Resilience could be retail’s next big value driver

Resilience could be retail’s next big value driver

Co-authors: 
Ingrid Robinson - Partner, Risk Consulting, EY Canada
Rachel Cantu - Executive in Residence, EY Canada
Margherita Braga - Senior Manager, Transformation Architecture - Consulting, EY Canada

In brief

  • As consumer behaviours and market complexity evolve, Canadian retailers and consumer-facing companies have a tremendous opportunity.
  • Repositioning organizational postures to foster enterprise-wide resilience now can position these businesses to generate value for years to come.
  • Making the most of this moment requires businesses to optimize four fundamental pillars in tandem through an integrated enterprise strategy backed by shared ownership.

These are extraordinary times to be a consumer-facing company. As people change how and where they shop — as well as what and why they buy — business complexity and the desire for transparency are intensifying globally.

Therein lies a rare opportunity for consumer brands and retail organizations to pivot in pursuit of resilience: a veritable superpower that can support revenue generation and sustainable growth over the long term.

Really unleashing the power of resilience, though, requires you to address this area with an overarching, enterprise-wide view.

Why does resilience represent such a big opportunity for Canadian retailers and brands?

Business model innovation is hitting an unprecedented pace as companies transform to adapt, survive, and thrive — all while facing off with shifting macroeconomic drivers, sustainability agendas, geopolitical conditions and rapid digital advancements that continue to impact company performance.

This environment is prompting boards and C-suite executives to ask: are we resilient? How do we know? In fact, recent research shows 70% of boards now say that processes and governance frameworks for the companies they govern are not highly resilient.

That said, what does resilience really mean? It depends on your business, industry and sector. For consumer product and retail organizations, resilience is essentially a matter of striking a balance across:

  • Financial excellence
  • Operational excellence
  • Talent and people
  • Market and brand

These pillars are absolutely interconnected. Building resilience means you cannot address one pillar at the expense of another. For example, an innovation project that optimizes for financial excellence but produces a negative impact on operational excellence or talent and people wouldn’t foster resilience. In fact, it could actually detract from it.

Digging deeper into the financial pillar, we tend to see consumer product and retail organizations associate resilience with cashflow. To be clear: remaining resilient in the face of so much complexity absolutely requires organizations to laser focus on cashflow while maintaining a broad strategy that also addresses financially significant areas like licence to operate, regulatory compliance and balance sheet strength.

Building meaningful resilience requires a business to pursue a path that positively impacts financial excellence while also having a neutral or net-positive impact on the three remaining pillars.

Getting resilience right can generate profitable outcomes and positive results.

True: history is riddled with stories of consumer product and retail businesses that failed to strengthen resilience, particularly in the face of digital advancement and other headwinds that negatively impacted business models. Think large-scale music retailers, movie rental businesses or film companies. Conversely, many companies have successfully instituted resilience systems.

Case in point: consider the global consumer products retailer that recently responded to declining revenue by introducing a new product line. Granted, the product launch was initially unsuccessful, resulting in pricing markdowns, inventory issues and customer service challenges. Executives tasked to uncover what went wrong discovered that inadequate product launch staffing at the retail-store level and poor integration of predictive metrics were the root cause. To address this, the company developed an integrated metrics system to provide insight and foresight to systemic issues that allowed them to stay ahead of product resilience pre- and post-product launch.

The moral of the story? Looking beyond the horizon and proactively adapting to what’s coming can empower consumer product and retail organizations to grow resilience and future-proof their business. Doing so requires a highly engaged team grounded in operational excellence, financial flexibility, customer trust, brand equity, sound internal processes and effective structures.

Getting resilience right can generate profitable outcomes and positive results.

True: history is riddled with stories of consumer product and retail businesses that failed to strengthen resilience, particularly in the face of digital advancement and other headwinds that negatively impacted business models. Think large-scale music retailers, movie rental businesses or film companies. Conversely, many companies have successfully instituted resilience systems.

