Playing the “Infinite Game” in Grocery Retail
Mercatus invited industry analyst and commentator, Brittain Ladd, to share his views on the seismic shifts affecting the grocery retail landscape. In this blog series, Brittain details the steps traditional grocery retailers can take to prepare themselves by digitally transforming the way they do business today.
Attend any business conference, listen to any corporate earnings call, read any business leadership book, and one word and all of its variations will dominate – win. This is true for grocery retail CEOs who especially like to refer to their strategies in terms of winning and losing. Who hasn’t heard a retail CEO or other executive stress the importance of winning at the shelf? Winning in the eyes of consumers? Winning market share? Winning against the competition?
While “winning” business strategies are understandable, new research indicates that focusing on winning is resulting in more and more companies losing…and the reason is fascinating.
According to the Human Systems Dynamic Institute:
- Finite Games have rules and timeframes. There are players, and there are observers in an established field of play. The rules are set, and generally known by the players. Someone is designated as referee or judge. The object of the game is to get the highest score in order to win. After the game, no one argues about the score.
- Infinite Games, on the other hand, are more open and less defined. Everyone plays in an Infinite Game, and the field is not clearly defined. The rules are inconsistent and change all the time. There are no external judges or referees. The players are accountable to themselves and each other for their behavior in the game. Ultimately, the rules are devised to keep the game going infinitely.
Business has no set rules; no referee; no scoreboard. By every definition, business is not a game that can be measured by utilizing the accepted definition of winner and loser. The fact is that there is no time limit on how long a business can exist and, simply put – business is infinite. Grocery retail executives who speak in terms of winning have failed to understand the purpose of business. The goal isn’t to win but to remain relevant to consumers and customers year after year, decade after decade. The goal isn’t to compete against other but to persevere and persist while other companies fail.
Be an Infinite Player
Embracing the importance of playing an Infinite Game vs. a Finite Game is easier said than done. Motivational speaker and author Simon Sinek has researched the topic of infinite games and states:
“Most businesses are making decisions in a finite game but they’re playing an infinite game. When the will and resources are gone at a company, it’s called bankruptcy, or it’s a merger or acquisition. A clear majority of companies are playing to be number one and not playing to sustain their will and resources, so they can be around for a long time. An Infinite player understands that sometimes you have a better product and sometimes your competitor does. In an infinite game, there is only ahead or behind.”
Sinek, the U.S. Military, McKinsey, and the Harvard Business Review have all addressed this topic resulting in the following recommendations for being an infinite player in business:
A Just Cause
- A just cause is what your company stands for and it’s bigger than the product or service you offer.
- Amazon and Apple both have a clearly defined Just Cause. Amazon is Earth’s Most Customer Centric Company and Apple creates products to empower people.
- Leaders prioritize the advancement of the just cause and do not become distracted by shiny objects. Ever.
- Leaders obsess over customers.
- Why does Apple design, build and sell such great products? Talent.
- Why is Amazon Amazon? Talent.
Understand and Assess Competitors
- No company will always lead in every industry or category.
- Learn from competitors.
- Success for infinite players isn’t left to chance.
- Extensive analysis is performed across demographics, consumer trends, technology, economics, societal changes, political landscape, risks, etc., on a consistent basis. Facts matter in strategy.
Fact: Amazon executives do not speak about taking market share or beating the competition. Amazon executives only speak about obsessing over customers. Amazon is playing an infinite game.
The Real World – What Grocery Retail Leaders Must Do
First and foremost, grocery retailers must be brutally honest in their assessment of their current state regarding: leadership, technology, supply chain, gross margin, EBIDTA, M&A, competitive position and especially talent. Management consulting firms have observed the disconnect between executives and reality when assessing the current state of their companies. This is especially true in the grocery industry.
I am aware that prior to Amazon’s acquisition of Whole Foods, two of the Big Four consulting firms conducted workshops with multiple grocery retailers and discussed Amazon. When asked if they were prepared for Amazon to expand their grocery investment, executives overwhelmingly affirmed that they were ready. When asked the same question two months after the acquisition, grocery executives overwhelmingly stated they were not prepared. Why the change? Grocery executives didn’t view Amazon as a threat prior to the acquisition of Whole Foods. Executives believed they could beat Amazon. Once Amazon made a Big Move, grocery executives realized their chances of going head-to-head with Amazon had significantly increased. Reality forced executives to be brutally honest with their current state.
Is Amazon a threat? Yes. So too, is Walmart, and Instacart, and any number of retailers who can disrupt grocery retailing by making a Big Move. Think Facebook can’t become a grocery retailer? Think again. What’s to prevent Google from acquiring Kroger? What would prevent Costco from acquiring Publix or HEB and scaling the network of stores? Threats are real and they’re increasing. It’s also impossible to predict every threat. Jeff Bezos famously stated: “I can’t predict the future, but I can focus on things customers will always want. In retail, customers will always want cheaper products delivered faster and easily available.”
Grocery retailers that play an infinite game protect against threats by focusing on their customers and creating an omni-channel experience powered by technology, analytics and personalization.
Customers who deftly move among multiple channels have a 30% higher lifetime value than those who engage with only one channel. As formats converge – physical retail, digital services and e-commerce channels – retailers need to deliver a fully integrated shopper experience, with all channels sharing common marketing, merchandising and supply chain strategies, as well as data formats.
By 2025, integrated efforts will be the norm for progressive grocery retailers. Instead of planning and executing by channel, retailers will support a consistent brand experience by viewing consumer touchpoints in more holistic ways. Consumers will engage with brands simultaneously across connected devices and on various platforms. Instant gratification will be paramount, and integration will be the path for providing it.
Thoughts on Elevating the Last Mile
A challenge for many grocery retailers, even those committed to playing an infinite game, is the commoditization of the last mile. A growing number of grocery retailers offer home delivery of groceries through any number of third-party partnerships such as Uber, Instacart, and Postmates to name a few. Last mile is becoming a commodity where the only differentiator is price. Most retailers will continue losing money on last mile deliveries under the assumption they have no alternative. False.
Grocery retail executives should not focus on only providing last mile grocery delivery services to their customers. Instead, progressive grocery retailers must seek out strategic providers capable of elevating the last mile to create a competitive advantage. An example is the grocery marketplace delivery company Shipt, owned by Target. By leveraging Shipt, grocery retailers can reimagine the grocery experience for their customers by giving them access to not only groceries but also an extensive line of other household essentials including merchandise from Target. In doing so, regional grocery retailers can greatly increase their customer value proposition by meeting the need for groceries, and other essentials (read more on Mercatus’ recently announced partnership with Shipt).
Enjoyed this blog post? Then you might like these resources:
- Podcast: Surrounded: Growing threats to traditional Grocery Retail Industry, featuring Brittain Ladd
- Blog Post: The Online Grocery Report: The market, drivers, key players, and opportunities in a rising segment of e-commerce