Innovation strategy planning process
As a retail company, METRO GROUP does not make its own products and therefore does not conduct research and development in the strict sense of the term. When it comes to innovation management, we concentrate more on pursuing the objective of fuelling our transformation within a world that is constantly reinventing itself.
Both our sector and our customers currently find themselves in a profound transformation process which is being driven in particular by megatrends such as digitisation and social change. These trends have a great impact on the way our customers live, work and consume. Our aim is to support our customers in this change process and remain a relevant partner for them. We are thereby faced with the challenge of changing ourselves, because as retailers, we can no longer be satisfied with simply providing access to products for our customers – both online and offline. In order to successfully shape the retail of the future, we want to offer our customers added value and involve them more closely beyond the transaction itself. To achieve this, we need new business models that enable us to generate added value and offer it to our customers. To that end, METRO GROUP is working together with the sales lines on a customer-centred process that is designed to optimally support everyone involved and that is adjusted with an eye to the customer groups of the various sales lines.
In the course of this process, digitisation, social change, urbanisation and sustainability were identified as the most important trends that will most strongly influence our customers. On the basis of these analyses, we ask the following questions: How do we ensure that we add value for our customers every day? How can we fully align our processes with the needs of our customers? How can we help to relieve our customers of everyday worries and to organise their daily routine so that it is more enjoyable?
In order to systematically increase customer value through innovation, METRO GROUP has set itself three overriding goals. First, we want to add significant value with our innovation projects, for example by contributing to the development of new business models and store formats. Second, METRO GROUP aims to be an attractive partner for start-ups and innovative businesses. Third, the group aims to establish a culture of innovation across the group.
Realising innovation projects
In financial year 2015/16, METRO GROUP implemented numerous innovation projects in close cooperation with its sales lines. Selected examples are outlined below.
As part of the cooperation between METRO Cash & Carry and the Berlin-based start-up Infarm, which began to work together in 2015, a high-tech cultivation area for sprouts, seedlings, herbs and lettuce was installed in the wholesale store in the Friedrichshain district of Berlin in February 2016, marking the first time this has been done in Europe. So-called vertical farming allows plants to be cultivated indoors – without the use of pesticides, while reducing water use by up to 90 per cent. As a result of the success in Berlin, there are already numerous initiatives to establish vertical farming in other wholesale stores and in countries in which METRO Cash & Carry is active. In August 2016, another facility of this kind was opened in Antwerp. METRO GROUP is the world’s first retail group to become a member of the Association for Vertical Farming and actively supports the development of the vertical farming industry through this organisation.
Express delivery and delivery at a time of the customer’s choice are a firm feature among the Media-Saturn range of services. In order to optimise the delivery experience for customers, the sales line launched a pilot project in July 2016 using self-driving delivery robots built by the tech start-up company Starship Technologies. The robots, which deliver parcels and groceries within a radius of five kilometres, are part of a global development programme at the start-up company.
Through its apps, the Real sales line now makes the shopping process easier for more than 1 million users. The digital services of the hypermarket operator support the customer from shopping preparation – through access to the large recipe database and current offers, for example – right through to store purchases using the “one-scan checkout” system. The new process digitalises previously analogue-based services and ensures more customer service and convenience through a faster checkout procedure. The “one-scan checkout” makes it possible to accumulate payback points using a mobile phone app; to redeem digital coupons; to collect Real loyalty stamps; to have an online version of a standard checkout receipt sent to your mobile phone; and even to pay via your mobile phone. Real is the first food retailer in Germany to offer this full service.
In 2015, METRO GROUP established the new business unit Horeca Digital to better support a core target group of the cash-and-carry business – independent companies in the hotel, restaurant and catering (Horeca) sector – and to specifically contribute to their business success through innovative solutions. The internationally active team pursues this goal through four key initiatives:
- First, the team focuses on creating a better understanding of how to optimally operate independent companies in the Horeca sector.
- Second, the METRO Accelerator powered by Techstars fosters the development of new ideas as well as their external funding and success in the market through professional preparations.
- Third, Horeca Digital activates METRO GROUP resources to support the creation of efficient sales channels for start-ups.
- Fourth, Horeca Digital invests in relevant start-up companies, applying the same standards as professional financial investors.
Improving independent Horeca companies
Horeca Digital promotes an exchange of experiences and community building in the Horeca sector through the cooperation with Ecole hôtelière de Lausanne (EHL), which was started in February 2016 with the establishment of the chair for digital innovation in the hotel, restaurant and catering sector. The aim of the “METRO Chair of Innovation” is to research the digitisation in the restaurant, hotel and catering sector in key markets like France, Italy, Spain, Germany and Japan as well as strengthen academic teaching in this area. In addition, Horeca Digital pursues systematic social media activities – for example, for the finalists of the METRO Accelerator powered by Techstars, to strengthen the company’s online reputation and help advance digital solutions for the food service and hospitality sectors. Horeca Digital has also started to explore the international digital Horeca environment. Key aspects that have been researched include the question of the geographic markets that are particularly attractive to innovative start-ups.
Supporting innovative companies
Together with the US company Techstars, METRO GROUP organises and supports the development of innovative digital services for independent companies in the Horeca sector. The aim of the Accelerator initiative is to support innovative start-ups in this environment, for example by helping them to improve their potential access to growth capital from professional investors. Ten international teams take part in the three-month programme in Berlin. They are supported by about 100 mentors from the start-up and investor communities as well as from the food service sector. During its second round, the METRO Accelerator powered by Techstars has increasingly evolved into a networking platform that brings the various players in the sector closer together. As before, the companies’ degree of maturity played a key role in the selection process for the Accelerator in 2016. Many of the teams have successfully established products in the market.
