(FORE)COURTING THE CONSUMER - Accenture · 2020. 5. 11. · (FORE)COURTING THE CONSUMER THE ROAD TO...

(FORE)COURTING THE CONSUMERTHE ROAD TO DATA-DRIVEN INNOVATION FOR FUEL RETAILERS

Disruptive threats are measurably on the rise in South Africa. Our research shows that 85 percent of South African companies are vulnerable to future disruption versus 70 percent globally. That’s because the majority of local companies are making a conservative play, competing in their traditional businesses using traditional approaches. Fuels forecourt retailers are among them. It’s a risky strategy.

In the fuel retail space, forecourt retail operations have always provided a convenience-driven competitive advantage. They now have a lot to grapple with. South Africa lags more advanced economies in the adoption of electric vehicles (only 1,000 bought since 20131). However, a number of other key factors are now converging to expose forecourt retailers to inescapable future disruption. With a tighter economy and rising fuel costs in South Africa, consumers are feeling the pinch. Competition for share of wallet at fuel stations has never been so heated. Forecourts have always added a convenience drawcard. Now, time-strapped, tech-savvy consumers are demanding greater relevance and convenience, and disruptors from unexpected quarters are stepping into this arena. The danger is real—so is the opportunity.

In 2017, Nielsen2 put the South African convenience retail sector at R35 billion, commanding 10 percent of total market retail spend, and pointed out the growth opportunity for forecourt retailers. Other reports3 also signal expansion of this segment as lifestyles change, busy consumers look to shop closer to work or home, and demand for convenience

DISRUPTION IS INESCAPABLE

85%

of South African companies are vulnerable to future disruption.

shopping grows. While many forecourt retailers have moved well beyond just stocking staples by partnering with trusted brands and meeting changing consumer demand, the level of disruption in this sector necessitates they do more.

New technologies (analytics, the Internet of Things, artificial intelligence, automation) along with access to enormous volumes of data and new and exciting ways of engaging with consumers, often in tandem with ecosystem partners, usher in a new era of competitiveness.

Change is also being driven by unexpected global events, such as the COVID-19 pandemic. The enforced isolation, lockdown measures and corporate shifts to remote working are expected to have a lasting impact on lives, lifestyles and workforce practices.

In this changing market, it will be the retailer’s understanding of market dynamics and individual consumers’ needs—and their ability to innovate, rapidly and continuously delivering solutions to meet changing needs—that will create a competitive advantage, positioning these players for sustainable success as consumer needs change.

3(FORE)COURTING THE CONSUMER THE ROAD TO DATA-DRIVEN INNOVATION FOR FUEL RETAILERS

How exposed are forecourt retailers?Accenture’s research on disruption across industries shows that all South African industries are facing disruption, but 85 percent (versus 70 percent of companies globally) are highly susceptible to future disruption. Sixty-two percent of companies within industries, including the retail, natural resources, financial services, energy and chemicals sectors, are vulnerable to future disruption. Forecourt retailers, impacted by energy, automotive and retail sector disruption factors fall into the ‘Vulnerability’ period (figure 1)—they are highly susceptible to future disruption. In this period of disruption, weaknesses in the sector begin to show. Rather than shoring up barriers to entry, it’s a period in which companies need to be exploring new avenues of growth and new markets. (See ‘About the Research’ for the methodology used to measure disruption).

Figure 1. South Africa: Industry Exposure to Disruption

Source: Accenture Research Disruptability Index 2.0, South Africa, 2020

0,20 0,30

Comms & Media

2018 GLOBAL WEIGHTED AVERAGE 0.51

DURABILITY (9% of companies)

VULNERABILITY (62% of companies)

VIABILITY (7% of companies)

2018

GLO

BAL

WEI

GH

TED

AVG

: 0.

54 VOLATILITY (23% of companies)

Software & Platforms

High tech

Health

Banking

TravelAutomotive

InsuranceCG&SRetail

Natural Resources

Industrial Equipment and Machinery

Infrastructure & Transportation Services

Utilities Chemicals

Life SciencesCapital Markets

Forecourt retailers

0,40 0,50 0,60 0,70 0,80

CU

RR

ENT

LEV

EL O

F D

ISRU

PTIO

N

SUSCEPTIBILITY TO FUTURE DISRUPTION

0,20

0,30

0,40

0,50

0,60

0,70

0,80

Energy

4 (FORE)COURTING THE CONSUMER THE ROAD TO DATA-DRIVEN INNOVATION FOR FUEL RETAILERS

Consumers’ lifestyles are changing. Work, travel and living patterns are evolving. And as technological change itself accelerates, so does the rate at which consumer demands change. In addition, as the impacts of COVID-19 on consumers' personal and work lives continue to be felt, we are reminded of the power of the unforseen to compel change and the need for retailers to be able to adapt rapidly. To remain relevant to the maturing digital consumer, fuels retailers need to dramatically re-invent the forecourt experience. With new competitors already making headway in this sector, forecourt retailers need to move quickly to fill emerging gaps.

