It’s very difficult to be a CEO in today’s rapidly changing world. Even retailing will be very different in a few years’ time. One of the world’s largest and most successful retailers, the UK’s Sainsbury, told analysts last week, “Today we’re in a market where there’s a huge degree of uncertainty”.
Retailing has been one of the ‘Happy Valley’ type of industries that I discussed in the ‘Four Valleys’ matrix in my March post. It has been a business where development lead times were short, and sales growth seemed endless. So the disruptive change hitting retailers is a warning sign for us in the ACS. After all, they are the ones who sell many of our products to the end-consumer.
So let’s suppose you are CEO for the day for a major retailer. What would be your priorities? You’d probably start by asking your top team for a quick summary of opportunities and threats. They’d almost certainly focus on the threats:
- Online retailers such as Amazon cutting prices
- Malls closing as shoppers move online and no longer need to visit stores so much
Their conclusion would be that even industry leaders such as Wal-Mart were now finding it very difficult to grow sales, and so were being forced to adopt new strategies.
But what about the opportunities? This is why you’re the CEO, after all. You might pull out this chart and challenge your team.
“Aren’t the changes more fundamental than just pricing policy and shoppers’ behaviour? Shouldn’t we focus on responding to these underlying trends, and reinvent our business model, if we want to be successful in the future?” “What about 3D printing?” (also known as “additive manufacturing”), you might add, as an example of the changes you see as being underway. “This will be a $1.5B consumer market opportunity by 2017 and a $6B market in total”.
You might then illustrate your point by highlighting developments at Wal-Mart. As well as selling printers and supplies, they plan to actually use the technology themselves in-store, to manufacture slower-selling product ranges on demand. The value proposition for this is two-fold: not only will it free up working capital for use elsewhere in the business, but it will also reduce the $3B they currently lose each year from ‘shrinkage’ – as nobody can steal what hasn’t yet been made.
You might also highlight how another ‘Happy Valley’ type of company, Boeing, is already using 3D printing to manufacture 20,000 different aircraft parts. They have recently even filed a patent application relating to the database required to store all the detail required for this activity. Like Wal-Mart, they can see that establishing local manufacturing capability – in this case at major airports - will provide massive cost savings, and reduce delays for passengers.
So what does this mean for your own business? The arrival of 3D printing is set to stimulate major change in most current supply chains. Obviously the plastics industry will be one of the first to feel the impact. But it won’t be long before it hits an industry like pharma, as a way of managing the trend towards more personalised medicine. Your day as CEO of a ‘Happy Valley’ retailer will have given you plenty of food for thought, as you return to your own company next day.
Paul Hodges is chairman of International eChem (www.iec.eu.com), trusted advisers to the chemical industry and its investment community. He is a member of the World Economic Forum’s Industrial Council on chemicals, advanced materials and biotechnology, and presents the ACS ‘Chemistry & the Economy’ webinars.