Unique Patient Evacuation Coordination management tool build with OutSystems Technology

By Health, News, Technology

IG&H, a partner of OutSystems with offices in the Netherlands and Portugal is coordinating the National Coordination Centre for Patient Evacuation (LCPS). The aim of LCPS is to spread the workload and care capacities across hospitals as effectively as possible. Therefor they needed to manage the available resources in each hospital and coordinate all patient transport movements across hospitals in real-time.

To avoid a possible catastrophic scenario, a management tool needed to be built very fast and with high standards of quality.

PECC was built with OutSystems by IG&H and became up and running in less than 2 weeks. This new centralized tool replaced shared files and whiteboards that were being used before. The result was impressive, not only did it improve the effectiveness of all staff involved, but is also created a new set of capabilities (i.e. auditing and reporting). The adoption by the users was almost instantaneous and the feedback that started to reach the Development Team was great.

The PECC application covers 119 hospitals in the Netherlands and Germany. PECC provides real-time overview dashboards and other web pages that manage the process of each patient’s transport movement. These include the workflow of identifying the criticality of each case, then finding the best hospital and managing the specific transport according to the situation of the patient. These decisions are based on 90+ different input fields, that lead to the most favorable solution.

Following the success of PECC, LCPS identified one other urgent necessity that could be tackled with Low Code, the result is the COVID19 NL-DE Kooperation Webportal and a tool managing the allocation and distribution of mission critical equipment like ventilators and IV-pumps called MedOps. The Kooperation portal has been built with OutSystems and is a web application portal that manages the availability of German hospitals to receive Dutch ICU-patients. Dashboards and web pages deliver the information that the application receives directly from the hospitals and transform it in a way that immediately shows the users the most useful information quickly and if needed that information can be drilled down to the required level of detail.

This solution was only possible due to the contributions of OutSystems by providing the necessary infrastructure, deep expertise and support, the Dutch Ministry of Health and the Dutch Army that helped defining the solution process, and by IG&H Health sector knowledge.

Contact
Nuno Pacheco
E: nuno.pacheco@igh.com

Blog 6 | Retailer-Supplier collaboration is crucial to successfully deal with uncertainty

By News, Retail

Having the right products available in the right quantity at the right time has always been important. However, the highly unpredictable and volatile period ahead will probably also proof it has never been more challenging.

How is consumer spending going to change in response to a recession? How is the 1,5m-society going to affect consumer needs and shopping behaviour and for how long? What will be the impact of new outbreaks on supply chains? These are just a few of the key questions that have recently made it to the boardroom agenda of retailers.

There is obviously no precedent to base the forecast on. What is clear, is that high levels of uncertainty and demand variability will remain a critical challenge for retail value chains. Most notably, supply chains with long lead times, large batch sizes and/or high seasonal exposure will proof vulnerable. These supply chains rely on early and precise forecasts, which are now virtually impossible to build.

What (not) to do
Unfortunately, some retailers have one-sidedly responded to the recent immediate loss of customer demand by cancelling orders (sometimes already produced), demanding substantial discounts or stretching payment terms.

Although understandable from a retailer’s cash perspective, pushing the problem upstream in the value chain is not a structural solution for the underlying challenge to match supply and demand in this Corona crisis. The current market dynamics require retailers and suppliers to collaborate in partnership and create flexibility and responsiveness on key strategic categories.

Some retailer-supplier combinations are responding in a more sustainable manner.

For example, some food retailers and their suppliers have managed to jointly respond to the recent surge in demand by eliminating side assortment, and thereby significantly increasing the production output of fast moving items.

And, in the fashion industry suppliers and retailers are working together to smartly de-risk the assortment by moving from seasonals towards basics and never-out-of-stock items.

For the more trendy and hence less predictable items, retailers and their suppliers are looking for a Corona-proof balance between product margin and supply chain flexibility, moving towards the latter one. Partial local sourcing, express logistics, smaller production quantities, and delayed order commitments are all discussed jointly.

Where to start  

Developing retailer-supplier collaboration to manage such demand & fulfilment challenges is complex and requires trust from both sides. Under normal circumstances building trust can take years, especially if the relationship has been highly transactional and predominantly price-focussed before. But, the current crisis creates the urgency and necessity to act immediately and decisively.

The three measures below are a starting point for retailers to initiate a collaborative response with suppliers to this Corona crisis.

1) Prioritise suppliers and categories based on commercial relevance and risk
The typical retailer has hundreds of suppliers and can simply not engage with every supplier on every category in great detail. Choices must be made.

Segmentation and prioritisation should be based on two perspectives. First, based on commercial relevance: what part of a retailer’s revenue comes from what supplier and what categories are most relevant for its commercial proposition? The second prioritisation perspective is a demand and supply risk consideration: how likely will customer demand deviate significantly from pre-corona levels and how likely will supply chains be disrupted?

