09 Mar Woolworths Ventures launched

Getting corporate venturing right is not difficult, you just need to not fool yourself into believing that you are busy doing the right things…. insights from Jonathan Cherry of CherryFlava.com, our favourite trend guru…

The engine of success powering Shoprite Checkers’ astounding recent performance is an operation they call ShopriteX.

ShopriteX is – for want of a better term – a skunkworks unit, tasked to operate independently of the larger Shoprite Group with the intention of designing and developing new innovations (like Sixty60 and Xtra Savings) that deliver so-called outperformance. The big idea is not so much about delivering linear, year-on-year growth, but rather total market domination; thanks to the creation of outsized value for customers. And it works really, really well.

Setting up a smaller, more agile unit to drive these customer-focused projects is critical to their success. Corporate behemoths (obsessed with delivering value to shareholders) naturally kill anything that looks like ‘risk’ (ventures would be a very big red flag); purposefully housing innovation outside of ‘the mess‘ is an important thing to do if being successful with your big aspirations is something you would like to achieve.

Under pressure to be more competitive in the category and perhaps thanks to the lessons offered in our book, Woolworths now has also set up an independent innovation-engine, which they have named… (rather unsurprisingly) Woolworths Ventures.

Before we go any further here – let’s just take a moment to understand something clearly.

A ‘venture’ – in the context of business – is ‘a high-risk, high-potential-return undertaking that carries with it a significant amount of uncertainty because it’s a project that is aimed at creating a significant amount of new value where currently little to none exists.’

The attraction that corporate venturing offers is, that if successful, it gives the business an enormous advantage in a category; ensuring that the business is able to secure a dominant position accompanied by exponential financial returns over the long-term.

The risk associated with true venturing is worth it because the possible returns are so lucrative.

To outsiders a venture looks like a gamble. To shrewd strategists; it’s all a matter of probability and plausibility based on conjecture.

Shoprite Checkers… investing significant amounts of time and money on fast grocery delivery (in a marketplace, where at the time, there was no entrenched consumer behaviour supporting the demand for fast grocery delivery)…is a venture. Toyota…going all-in on hybrid-technology when everyone else was saying that the future is EV…is a venture.

In stark contrast, the tone of what has been published about Woolworths Ventures is anything but welcoming of ‘risk’ in exchange for massive upside over the long-term.

According to Moneyweb:

A new standalone unit inside the sprawling retailer, Woolworths Ventures, will give the business the edge on the four high-growth adjacent categories to the core that it is targeting. These are pet, liquor, its smaller format clothing outlets known as W Edit, and food services. The last is a catch-all for its in-store coffee stands, standalone Now Now takeout, and W Café efforts. 

…further…

The Woolworths CEO, Roy Bagattini, says the group’s “biggest opportunity is not in acquiring new customers; it is in growing the share of wallet of our existing customers”.

Really? Is that really the biggest growth opportunity?

In the Food business, he points to ‘VIP’ customers, who do the bulk of their grocery shopping at Woolies. This segment only comprises 10% of its base. For the remaining 90%, Bagattini says that for every additional 1% of their grocery spend they shift to Woolies, this translates into R1.5-billion in additional sales. 

[BTW wishful paper-napkin mathematical calculations like this one for a business that is increasingly losing the remaining 90% of their customer base to a much more aggressive competitor, is not something you want to be sharing in public with a straight face.]

After reading this Moneyweb article, we’re left with some questions…..

Cherryflava – read full article here.