Reinventing the future in retail
Lodewijk Hijmans van den Bergh
The Executive Vice President and Chief Corporate Governance Counsel at Dutch international retailer Royal Ahold, Lodewijk Hijmans van den Bergh emphasised the large number of inventions and innovations the company had brought to the Dutch public – including barcodes, shopping trolleys and kiwi fruit – in its 127-year history. He said business should look at the past in order not to repeat its mistakes.
The company is passionate about food and the emotions surrounding it, with businesses in Europe and the USA. It employs more than 200,000 people, and makes annual sales of €33 billion. After its ordinary origin as a single corner shop, Ahold is now a ‘multi-grocer’. ”We’ll have to see what the future brings; we can’t guess it but we can invent it, and we must have the confidence to deal with it,” said Hijmans van den Bergh, saying that the country lags behind the rest of Europe and its consumer confidence is low. “We need to talk about improving confidence,” he said.
He listed three business requirements for a ‘can do’ mentality that were ‘almost stating the obvious’:
- Good people
- The right culture
- A good framework of governance that stimulates invention and innovative thinking, while not letting it run out of control.
“But if change spins out of control, things can go wrong,” he warned. Ahold was a case in point 10 years ago in February 2003. The CEO described Ahold’s ‘near-death experience’ when its shares lost nearly two-thirds of their value after the company warned it had overstated profits, and its CEO and CFO announced they were quitting. But Hijmans van den Bergh told the Summit audience to ‘zoom out from the graph’ and see that there were other instances of sinking share prices for the company. “Like I said, you need to know your past,” he told them, and explained that the real story occurred in the years before 2003, when things had already gone wrong. “Was it hubris? Was it too much focus on the top line?” he asked.
‘Never miss a good crisis, it can create tremendous opportunity.’
“The company was almost out of control before the company almost went belly up,” he said, and explained that while innovation and inventions should be ‘part of a company’s DNA’ he also thought it was important to ‘never miss a good crisis, it can create tremendous opportunity’.
In February 2003, the company was not doing well, with ‘too much focus on margins’. “Customers were walking away,” said Hijmans van den Bergh. The company’s incoming CEO Dick Boer could reposition the brand and reconnect to its customers during the company’s crisis in a way that might not be possible in a going concern.
Then the Ahold EVP posed a question. “What happens to companies that never go through a big crisis? Will they see the long term? Will they have the chance to reinvent themselves, or will they slowly go down, stumbling between realisations? I think it would be interesting research,” he said.
He explained that Ahold had worked hard and prepared carefully before launching its ‘Reshaping Retail’ strategy, looking at future predictions in order to develop the company’s ‘three pillars’ – to become a better place to shop, a better place to work, and a better neighbour. Those promises are used every day, said Hijmans van den Bergh.
With regard to growth, “Retailers don’t have to fly to the moon. All they have to do is make sure customers can access their services, make sure they offer the right assortment of products,” he said.
Hijmans van den Bergh said the growth of online activity and increasing use of social media is creating a sea change and had redefined the company’s strategy. “We thought, ‘we know a lot about traditional retail, but how much do we know about the people and the culture online?’ ”
The company moved into online retailing with its purchase of online retailer BOL.com in 2012. “Ahold did it to learn and understand, and to change our culture and combine our passion for food with the new world. It’s not a case of ‘either/or’. It’s not either go shopping or go online; it’s about blending it all together,” he said, and explained that online retailing removed the limitation of store size on operations. “Bol.com has five million SKUs [Stock-Keeping Units]; the possibility for offering more becomes incredible. It includes home delivery, pick up, or third-party delivery,” he said, and called this ‘omni-channel retailing’, in other words, a seamless approach to the consumer experience through all available shopping channels.
Is Omni-channel retailing a point of inflection, he asked? “Will it change the world or not? The jury is out, but we need to prepare for it.”
Hijmans van den Bergh made a second point. Reinventing the future is responsible retailing, he said, but it leads to an incredible amount of innovation and invention which can address not only health issues such as increasing levels of obesity, but also an aging population, and educating millions of children about healthy food.
Responsible sourcing is also major sea change and the basis of innovation, said the EVP, and described his father’s glimpse of the first imported tomatoes in the Netherlands in the early 20th century. He said it was now ‘normal’ for strawberries to be available in January. These changes had made supply chains longer and more complicated. “To get safe products prepared with respect for the world, then you need to keep reinventing yourself,” he said.
Trust and build to succeed
“I think we need, as a company, and as a country, to complement each other. We draw on the strength of this country, its education and trade, sustainability and innovation,” and here he mentioned the Netherlands’ track record as the second largest exporter of food after the USA.
So why is consumer confidence so low in the Netherlands? asked Hijmans van den Bergh. A company needs good people, the right culture and good governance. This country has good people and mostly good governance, he said, and in general a very good structure. He said he thought that the Netherlands’ confidence needed work.
“As Ahold we have not had a bigger challenge in the past. But we are confident we can meet those challenges, and I’m sure the same can apply to the Netherlands. We have a ‘can do’ mentality in this country. We must trust and build to succeed.”