A clear prioritisation of those suppliers that require more intensive collaboration emerges once both the commercial relevance and the risk of demand deviations and supply disruptions are understood.

2) Share and use data to understand how demand develops
Most demand scenarios are top-down and expressed in financial terms. In order to be able to make sensible decisions, it is necessary to have access to the latest demand information about the specific high-risk categories in focus and bring a collaborative team together around it. For example, the use of advanced analytics on real time (POS) consumer data can identify shifts in demand across categories and regions fast and at an actionable level of granularity. Simple dashboards on a digital platform accessible to the common retailer-supplier team can then help to facilitate the collaboration process.

Full transparency and constant communication with respect to changes in the demand pattern will enable the retailer-supplier combination to act faster.

3) Engage in a collaborative and constant dialogue
For many categories future demand is expected to remain highly uncertain. A large fashion retailer commented that the key in creating flexibility is to start thinking from the perspective of the supplier and listen to understand what drives lead time and complexity from sourcing to dispatch.

This is becoming even more relevant in this Corona crisis. Collaboration can result in the retailer committing to multi-purpose raw materials and production capacity (to ensure supplier ability to supply), whilst both parties have a dialogue on the latest possible production moment and its batch size (to prevent over and under stock of specific products).

We started this blog by stating that we foresee a highly unpredictable and volatile period ahead. We see retailers responding in various manners. Some seem to try and push their problems upon their suppliers, others seek to enhance collaboration with their suppliers and take an end-to-end value chain perspective in addressing the challenges posed. We believe the latter will emerge stronger as retailer-supplier collaboration will proof to be a crucial factor to survive this Corona crisis.

Contact
Ruud Schoenmakers
Partner Retail at IG&H
E: ruud.schoenmakers@igh.com
T: +31651319257

Jasper van Rijn
Partner Retail at IG&H
E: jasper.vanrijn@igh.com
T: +31653376760

Carsten Treur
Manager at IG&H
E: carsten.treur@igh.com
T: +31651150504

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Why is the Corona crisis similar to the introduction of the iPad and what can companies learn from it?

By News, Organizational transformation

The current Corona crisis leaves many businesses in a lot of uncertainty about the future. Many companies face a significant decrease in turnover. Interestingly, this shows similarities with the introduction of the iPad in 2010. Do you want to know these similarities? Read about why your organisation hato anticipate today, and about our three most important learnings. 

When the iPad was introduced in 2010, a publishing company predicted that the introduction of the iPad would cause a 70% sales decrease in hard copy magazines and subscriptions by 2020The online world was hardly existing back then and nobody knew how this would pan out. The magazine publisher had a decade to find a solution but was not sure about which direction to takeIn the current Corona crisis, many companies don’t know either: many of the short-term emergency measures will become the new normal, but which ones?   

Studies and empirical research describe the situation of these companies as complex. It is important to understand that complexity makes it impossible to predict patterns of the futureThe normal way of strategy forming is therefore not effective and organisations should seek alternative ways.  

The answer lies in conducting many safe fail experiments within a shared set of rules (boundaries). Safe fail literally means that it is “safe to fail”there are little resources invested and that it is easy to kill the experiment when not successful. When successful, the organisation should of course be able to scale up quickly. What we see in many organisations is that experiments are the opposite, they are just the first step of a giant roll out. The publisher in this case started a series of experiments in several countries on web fora, digital magazines, interaction with readers, and more things that we find common nowadays. It is an example of successfully adapting to new opportunities.  

So, start today with our three important learnings from this case: 

1) Accept uncertainty: When you accept the complexity, you accept that there is no cause and effect relationship visible upfront. Therefore, regular strategy forming processes do not work.

2) Set a clear purpose of your organisation and define rules for experimentingBe clear on the company’s purpose. For example, the purpose of the publishing company was to remain customer relevant in off- and online contentWe advise you to define specific rules (called boundaries in complexity theory) within which your company can start to experiment. Examples of these rules are

  • Experiments should always create customer value
  • Experiments should start small and develop quickly to a larger scale
  • Experiments should be bold with ambitious goals that innovate the sector  

3) Start bottom up experimentsStart experimenting within your organisationInvolve employees that are in day to day contact with customers, trust them with coming up with the right ideasCreate multidisciplinary teams to boost creativity and enable quick roll outs. Managers should delegate maximum authority to experiment teams in order to maximise productivity and ownership. Additionally, this enables managers to focus on staying connected, communication, and providing perspective. Read more about this in our recent blog on leadership.   

The theory of these learnings is the easy part, putting them into practice is hard. Keep in mind that you should never waste a good crisis, maybe your experiment teams will discover the next breakthrough innovation in your sector! 