In the sector, five forces are spurring disruption.

FIVE FORCES IMPACTING FORECOURT RETAILERS

THE CHANGING CONSUMERConsumers are demanding convenience—they want access to stores that are close to home or their workplace, they want modern store formats and they want quick and seamless service at every single touchpoint. Research from Nielsen4 bears this out—it notes that South African consumers are more influenced by convenience of location (71 percent), high-quality fresh produce (71 percent), product availability (68 percent) and speed (61 percent) than by price (56 percent) and promotions (56 percent).

In addition, the desire for health and wellness is on the rise locally and internationally. The Health and Wellness food product category grew at an CAGR of 9.6 percent5 last year in South Africa. Fuels retailers are already taking advantage of the trend. In the UK, for example, Jamie Oliver and Shell have teamed up to create “Jamie Oliver Deli by Shell”6 to curate a new “food to go” range. The assortment offers healthier alternatives and gives consumers the notion that fast food no longer has to be associated with unhealthy food.

South Africans are making digital technology part of every dimension of their lives and they have high expectations of retailers. They are increasingly digitally savvy and keen to engage when retailers and brands do this right. Our research7 shows that the share of digitally savvy and digitally experimental South Africans grew from 53 percent of the population in 2015 to 70 percent in 2018. Forecourt retailers that are able to leverage data and analytics to make sense of consumer behaviour and offer highly personalised solutions will improve their competitiveness.

1


Hyper-relevance is replacing ‘loyalty’ as a driver of retail choices. In the past, customers have been swayed by loyalty programmes that incentivise them to purchase from certain brands. However, traditional loyalty programmes are no longer enough to provide a compelling experience that reaches beyond filling the tank. Today’s technology-enabled customers can continuously re-evaluate their options, choosing a provider that is most relevant to them in the moment. With South African customers becoming increasingly fluid in their decisions and buying behaviour, forecourt retailers will be compelled to be more radically innovative in how they retain their current customer base while winning over new fans.

The lack of relevance drove 66 percent of switching of brands among South African consumers, putting R438 billion in potential revenue at risk.

66%

This shift to support brands with greater relevance is already impacting the bottom lines of companies across South Africa. Our research8 shows that in 2017, lack of relevance drove 66 percent of switching of brands among South African consumers, putting R438 billion in potential revenue at risk.

The disposable income of South Africans is shrinking as a result of increased unemployment, decreased job security and rising income to debt ratios. It is raising the competition for available spend. According to Nielsen,9 85 percent of South Africans say they have changed their spending to save on household expenses. As a result, price sensitivity10 has increased, with shopping baskets getting smaller11 and being replenished more frequently. To meet consumers’ changing needs, forecourt retailers need to ensure they have the correct mix of items in stock per site and drive efficiencies in their products supply chain.


THE MULTIPLIER EFFECT OF ECOSYSTEMSIn South Africa, fuel is largely regulated, prohibiting fuel retailers from discounting fuel prices. Partnerships to create attractive forecourt ecosystems have thus become an important source of competitiveness for forecourt retailers. Key examples include partnerships created with major retail brands such as Woolworths, Pick n Pay and Spar, and with brands from other sectors—e.g. FNB’s e-bucks and Mugg & Bean. However, low barriers to partnership entry and exit make these ecosystems susceptible to disruption.

The Shell and Clicks Club Card partnership12 illustrates the point. In November 2019 the companies announced a severing of ties. Less than two weeks later, Clicks partnered with Engen. Shortly afterwards, Shell announced its own V+ rewards scheme. This suggests that fuel retailers will need to look beyond partner loyalty rewards in order to attract and retain customers in the evolving future.

Strong ecosystem relationships will become important differentiators for forecourt retailers. Innovative, multi-dimensional plays that meet complex consumer needs will help drive competitiveness as the landscape continues to change.

2

3 NEW COMPETITORSThe 5Cs convenience of forecourt retailers (namely provision of access to coffee, chips, chocolate, cigarettes, cooldrink) is being cannibalised by new players. For example, e-hailing service provider Uber Eats and e-commerce apps such as OneCart and Sixty60 can now deliver most of the 5Cs to consumers’ doorsteps with just a few swipes.

Internationally, enterprising fuel retailers are also getting into the race, leveraging consumer demand for convenience with new fuel delivery services. This impacts foot traffic at forecourts, which will impact forecourt retailers’ non-fuel business. Startup tracker Tracxn13 notes there are now 42 fuel delivery companies globally. In Africa, UR Fuels,14 an on-demand app-based fuel delivery start-up, was launched in Nigeria in late 2019 with the aim of streamlining the process of purchasing and obtaining fuel. At present, local fuel regulations provide a high barrier to entry for local startups. What if this happens to change at some point?