The business idea developed by Lunchio proved promising. The participant of the first Accelerator programme has developed an app that allows users to order and pay for their lunch online. Directly following Demo Day, the young company started a financing round which it successfully completed in May 2016. Flowtify, another first-round participant, also further expanded its business relationship with METRO Cash & Carry. Flowtify supports complete and proper implementation of HACCP self-documentation and other repetitive tasks and has already been tested in the restaurants of the METRO Cash & Carry wholesale stores in Germany.
In line with market standards, METRO GROUP invests small sums in the companies that participate in the Accelerator programme. METRO GROUP’s partner Techstars supports the group in the selection of participants and in its investment decisions. In the future, lasting successes can be expected as well as companies dropping out of the portfolio due to competition – as is the case with any professionally managed investment portfolio for innovative, very young and young companies.
Creating efficient sales channels
In another field of action, Horeca Digital supports the creation of efficient sales channels. In this way, Horeca Digital helps start-ups to provide suitable, usually digital solutions to independent companies from the food service and hospitality sectors. The aim is to offer Horeca customers operational support through successfully tested digital solutions customised to individual entrepreneurs’ specific needs. This process can also help METRO Cash & Carry establish contact with new customers and expand existing customer relationships. In order to find out which digital products and functions are particularly helpful and how they can help to significantly improve customers’ daily operations, Horeca Digital launched pilot projects in several restaurants in Berlin, Paris and Vienna. These projects are used to offer start-ups insight into user behaviour and preferences as well as connect them with potential future customers.
Investments in innovative companies
In order to accelerate the digitisation of the Horeca industry, METRO GROUP consistently works on making appropriate products and services more easily available to the target groups. In the process, the objective is to participate in the increase in value of companies in the Horeca sector through shareholdings, often in cooperation with other professional investors. The goal of the activity is not, therefore, to acquire and integrate companies in order to transform the core business. Managing these investments is the responsibility of a team consisting of experienced investors who make decisions with the support of an investment committee, which is separate from the cash-and-carry business. The investment strategy focuses on the value creation potential, independent of METRO GROUP. Wherever it is possible and helpful, any other possibilities for value creation – through sales access, for example – are developed by utilising METRO resources.
In financial year 2015/16, METRO GROUP made investments in Berlin-based start-up Orderbird as well as Munich-based start-up Shore, among others. Orderbird is the leading iPad POS system for restaurants in the German-speaking area. Shore supports small and medium-sized businesses as well as service providers with cloud-based software that allows them to digitally manage their business processes. The investments represent another building block in METRO GROUP’s efforts to advance digital business models for its customers.
Supporting networking and exchange
One aspect of innovation management is positioning METRO GROUP as an interesting and reliable partner for start-up businesses and making active use of its strengths for this purpose. The aim is to strengthen collaboration with business founders and young entrepreneurs as well as to strengthen and support start-up structures in general. Against this background, METRO GROUP initiated and supported several events during financial year 2015/16.
One example of this is a series of events entitled “Innovation in Retail” Meetup, through which we have created a platform for exchange between innovative business start-ups in the retail and food service sectors and METRO GROUP and its sales lines. This platform is now used by more than 800 members. At the gatherings, business founders present their ideas and business models and then network with other founders, experts and representatives of METRO GROUP. Here, valuable contacts are established, which result in start-up businesses being able to implement pilot projects within the METRO GROUP sales lines. METRO GROUP’s intensive cooperation efforts during financial year 2015/16 have been recognised repeatedly. For example, the German federal state of North Rhine-Westphalia honoured METRO GROUP as a pioneer of digital transformation with its DWNRW award. The European Commission awarded the retail group its “Europe’s 25 Corporate Startup Stars” prize in 2016 in recognition of METRO GROUP’s work with start-up businesses at an international level.
Driving cultural change
Innovation management also has an impact on the process of cultural change within the company. The emphasis in this case is on fostering the understanding that the company must constantly and ever more quickly reinvent itself in the digital age. At the same time, it is necessary to impart in the employees the joy that comes with constant change and the knowledge gained from it. In order to promote methodical expertise specifically, an appropriate series of workshops was initiated in 2015 for employees at the company location in Düsseldorf. The format that has since been further developed serves to present innovations and, together with the participants, to work out how these innovations can be applied within the company.
In order to advance the cultural change associated with innovations, METRO GROUP held an Innovation Day in June 2016 for the first time. The goal of the event was to present innovations. For example, a panel discussion took place with the human-like robot Geminoid HI-4; the self-driving shopping cart wiiGo was presented; and the Starship delivery robot, which Media Markt has been trialling in a pilot project since October 2016, handled its first delivery. At the same time, the Innovation Day served to familiarise employees with, among other things, methodical expertise through workshops. The Innovation Day ended with the so-called “Fuck Up Night”. The global movement, which originated in Mexico in 2012, serves to promote a culture of error tolerance and to speak openly about corporate failure and the lessons learned from it. “Fuck Up Night” was organised exclusively for employees in 2016 for the first time. Internal and external speakers shared their experiences with the audience, explaining how they learned from mistakes.