 Are you triggered about the impact of complexity on your organisation and do you want to create momentum to get a head start? We are more than ready to help you explore new opportunities! On our websitewe will share more blogs, hand-outs and other materials related to the current Corona situation. 

Contact
Boy Knoef
E: boy.knoef@igh.com

Become a true Data Driven Organization

By Banking, Data science, News

In Commercial Banking it is increasingly important that business processes are digital, data driven and can leverage AI. In the current times of unexpected change we see this magnified. IG&H data scientists observe that organizations who already transformed their processes now truly benefit.

Commercial banks are confronted with a sudden wave of SME client requests, changed risk drivers and changes in risk profiles. Banks want to help and need to figure out what (temporary) policy changes would be meaningful for clients. And also, what the impact of specific changes would be on the bank’s business.

Those who have already transformed their processes are now able to handle this situation much faster and more confidently. Their business processes are already more efficient and more consistent. And in the current time of crisis they also prove to be much more Scalable, Transparent, and Adaptable and they offer more options for looking forward in a smart way.

Scalable
Digital, data driven business processes with a high rate of straight-through-processing and where decisions are made (partly) by AI decision models, require much less human effort. Therefore, they can deal more easily with peaks in workload, especially in times when human capacity may be limited.

This benefit can only fully materialize when there are no bottlenecks in other parts with a crucial dependency. This stresses the fact that individual point solutions are not the way to go. The effective way is a transformation to become a true Data Driven Organization in People, Process, Data and Technology.

Transparent
Monitoring the impact of the current situation on the client experience, on process performance metrics and on KPIs is much more accurate and near real-time in a data driven process. This facilitates communication and coordination throughout the organization and allows management to take more effective actions.

For example: Dashboards can quickly be shared to observe what is really happening. Such as which teams have the highest workload increase. Or where clients’ payment behavior is most impacted.  Analytics can be used to signal early warning indicators such as trends and significant deviations.

Adaptable
AI decision models and business rules can be configured easily to effectuate policy changes like (temporary) higher risk thresholds, lowering the weight of specific risk drivers, higher or lower maximum values, etcetera.

For example: It can be easier to change a few parameters in a risk review decision model, than it is to communicate such changes to whole departments of specialists and coach them to quickly and consistently execute these.

Smart forward looking
Finally, AI decision models can be used to ‘test out’ different scenarios and evaluate very fast the likely effects on individual loans and on portfolio level.

For example: Changing the values of specific risk variables along the lines of different scenarios and observing the predicted effects, is being used to zoom in on those clients who likely require first attention.

AI models can be a very powerful tool to provide insight in likely future outcomes. A data scientist and business specialist who understand how the underlying machine learning works and on what data it was trained can provide a range of quick scan insights within a very short turnaround time.

IG&H’s data scientists and banking consultants continue to work with clients (especially now) to transform commercial banking organizations to remain competitive and benefit from being a true Data Driven Organization.

Would you like to talk about what you can do while your processes are not yet as digital and data driven as you would like? How you can best take the first step? Or how you can leverage your first progress and truly turn the corner to transform into a Data Driven organization? We are ready to help you explore and make data work! Just drop me a note!

Mando Rotman
Manager Data Science IG&H
E: mando.rotman@igh.com

Blog 5 | How to create an intimate customer relationship whilst keeping a ‘social distance’

By News, Retail

The corona virus pandemic ushered in a new reality and it is increasingly becoming clear that these changes will persist for a prolonged time. Consumer behaviour has seen radical changes (e.g. hoarding of essentials) and people are finding new ways to meet their needs.

Customers are looking for a genuinely emphatic connection while having to come to terms with the 1,5-metre-economy. This poses a conundrum for Retailers. Having had to close their stores, they are missing out on valuable customer contact. Moreover, there is no historic data or experience with this unprecedented crisis. Understanding customer needs and behavior that has radically (and instantly) changed is not easy.

Historically, shopping in stores is the ultimate way to create an intimate and personal connection with customers. Due to corona, online is rapidly becoming the starting point for customer journeys, even in areas where this did not seem obvious before. New solutions need to be found to address the missing personal offline touch.

One success story of customer intimacy is Chinese department store Intime. They developed a new way to connect customers with their brands during the Corona lockdown by offering livestreams to provide personal advice and tutorials. Per livestream one representative was able to help more customers than they normally could in half a year. Now, Intime is planning to offer 100 livestreams per day as a permanent fixture.
In this blog we elaborate on 3 elements that we see as crucial for becoming a customer intimacy frontrunner:

  • Be creative in how to understand your (new) customers while they are still discovering their current needs
  • Translate insights into radical new and customer driven solutions
  • Last but not least, how to create a heartfelt connection with your customers

1) Be creative on how to understand your customers while they are still discovering their needs today
Radical times ask for new, explorative, ways of understanding people’s changing needs. Retailers are used to automated data-driven insights that enable optimization of the ‘ongoing’ business. Now is the time to use analytics as a means to get insight in how customer preferences and behavior have changed before the crisis and now. Widening your scope from ‘customers’ to ‘all humans’ is key in that.