4 NEW OFFERINGS AND IMPROVED SERVICESTo drive retail margins up and create value-for-money differentiation, retailers are creating housebrands or private label goods. This trend is extending to the forecourt. Consumers across all income groups are increasingly swapping out branded products for cheaper private label alternatives. Private label in South Africa is now a R49 billion business15 and has grown by 20 percent over the last year, with many retailers such as Pick n Pay looking to aggressively expand their private label offerings. Private label offerings will, however, require new supply chain capabilities, such as improved demand planning, and inventory and category management.

Fuel retailers are also under pressure to find innovative ways to maintain key hygiene factors that consumers expect, such as safety and security. Accenture conducted a social listening exercise across multiple social media channels to better understand consumer sentiment regarding forecourt retailers. The exercise, conducted over the last two years, included over 71 million impressions. The good news is that net sentiment regarding forecourt retailers is positive at 52 percent, indicating appreciation by consumers for convenience. However, the score is being dragged down by negative sentiment with regard to safety, crime and the quality of food at forecourt retail stores. The South African Police Service notes that robberies at fuel stations increased by 8.2 percent in 2019. The majority of the crimes (92.1 percent) took place within the store.16

Stock-outs of key products are another hygiene factor fuel retailers need to address. They negatively impact the consumer’s experience. By improving their analytics and data management skills, forecourt retailers can ensure timeous stock replenishment.


TECHNOLOGY INNOVATIONSThe cost of technology is dropping and new technologies are emerging, creating abundant opportunities for more companies, including forecourt retailers, to drive efficiencies and innovate.

Technologies like the IoT, sensors, robotics and analytics can be leveraged to drive preventative maintenance, improve service quality and automate service. More importantly, there is the opportunity to create a frictionless customer experience at every point of the customer journey—beginning long before customers reach the forecourt—by bringing together the physical and digital worlds to influence and bolster one another. Based on our survey of South African consumers, 56 percent17 of Internet users say that when they purchase, their choices are influenced by social media.

These technologies can speed up supply chains, reduce waste, help forecourt retailers avoid stock-outs, and assist them to become hyper-relevant by accelerating responses to demand shifts.

In addition, technologies such as video analytics are helping traditional retailers access accurate and actionable data. For example, Shell is piloting a new cloud-based, deep learning solution built on Microsoft Azure.18 The solution captures footage via onsite CCTV cameras, then uses image processing and artificial intelligence (AI) models to detect the presence of cigarettes in forecourt danger zones and alert the station manager. This technology not only improves the customer experience, it helps address the increasing security challenge.

The adoption of connected and intelligent cars will reshape the way consumers behave and the ubiquitous presence of the IoT will influence marketing campaigns, impulse decisions and information gathering for pre-buying decisions. Vehicles are becoming ‘computers on wheels’ linked to a universe of service providers. Forecasts predict that there will be as many as 400 million connected cars on roads worldwide by 2030.19

New payment ecosystems are being pioneered and almost invisible systems, such as cashierless retail stores and payment by smartphone and facial recognition, are emerging. Over the next few years, the change will accelerate and Accenture20 forecasts a significant rise in the use of "biometric mobile wallets", namely payment by fingerprints, facial or retina recognition.

To unlock new opportunities, forecourt retailers must earn their customers' trust through great, seamless experiences and demonstrable competence.

The data to drive these innovations is available to forecourt retailers right now; it is just not being harvested well to create insights and drive services. Building the right data assets will be essential. Forecourts have an opportunity to use in-store customer data to discover new ways to improve the customer experience online and drive up sales.

5


Playing it safe is dangerous in a landscape characterised by fierce disruption. In the forecourt retail sector, executives are aware of the threat—yet few are prepared.

Accenture conducted interviews with 100 South African C-suite executives from 16 industries to understand how their businesses are preparing for, and are positioned to deal with disruption through innovation. The responses of the forecourt retailers are a cause for concern:

PLAYING IT SAFE IS RISKY

76%

60%

23%

expect their industry to be disrupted by new innovations at some point within the next three years, especially from new competitors and technologies.

concede that their companies are not prepared for disruption.

are very satisfied that their company’s innovation efforts will position them well to overcome future disruption.

With technology advances creating abundant value opportunities and scope for innovation, why are local companies slow to unlock this value and get onto the winning side of disruption?

When companies are in the middle of disruption, they typically make cautious moves. They become defensive and raise barriers to entry instead of extending themselves outward. They rely on what’s worked for them in the past, in lieu of seeking deep


change on the inside. They double down on efficiency, rather than committing to real innovation. In summary, they focus their energies and resources on the core business that generates most of their income and profits. While these are instinctual and understandable choices, they don’t work. These choices keep companies in survival mode and away from actively shaping their future.

Unfortunately, as disruption escalates and business growth begins to moderate, companies that have not kept pace with change find themselves ill-equipped to compete.

Simply put, companies on the wrong side of disruption are failing to unlock value trapped within their businesses. For them, the economic opportunity is visible but unreachable—it cannot be attained with their existing business models or capabilities.

