The news yesterday that supermarket Tesco has recruited Guus Dekkers (left) as its chief technology officer (CTO) demonstrates an awareness that in vertical markets where margins are hard won, a good technology leader is essential.
Dekkers recruitment from aircraft engineering leaders Airbus follows hard on the shopping trolley wheels of arch rivals J Sainsbury’s recruiting former Global CIO of Telefonica Phil Jordan. Tesco and Sainsbury’s are at the head of the battle for supermarket supremacy, but as Jordan outlined in the exclusive podcast interview with Horizon late last year, the battle lines are not just against one another, but an increasingly complex retail environment that offers the customer unparalleled levels of choice.
Tesco reported a cash flow margin of just 3.54% last year and net income decreased, although its revenues grew by a similar 3.68%. Sainsbury’s is the second largest supermarket in the UK with around 16.9% of the market. And that tells you a lot about the challenge that the supermarket sector faces, second in the market and under 20% of the market share.
“We can all see the impact that Amazon has had on the general retail market,” Jordan told this title’s podcast. “Food is relatively traditional business model and supply chain, but it is going to be disrupted, positively with technology and across the whole business.” Tesco and Dekkers will in all likelihood echo Jordan.
Retail is not alone in realising that margins will continue to be hard to win. Organisations and vertical markets that realise this are also realising that technology is a key to protecting and possibly increasing margin. On the very day that Dekkers appointment is announced I interviewed a CIO in a vertical market that has been under the public spotlight for failures as a result of not protecting its margins. That CIO, again new to the sector, has been brought in to deliver technology services that will protect the company through offering value added services that increase the likelihood of retention when contract renewal comes about. A plain talking CIO, he told me: “I’m making it harder for the client to leave my organisation for another, despite them offering wage arbitrage.”
The insurance sector, especially general insurance, is another that through 2016 and 2017 sought out and recruited CIOs with a track record of transformation. As this title reported CIOs such as Mike Sturrock, Tim Grieveson and most recently Paul Caris have joined the sector, bringing with them experience from airlines, law, retail, security provision, technology and logistics. With global stock markets performing poorly, the insurance sector has to protect its margins in a digitally disrupted market.
Any sector that struggles to achieve margin should embrace the opportunities technology offers. Whether through services that offer customers and clients increased value or through new models of business optimisation. As the fourth industrial revolution enters almost every vertical market, organisations with hard to achieve margins can use data analytics, sensors, alerts, wearables, AI chatbots and machine learning to increase the utilisation of their assets. But only if they have a CIO capable of seeing the opportunities within their business and beyond.