and guest lecturer at UCLA Anderson School of Management, says that the failure of the Kroger board to appreciate its vulnerability does not bode well for the company’s future. “Amazon has so much data on Kroger shoppers, what they have bought and what they haven’t bought, that they could do a productive shipment to Kroger customers with almost 100% accuracy,” he says.

By that logic it must be a matter of when and not if Amazon begins to eat into Kroger’s customer base, says Kramer who has looked closely management teams that fail to grasp the nettle when it comes to the disruption.

A 20-year veteran of the telecoms space, he became regional president of Vodafone Americas, a company that has maintained a powerful global position through understanding how to interpret data.

To reinforce the dangers of management hubris, he references the experience of former Ford CEO Mark Fields whose tenure at the top of the once dominant car maker lasted less than three years.

Previously Ford’s chief operating officer, Fields was elevated to the top role in 2014, as the automobile sector efforts to understand and develop autonomous vehicles was gathering pace.

In the period Fields was in charge, Ford’s stock dropped 40%, and he was replaced by James Hackett, who had been running the group’s autonomous vehicle subsidiary Ford Smart Mobility.

Kramer says the clue to Fields’ early retirement might have been Ford’s failure to capture the data required to lead the autonomous vehicle revolution. In the same period Google’s data from testing of its Waymo vehicle was a thousand times the size of intelligence Ford had gathered for its programme.

“It’s no surprise that Google Waymo has been valued at $130-140bn, that’s 30 per cent more than all three largest US carmakers combined,” says Kramer.

Figuring it out

Mark Jenkins, professor of business strategy at the School of Management, Cranfield University, says leaders being ‘tech-savvy’ is not enough. He says the focus has to be around customer need and customer value and how technology can enable this, in ways that make it hard for the competition to catch up. “Technology for the sake of technology is not enough and worse very expensive. You have to be bring together the tech savvy with the market savvy,” he says.

“A further danger is being savvy in the current technologies, but not being able to adapt to the new technologies. History is littered with established firms that failed to adapt their technologies, not because they weren’t tech-savvy, they were just savvy in the wrong technologies.

Prof Jenkins says leaders need to stimulate different thinking, drive collective conversations and enable clarity in terms of actions and communication. But more important is how the tools are used and applied to deliver future value. “If you draw on areas such as complexity theory the key for innovation and making better longer-term choices is building in diversity. Diversity of perspectives, diversity of knowledge and perhaps most importantly, diversity of mindsets,” he says.

What should business leaders do to nurture a cadre of tech-savvy executives below them? “The question is should you focus on developing senior leadership skills in technologists or developing technological awareness in senior leaders? Of course the answer is both, but the former has the potential to build real value as it enables the potential, the limits and the risks of the technology to be properly understood.

“The development of multi-faceted teams is critical here. No one individual can hold all the technical expertise it needs to be a combination of areas, fundamentally it is about technically curious executives who are constantly looking for and developing future technologies and their applications in order to develop their business and stay ahead of the conversation.”

It’s not just a matter of leaders being able to understand the changing environment and implementing the right tools, it’s about creating environments where problems get solved, says Dr Stephen Robertson of Edinburgh Napier University.

“From my experience of the banking and IT world before I became a lecturer, I needed everybody in my team to solve problems, it couldn’t all go through me. I had to create the the environment whereby people could take decisions within certain criteria.

“Do we need our leaders to solve all the issues or do they need to be the people who can draw in the other people who can collectively solve the problem, especially where we need a better understanding of technology, of data and its value?” he asks.

Robertson says the guru of leadership studies Warren G. Bennis expressed clearly how management teams need to capture the necessary creative thought to address the challenges of the age of disruption.

“There are two ways of being creative. One can sing and dance. Or one can create an environment in which singers and dancers flourish. Leaders must encourage their organizations to dance to forms of music yet to be heard,” said Bennis.