Our research shows that 73 percent of South African forecourt retailers continue to compete in their legacy businesses using mostly traditional approaches, or have just started transforming their legacy business into new business. The good news is that investment in innovation is growing—more companies are planning to allocate a bigger share of financial investments to innovation (figure 2). Will it be enough? A more focussed and radical approach may be required.

In the last five years, 85 percent of forecourt retailers have invested less than 25 percent of financial investments in innovation. In the next five years, 58 percent plan to invest 25 – 50 percent in innovation. That’s a big jump from the 15 percent that did so in the last five years. However, only 5 percent aim to invest more than 50 percent in the next five years.

Given the opportunity, this may be short-sighted.

85%

38% 58%

15% 5%0%

Less than 25% 25% - 50% More than 50%

Past 5 years

Next 5 years

Source: Survey data based on interviews with South African forecourt retail sector executives

Figure 2: Financial investments in innovation over the past (and next) five years


The domination of two recognised industry giants illustrates the point:

Netflix’s video streaming business has now expanded globally. It has disrupted the video, DVD and PayTV markets and is now, with the development of original content, shaking the film industry.

Amazon,21 which now has a market capitalisation of almost $1 billion, has changed retailing forever and continues to enter new markets—most recently, the health care and financial services markets.

What can we learn from these companies?

Accenture’s research, a global study that looks at how businesses are preparing for, and are positioned to deal with disruption, indicates that high-growth companies—companies on the winning side of disruption—actively build formal innovation structures and embed seven innovation practices across their businesses.

The findings from this research were applied to create an Innovation Maturity Index. The Index measures the readiness of companies’ innovation capabilities to unlock value and support their journey to the NEW.

How do South African companies—including forecourt retailers—score?

Disruption is caused by innovation. This makes innovation the source of the disruption—and the antidote to being displaced by disruption.Brisk advances in digital technologies offer a way to rapidly address these issues, introducing new, more efficient and effective processes, making new business models possible and providing unparalleled opportunities for value creation.

But unleashing that value requires a strong innovation capability.

Nearly all disruptions are caused by innovation. This makes innovation the source of the disruption—and the antidote to being disrupted.

Companies that thrive in the age of disruption actively innovate.

WHY INNOVATION MATTERS


To develop the Innovation Maturity Index, Accenture took a bottom up approach—we identified a number of innovation characteristics and factors from literature reviews and from our survey insights where we studied and tested the adoption of these innovation characteristics and factors on high-growth companies globally. The Accenture Innovation Maturity Index groups these characteristics, evaluating the extent to which respondents apply the characteristics and factors to innovate and release value. By high growth we are referring to companies that have outgrown their peers in the last five years and are expected to outgrow their peers in the next five in terms of revenue and profitability growth.

We found that high-growth companies take a distinct approach to unlock trapped value with innovation. These leaders successfully unlock trapped value in their business and manage disruption by doing two critical things:

• They ‘innovate by design’, building the structural capacity to innovate by putting in place an innovation strategy, culture and architecture—82 percent of these companies agreed that structures describe their organisation to a significant extent.

• They embed innovation in their everyday business by applying seven practices that successful innovators share: they are data-driven, hyper-relevant, network powered, asset smart, inclusive, talent rich and technology propelled—90 percent of high-growth companies agreed practices describe their organisation to a significant extent.

Innovate by Design

STRATEGY Successful innovators share a similar approach to innovation strategy.

• They aim for disruptive advances, rather than incremental improvements. • They build concentrated innovation functions, rather than dispersed teams. • They balance innovation between old and new and make sure innovation is

quantifiable.

CULTURE Companies that succeed in innovation have a culture of innovation in which:

• Creativity is encouraged and rewarded. • Ideation is applauded by managers. • New thinking is fostered within the organisation.

DELIBERATE INNOVATION STRUCTURES AND PRACTICES DRIVE SUCCESS


ARCHITECTURE A well-designed innovation architecture specifies clear processes for moving innovation from ideation through R&D to mass-market commercialisation, employing a combination of internal and external innovation capabilities.

Innovation Practices

• Data-driven. Generating, sharing and deploying data to deliver new product and service innovations safely and securely.

• Hyper-relevant. Knowing how to be—and stay—relevant by sensing and addressing customers’ changing needs.

• Network Powered. Harnessing the power of a carefully managed ecosystem of partners to bring the best innovations to your customers.

• Asset Smart. Adopting intelligent asset and operations management to run businesses as efficiently as possible, and to free up the capacity for other innovative efforts.

• Inclusive. Adopting an inclusive approach to innovation and governance that incorporates a broader range of stakeholders.

• Talent Rich. Creating new, modern forms of workforces (flexible, augmented and adaptive) to gain a competitive advantage in fast-changing markets.

• Technology Propelled. Mastering leading edge technologies that enable business innovation.