Case in point: consider the global consumer products retailer that recently responded to declining revenue by introducing a new product line. Granted, the product launch was initially unsuccessful, resulting in pricing markdowns, inventory issues and customer service challenges. Executives tasked to uncover what went wrong discovered that inadequate product launch staffing at the retail-store level and poor integration of predictive metrics were the root cause. To address this, the company developed an integrated metrics system to provide insight and foresight to systemic issues that allowed them to stay ahead of product resilience pre- and post-product launch.

The moral of the story? Looking beyond the horizon and proactively adapting to what’s coming can empower consumer product and retail organizations to grow resilience and future-proof their business. Doing so requires a highly engaged team grounded in operational excellence, financial flexibility, customer trust, brand equity, sound internal processes and effective structures.

How can retailers build enterprise resilience now?

Leading in this environment and generating resilience requires a different mindset, one that shifts from a focus on risk mitigation to a more transformative model with enterprise resilience at the core of the business strategy.

This process begins by doubling down on four fundamental areas through a connected approach. You cannot strengthen one pillar without simultaneously addressing the others. For this process to be effective, you must consider these four areas through a connected, enterprise-wide view backed by shared responsibility across functions, business units and management.

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Summary

Staying ahead of trends and disruptions requires resilience. Consumer product organizations, brands and retailers can proactively address complexity by strengthening resilience today. That means working through key steps and embracing an integrated strategy for cultivating resilience not just now, but as a way of working and innovating over the long term.

At EY, we recommend consumer brands and retailers work through four key steps to kickstart resilience building:

1.  Define what resilience means to your organization today.

Conduct a survey to paint a clear picture of your organization’s resilience maturity level. It can be challenging to gain visibility into the direct and indirect impacts of a business’s actions and operations, as well as understanding the incoming changes and trends happening in the broader world. Leaders who get insights more quickly and cross-functionally can evaluate potential actions or areas for continuous improvement in the business more quickly and proactively.

At EY, our dashboard tool puts connected data and cross-functional insights in the hands of business leaders with a customized view of the horizon, providing intel on trends that could have impacts on a given business sector. This allows business leaders to spend more time considering how they can plan for coming changes, capitalize on new opportunities and strengthen the core of their own business operations.

Questions you should ask at this stage

  • Do we have a core risk management practice in place?
  • Where do gaps lie across the process?

2. Identify critical enablers of business strategy.

Facilitate a workshop with the executive team to unpack critical enablers of the business and strategy as well as internal and external ecosystem drivers. With this information, you can then review survey results and define a clear resilience timeline to marshal progress.

Questions you should ask at this stage

  • Do we have a centralized process for key business metrics?
  • Are we systematically measuring performance impact of process improvements?

3. Outline core impact area resilience concerns.

This should include financial, organizational, talent, market, brand, operations, logistics, supply chain and IT.

Questions you should ask at this stage

  • How can we create a framework for root cause analysis?
  • What additional concerns loom on the horizon and how will we track them over time?

4. Create a resilience initiative roadmap.

Integrated efforts and shared ownership over the four pillars of resilience require a clear roadmap to guide stakeholders and empower folks to work together. This unifies efforts and helps people sing off the same proverbial song sheet as they build resilience through an enterprise lens.

Questions you should ask at this stage:

  • What are our key priorities for each fundamental pillar, and who will own these respective areas?
  • How will we report, track and share progress to inform subsequent stages of our action plan to scale enterprise resilience across units and teams?

With that foundation in place, you’ll want to stay informed by continuously monitoring the landscape for potential risks, and proactively managing challenges or seeking the advice of independent professionals. This culture of resilience also lends itself naturally to strong, collaborative partnerships across the C-suite and operational roles. This is vital to long-term resilience. You need an operating environment in which the Chief Risk Officer, Chief Resilience Officer and Chief Security Officer are empowered to problem solve together.

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