If there’s one undeniable consequence of the COVID-19 pandemic for business, it’s that global markets have become more fragmented than ever. The costs of doing international business continue to rise, with the advantages of producing goods locally becoming increasingly evident.
In light of this, many retailers have turned their focus from global to local. Retail companies are ramping up the localisation of their supply chain, R&D initiatives, leadership teams and corporate structures and are consolidating their international operations between fewer countries.
Retailers can navigate these challenges by moving their decision-making authority to the “edges” of their business, relying on networked teams rather than pushing every decision from the top down.
Accenture’s latest ‘Business Futures’ report calls these businesses “edge organisations” – borrowing terminology from “edge computing”, which moves data processing and intelligence closer to the point of use, allowing for faster speeds and more agile decision making.
The same principle applies to edge organisations, which move their decision-making to the edge, or the local markets where the business actually operates, empowering staff to organise, work and meet corporate goals while optimising local performance. This approach can be summarised as “think globally, act locally”.
The advent of edge retailing is not on the horizon – it has already arrived. Our research finds that 71 per cent of executives globally have already, or are planning to, decentralise decision-making in parts of their business in response to the shifting international business environment. While giving up decision-making power can be daunting, moving decision-making to the edge enables retailers to give employees more agency and accountability over customer service and outcomes.
There are several factors that have advanced the development of edge organisations – making them not just a reality, but a necessity for businesses that want to be future-ready. The most blatant factor is the pandemic, which led to the largest and most widespread shift towards remote working ever, as well as proving it is possible, and sometimes preferable, to have a large segment of the workforce work from home. Remote working, coupled with fragmented markets and changing consumer preferences, has made moving decision-making to the edge a new standard for businesses.
Amid the pandemic, the dynamics of consumer loyalty have also shifted, with customer preferences moving faster than retailers are able to catch up. Edge organisations are better placed to quickly react to shifting customer preferences than they would be with a top-down decision-making structure. In an environment where customer needs differ so much from market to market, a universal playbook is no longer effective. Retailers that push decision-making authority to the edges will be best positioned to meet ongoing changes in local needs.
For retailers to become edge organisations, they need structures, processes, people and technology that are themselves receptive to change. Edge organisations flatten their leadership structures and move away from conventional hierarchies in favour of networked teams. These teams contain multidisciplinary staff that are centred around customer outcomes rather than their individual function.
Locally, Bunnings have set up their corporate function to specifically support their store teams, pushing focus to their ‘edge’. This approach to prioritising frontline staff has been the company’s model for success, even throughout the pandemic.
Managing a multidisciplinary team requires people to take on multiple or more complex roles. In turn, this enables retailers to make training and learning new skills accessible to as many people across the business as possible to encourage inclusive and widespread upskilling.
With the shift away from traditional hierarchies to a more centralised team structure, the corporate functionality and C-suite needs to change too – focusing on serving employees rather than vice versa. The C-suite leaders in edge organisations make wide-ranging decisions like defining the organisation’s purpose, setting strategy and allocating capital, rather than managing the edges.
Edge organisations aren’t just flying blind though – centralised decision-making should always be underpinned by data. A quarter (25%) of the organisations we surveyed globally have already scaled the use of real-time, on-site data to inform decision-making at their edges, with 68 per cent scaling up or piloting their ability to do so.
The more data they have and the easier it is for that data to flow, the more the edges are informed. It’s still important for the various functions within an edge organisation to work in alignment and this is a role that leaders can play by clearly communicating the company’s purpose and strategy, acting more as a guide to those on the edge.
While the benefits for retailers of moving to the edge are immense, there is a risk that retailers could over-extend their edge and either lose their identity or strategic control of their edges. To prevent that, retailers should start with small changes like trialing new processes in smaller markets before implementing large-scale rollouts.
The key for retailers to successfully become edge organisations is to keep in mind when and where to divest control and keep communication as clear and transparent as possible – so that they can seamlessly decentralise decision-making and transition to becoming a retailer of the future.
Louise May is strategy and consulting lead for Australia and New Zealand at Accenture.