The Accenture Innovation Maturity Index framework is designed to measure the readiness of companies’ innovation capabilities to unlock trapped value and support their journey to the NEW.

INNOVATION PRACTICES

INNOVATE BY DESIGN

INNOVATION MATURITY INDEX

PILLAR 1 PILLAR 2

Innovation Architecture

Innovation Strategy

Innovation Culture

Technology Propelled

Network Powered

Inclusive

Hyper-relevant

Data-driven

Asset Smart

Talent Rich


In South Africa, and globally, the gap between companies on the winning side of innovation and those being disrupted by it is growing. The average score on the Accenture Innovation Maturity Index in South Africa was 54 out of 100 (figure 3). Forecourt retailers are further behind, at 53 points. A small group of South African companies we refer to as Champions—7 percent of the sample—averaged 68 points, eight points lower than the 76-point average of Global Innovation Champions.

Forecourt retailers also trail the rest of the market in both building innovation structures and implementing innovation practices.

The winners are innovating—using digital technologies to unlock value in their current businesses, seize new market opportunities, scale up innovation and grow their current and future businesses. As these innovators release more value, industry disruption grows for those unable to release trapped value. Their innovation “maturity” allows them to release trapped value much more effectively than their peers.

Their balanced approach to growth is, however, an equally important success factor.

INNOVATION MATURITY – HOW SOUTH AFRICAN FORECOURT RETAILERS MEASURE UP

Figure 3: Innovation Maturity Index Scores (out of 100)

54

68

Rest of the market

South African

Innovation Champions: 7 percent of the sample

53

Forecourt Retailers

68+6

62

Innovate by Design

45+22

67

Innovation Practices

63

46


1. They pursue wise pivots. In our research, 71 percent of Innovation Champions use innovation to unlock value in new businesses while revitalising their core business (compared with a 41 percent for less innovative firms).

Companies that survive disruption are constantly reinventing themselves, making their businesses relevant to the future. But it’s a balancing act—if companies are overly focused on their core business, they cannot pursue new opportunities; if they neglect their core business in a dash to the new, they may find themselves short of the investment capacity they need.

To pivot successfully—make a wise pivot—companies need to adopt a new approach to organisational change. This strategy is continuously evolving and allows companies to manage their core assets as a dynamic portfolio within three lifecycle stages—the old, the now and the new—to grow and reshape their

core business into a new one built with new technologies.

Champions are more confident of the levels of investment they dedicate to pivoting their business (figure 4).

Figure 4: Levels of investments dedicated to pivoting the business

Their goals are to:

• Transform the core to generate investment capacity. This involves investing in processes and functions to increase efficiency and create value in the form of higher profits.

• Grow the core to sustain the fuel for growth. This may involve finding new customers or markets for existing offerings or innovations that improve customer experience.

• Scale the new to identify and scale new growth areas at pace. To deliver the growth and impact the company expects, innovations—whether new products or new business models—must be commercialised and brought to a mass market.

By carefully scaling and timing investments, these companies can build “the new” while continuing to nurture and grow the core.

Our survey results show that forecourt retailers are behind the curve considering their high susceptibility to future disruption—they need to focus on growing their core and scaling new business.

THE INNOVATION CHAMPION APPROACH

WISE PIVOT

TRANSFORM THE CORE

GROW THE CORE

SCALE THE NEW

1.5X

2.2X

4X

Bubble size: Level of investment confidence by change activity: Champions over rest of the market


2. They prioritise formal innovation structures to support their innovation execution. In South Africa, forecourt retailers are right up there with Innovation Champions in terms of designing an innovation strategy. They lag Champions, however, in promoting and fostering an innovation culture within their organisations and building innovation architecture structures—i.e. the processes and capabilities needed to take innovation from idea to viable commercial product and scale it. Global Champions score 67 points for innovation architecture, local Champions score 54 and forecourt retailers 50 points on the index (figure 5). While forecourt retailers closely tail South African Champions, improvement in this area is critical to future success for all in the region.

63 69

48

62

74+3

+18

+4

77

57

50

68

72

75

54Rest of the market

Forecourt Retailers

South African

Innovation Champions

Innovate by Design

Innovation Architecture

Innovation Strategy

Innovation Culture

Figure 5: Innovate by Design Index Scores (out of 100)


46 45

+38

+31

+21

+19

+13

+13

+23

67

50

52

45

47

44

42

41

33

40

45

47

48

49

46

71

71

69

68

67

62

59

Rest of the market

Forecourt Retailers

South African

Innovation Champions

Data- driven

Hyper-relevant

Network Powered

Asset Smart

Talent Rich

Technology Propelled

Inclusive

3. They adopt first-rate innovation practices with data as the alpha trend. Local Champions are a good 20 points ahead of the rest of South African companies, and Global Champions are 30 points ahead (figure 6).

Areas of least progress for forecourt retailers compared to Champions in terms of adopting innovation practices are in becoming data driven, hyper-relevant and network powered.

Increased focus on adoption of all seven innovation practices will be important for companies aiming to drive growth. These leaders acknowledge being data-driven as the alpha trend that enables all other innovation practices, which in turn leads to the generation of more data to power organisational insights creating a virtuous cycle of growth

Figure 6: Innovation Practices Index Scores (out of 100)


Data-driven and network poweredFuel retailer Phillips 66 is partnering with GasBuddy Business Pages for a digital push across its 6,000 fuel and convenience stores.22 GasBuddy offers a business-to-business (B2B) software-as-a-service (SaaS) that enables marketers and operations personnel to:

• Manage critical customer-facing store information such as hours, prices and amenities.

• Manage and maintain store performance with respect to customer service and experience.

• Directly market products such as loyalty programmes and other incentives to GasBuddy consumers.

Data-driven and hyper-relevant Shell Retail UK launched Shell Go+, a new, digital-first app-based rewards programme in March 2019.23 Rather than accrue points for money spent, the app focuses on frequency of visits and this data is then used to offer customers instant, personalised rewards based on the things they buy most—from money-off fuel vouchers to surprise treats sent straight to their phones! As well as accessing their loyalty card via the app, customers can also choose their rewards and manage their account directly from their smartphone. The objective is to use the power of data-driven insight to improve and personalise customers’ interactions with the brand. The solution uses a combination of algorithms (propensity, recency, frequency, margin scoring, generosity and churn analysis) to incentivise customers to choose Shell products and services; and to truly understand customer preferences, attitudes and needs, and then develop products and services to match.

Other industries In the retail sector, Starbucks has upgraded its personalisation game with the use of AI.24 Using real-time data, its system can send over 400,000 variants of hyper-personalised messages. Offers are unique to each user’s preferences, based on their activity and past purchases. The app interface is also personalised for each user. This has resulted in a 3X increase in marketing campaign effectiveness; 3X increase in incremental spends via offer redemptions; and 24 percent of total company transactions happening via its mobile app.

HOW THE INNOVATORS DO IT


Data powers insight, consumer engagement and innovation. In the digital era, the consumer demands relevance and, increasingly, personalisation. As our research shows, lack of relevance is the number one reason that consumers will shift their loyalty and buying power. On the Innovation Maturity Index, forecourt retailers score low, well below even the ‘rest of the market’ on both hyper-relevance and being data-driven. This exposes them to disruption.

To succeed in this changing market, they need to become hyper-relevant and that means data-driven. Fortunately, the ongoing, exponential growth in data offers opportunities for companies to deliver value to customers like never before. Consider that, in the past 10

years alone, the world saw the birth of 90 percent of the data ever created. By 2025, experts predict that 175 zettabytes (equal to 175 trillion gigabytes) of data will have been created—that's more than 10 times the data that existed in 2017.25 Innovation Champions’ scores indicate that being data-driven is a strategic asset that powers their pivot.

This is because data-led activities applied at the foundation can help increase data quality and trust, and create efficiencies to transform the core business and improve the current value of operations. At the same time, building a solid data foundation is critical to set up an analytics and AI capability to power the new (figure 7).

WHY IS IT IMPORTANT TO BECOME DATA DRIVEN?

Figure 7: Data Powers the Wise Pivot

Value from analytics & AI

Value from solid data foundation

BusinessGrowth

Operational Excellence

Optimized Customer

Experience

Innovative Products &

Services

Data

Data Trust

Data Quality

2. POWER THE NEW

3. BUSINESS VALUE

Value from analytics & AI

Value from solid data foundation

BusinessGrowth

Operational Excellence

OptimisedCustomer

Experience

Innovative Products &

Services

Data

Data Trust

Data Quality

2. POWER THE NEW

3. BUSINESS VALUE


Though the world may be deluged by data, companies in all regions are failing to make good use of it. The result: a “data value gap” that shows few signs of narrowing. According to market researcher Forrester, up to 73 percent of the data held by most firms is never used for business analytics.26

Innovation Champions unlock value trapped in data by focusing on building infrastructure to achieve four key outcomes.

1. Build the right data foundation: They integrate data across the enterprise in a structured way to provide faster access to trustworthy data that can be used to drive insights and realtime decision making.

2. Establish good data management and governance practices: They focus on controlling and managing data at scale so that it can be leveraged as an enterprise-wide strategic asset.

3. Turn data into insights: They leverage analytical insight generation to serve as the gateway to insight-powered enterprises; integrating data-driven decisions across the business functions.

4. Realise business value from data: They ensure that implementation of analytics strategy generates business benefits and drives sustainable returns for the enterprise.

While an overall data infrastructure is built, organisations need to deliver concrete business results in parallel to be successful. They can achieve this by pursuing an iterative approach:

BEGIN YOUR JOURNEY TO BECOMING A DATA DRIVEN LEADER NOW

• Identify use cases to drive focus for creating business impact from the start

• Follow a “cross the bridge as we build it” culture

• Leverage multidisciplinary POD teams to deliver results while building capacity

• Employ design thinking to innovate while driving business results

Data Governance and Management

Data Foundation

Insights Generation

Use case 3

Use case 2

Use case 1

Business value/ Results


Digital disruption is now truly making itself felt. A new age of competitiveness has just begun. Forecourt retailers are under threat—they are in the path of a tidal wave of disruption sweeping the energy, automotive and retail sectors. These organisations have an opportunity to ride this wave, carving a role for themselves in a transformed future if they are able to rapidly embrace innovation, learning to leverage the most powerful enabling component of innovation—namely data—to retain and attract customers.

Innovation is the source of almost all disruption and the means to beating disruption—to becoming a disruptor. High performers in the forecourt retail arena, today’s Innovation Champions, are driving success across their businesses, carefully pivoting from core to new business by deliberately building innovation structures and embedding innovation practices to power their growth. These leaders are able to delight their customers, exceeding their expectations by providing them with ultra-convenient and consistently superior experience at every point of their engagement.

In South Africa, as new technologies, new business ecosystems and new entrants change customer experiences and expectations, forecourt retail incumbents are being compelled to recalibrate their business strategies and business models. To do so, and to secure their future in a continuously changing landscape, they need to urgently build and mature their innovation capability.

The future is exciting. New opportunities are emerging and the race to win the customer has started. The time for forecourt retailers to act is now.

DISRUPT, OR BE DISRUPTED


This report combines multiple streams of proprietary research using both outside-in and survey-based research methodologies.

Our survey of 100 C-suite executives sought insights on how large South African companies (across industries) are responding to disruptive change: To what extent are they improving their innovation capabilities to unlock trapped value? Are they making good use of digital technology to transform legacy businesses and build new ones? These findings formed the basis for Accenture’s Innovation Maturity Index. By studying innovation-related approaches, practices and processes of high growth companies globally we designed the Accenture Innovation Maturity Index framework. This included gathering demographic and financial information about our survey respondents as well as evaluating

the extent to which respondents applied 49 innovation factors and 26 structural processes that—as determined by an extensive review of existing empirical literature—underpin their ability to release trapped value. By high-growth companies we are referring to those who self-report revenue growth and profitability above the industry median from 2013 to 2018 and expect this to continue from 2019 to 2023. Innovation Champions are defined as high-growth companies scoring one standard deviation above the mean score on the index.

Our separate analysis of over 3,000 companies globally, including 100 South African companies, among them forecourt retailers, assessed the presence and penetration of disruptors across sectors.

ABOUT THE RESEARCH

Our Disruptability Framework measures an industry’s current level of disruption as well as its susceptibility to future disruption. For the former, we examine two components: the presence and penetration of disruptor companies and the financial performance of incumbents. To gauge susceptibility, we measure three components: incumbents’ operational efficiency, commitment to innovation, and defences against attack. To measure these variables, we built a bottom-up approach using data from 100 companies across South Africa.


Results from the analysis reveal that disruption has a pattern defined by four distinct periods (figure 1 provides a view of the degree of disruption exposure or period that South African Industries are exposed to):

VULNERABILITYIn the period of Vulnerability, acute weaknesses in industries, from a lack of innovation to insufficient investment, become apparent. It is in this period that incumbents benefit from the continued presence of high barriers to entry and, instinctively, many rely on these defences to fend off disruption. This blind spot distracts many from a great opportunity: scaling up new ideas and venturing into new markets.

PRESENCE AND PENETRATION OF

DISRUPTORS

ABILITY TO OPERATE

EFFICIENTLY

INNOVATION ACTIVITIES AND

INVESTMENTSPERFORMANCE

OF INCUMBENTS DEFENCES

Presence of incumbent disruptors

Presence and penetration of

start ups

Investment in new digital

technologies

Scale andconsistency of

incumbent growth

Incumbent profitabilty

Scale of innovation efforts

Transaction intensity

Asset intensity

Brand Dominance

Openness of market

Value of venture capital

flows

Market perception of

ability to innovate

Incumbent bankruptcy

rate

Scale of trapped value

Labour intensity

VIABILITYIn the Viability period, embryonic or reborn industries try to sustain high rates of innovation and enjoy only short-lived competitive advantages as new disruptors constantly emerge. Here the opportunity lies not only in growing the core business by offering new products in existing markets, but also in expanding the footprint of existing products to new markets.

VOLATILITYIn the period of Volatility, old sources of industry strength become weaknesses as large disruptors enter to unlock new sources of value. Most companies focus on resolving pressing issues in the core business; what’s much harder is redirecting investment capacity to grow new businesses.

DURABILITYIndustries in this period demonstrate broad resilience and achieve consistent performance, while disruptors remain a distant threat, for now. Instead of purely sustaining the status quo, this is a period in which companies have a great opportunity to seek, and experiment with new business ideas.


Digital disruption is now truly making itself felt. A new age of competitiveness has just begun. For forecourt retailers, the future is exciting.

REFERENCES: 1. https://www.itweb.co.za/content/KPNG878d9Em74mwD 2. https://www.nielsen.com/za/en/press-releases/2017/garage-forecourt-stores-meet-sa-consumers-

need-for-speed/3. https://www.euromonitor.com/convenience-stores-in-south-africa/report4. https://www.bizcommunity.com/Article/196/168/153163.html5. https://www.euromonitor.com/health-and-wellness-in-south-africa/report6. https://www.foodspark.com/Eating-Out/Fuelling-choice-Jamie-Oliver-launches-new-food-to-go-

range-with-Shel7. Accenture’s 13th Global Consumer Pulse Research. https://www.accenture.com/_acnmedia/pdf-108/

accenture-ecommerce-pov.pdf8. Welcome to the Hyper-relevance Era, Accenture South Africa, 2018. https://www.accenture.com/_

acnmedia/pdf-81/accenture-south-africa-hyper-relevance.pdf9. https://www.nielsen.com/ssa/en/insights/article/2019/south-african-consumer-confidence-steady/10. https://www.nielsen.com/ssa/en/insights/article/2019/south-africa-is-the-second-most-price-

sensitive-country-in-the-world/11. https://www.nielsen.com/za/en/insights/article/2018/south-african-basket-sizes-are-shrinking-as-

shopping-behaviour-shifts/ 12. https://www.businessinsider.co.za/shell-replaces-clicks-clubcard-with-its-own-fuel-rewards-

scheme-2019-1213. https://tracxn.com/d/trending-themes/Startups-in-Fuel-Delivery 14. https://disrupt-africa.com/2019/08/on-demand-fuel-delivery-app-launched-in-nigeria/ 15. https://www.nielsen.com/za/en/insights/article/2018/private-label-surges-ahead-in-south-africa/16. https://www.saps.gov.za/services/annual_crime_report2019.pdf17. Rethinking the ecommerce opportunity in South Africa, Accenture https://www.accenture.com/_

acnmedia/PDF-108/Accenture-eCommerce-POV.pdf#zoom=5018. https://customers.microsoft.com/en-us/story/shell-mining-oil-gas-azure-databricks

19. https://www.accenture.com/_acnmedia/PDF-76/Accenture-10-More-than-fuel-in-the-future.pdf#zoom=50

20. Fjord Trends 2020, https://www.accenture.com/us-en/insights/digital/fjord-trends-2020

21. https://www.weforum.org/agenda/2019/07/amazon-is-turning-25-here-s-a-look-back-at-how-it-changed-the-world/

22. https://csnews.com/phillips-66-taps-gasbuddy-business-pages-digital-push

23. https://retailtechinnovationhub.com/home/2019/6/27/shells-daniel-jeavons-data-will-drive-future-of-retail-sector

24. https://webengage.com/blog/hyper-personalization-marketing-future/

25. https://www.networkworld.com/article/3325397/idc-expect-175-zettabytes-of-data-worldwide-by-2025.html

26. CEO Magazine: Underuse of Analytics could be costing organisations millions - April 2019

ABOUT ACCENTUREAccenture is a leading global professional services company, providing a broad range of services in strategy and consulting, interactive, technology and operations, with digital capabilities across all of these services. We combine unmatched experience and specialized capabilities across more than 40 industries – powered by the world’s largest network of Advanced Technology and Intelligent Operations centers. With 505,000 people serving clients in more than 120 countries, Accenture brings continuous innovation to help clients improve their performance and create lasting value across their enterprises. Visit us at www.accenture.com.

ABOUT ACCENTURE RESEARCH Accenture Research shapes trends and creates data driven insights about the most pressing issues global organizations face. Combining the power of innovative research techniques with a deep understanding of our clients’ industries, our team of 300 researchers and analysts spans 20 countries and publishes hundreds of reports, articles and points of view every year. Our thought-provoking research — supported by proprietary data and partnerships with leading organizations, such as MIT and Harvard — guides our innovations and allows us to transform theories and fresh ideas into real-world solutions for our clients. For more information, visit www.accenture.com/research

CONTACT THE AUTHORSNishal Nair Managing Director Accenture South Africa

Priscilla Law Retail Innovation Associate Director Accenture South Africa

Yusof Seedat Thought Leadership Director Accenture Research

ACKNOWLEDGEMENTS:Bobby James, Taurai Nyaruwata, Julie Adams, Carmen Whateley, Kathryn Language, Thrinadh Kottagundla

Copyright © 2020 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, the ideas should not be viewed as professional advice with respect to your business.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

(FORE)COURTING THE CONSUMER - Accenture · 2020. 5. 11. · (FORE)COURTING THE CONSUMER THE ROAD TO...

Documents

Transcript of (FORE)COURTING THE CONSUMER - Accenture · 2020. 5. 11. · (FORE)COURTING THE CONSUMER THE ROAD TO...