To understand how people’s behavior changes, create real-time data that can be contrasted with historical (POS) data. Form a customer insights taskforce to stay on top of the latest developments and encourage them to seek new ways to get input from customers. Web scrape relevant news pages and opinions on social media. Create thousands of datapoints through simple and targeted surveys, polls, A/B testing or smiley terminals in stores. Determine which information is relevant for whom and make it easily accessible to act upon (via dashboards). This way, everyone stays on top of changing circumstances as the virus develops.

With the historical and real-time data you can investigate shifts in popular items and categories, price segments, how people shop online compared to offline, at what times. Segment customers not by traditional demographic characteristics (e.g. “the elderly”), but segment according to behavior and preference characteristics. Find out if, how and why your customer base has changed, or why it has not. Improve (where possible) analyses with predictive models reflecting new demand patterns.

Despite efforts as mentioned above, data will not give all the answers. Therefore, interpreting data and validating your hypothesis is more important than ever. Not only enrich your findings, but also discover new ones by entering in a real dialogue with your customers. Use underutilized sales or store personnel to call, chat or organize (digital) sessions. Understand why needs change, what choices customers make and see patterns emerge.

2) Translate insights into radical new and customer driven solutions
Identifying people’s altered needs enables retailers to take away pains in a way that maximizes value. A successful example is Nike. During Corona they invested heavily in promoting their digital fitness app; Chinese consumers eagerly made use of the digitally connected ‘expert training network’ while quarantined. As a result, Nike’s digital business in China grew by more than 30% during the first quarter and maintained momentum throughout this period.

Quickly developing new initiatives enables connecting with customers in a way that sticks. Faced with increased traffic at stores, Albert Heijn and Jumbo were quick to recognize concerns of their senior target audience, being a group at high risk for corona, by organizing an ‘elderly hour’ in the early morning.

Whereas the first retailer extending their return policy or instating a ‘elderly hour’ will stand out, the tenth retailer won’t be noticed. Furthermore, actively involving customers in developing new solutions to take away pains and address needs might lead to radically new ideas altogether.

Success doesn’t necessarily mean that an initiative must yield euros right away. Rather, if you have demonstrated genuine connection and intimacy it will stay in peoples mind.

3) Last but not least: how to create a heartfelt connection with your customers
There’s a thin line between really connecting with customers and giving them the idea you are taking advantage of the situation. What might start as a genuine promotion can easily backfire if your actions are not perceived as genuine. RUMAG, for instance, experienced this when they were exposed to profit from their collaboration with the Red Cross to raise funds for fighting the Corona-virus.

Sympathetic actions can deepen connections with customers. For example, one Albert Heijn entrepreneur released a touching advertisement encouraging customers to shop at local (competitor) bakeries and groceries to support them. Likewise, UberEats gave discounts on delivery from local eateries to support local businesses. What we learn from China is that local players have shown to be better positioned to come up with a sympathetic response than international players, further reflecting the need to enter in real dialogues with your customers.

One of the key elements to create a heartfelt connection is to be emphatic; speak early and directly with consumers, while sticking close to your brand identity. Make them feel you understand how they are coping with this crisis and care about their wellbeing. Customers are still keen on the value you create for them; telling them what innovations have arisen from dealing with the crisis and how you are serving them in new ways will make them curious. Finally, give customers means to stay connected and be accommodating to things that are out of the ordinary (e.g.: be reachable at non-typical moments, be less strict in policies)

If set-up well, creating customer intimacy enhances lifetime value after the corona crisis
Taking time now to understand changing needs can feel counterintuitive – because the building is on fire and it is important to assure that every euro is well spent. However, it will prove crucial when trying to maintain an intimate relationship over every channel even after the corona crisis, since customers will continue to switch between their online and offline journeys. Take the courage to pursue radically different initiatives and go the extra mile to create a heartfelt connection. Consumers will remember your genuine actions and will potentially be a fan for life.

Contact
Bram Gilliam
Director Retail at IG&H
E:  bram.gilliam@igh.com T: +31622564054

Maarten Vaessen
Partner Retail at IG&H
E: maarten.vaessen@igh.com T: +31653571666

Rinke Klein Entink
Manager Analytics at IG&H
E: rinke.kleinentink@igh.com T: +31645530833

Author: Evelien Kip (evelien.kip@igh.com) and Robert Briggeman (robert.briggeman@igh.com)

 

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A look inside the National Coordination Center for Patient Evacuation (LCPS)

By Health, News

About LCPS
Due to the national increase in patients with COVID-19, the workload of patient care across the Netherlands needed to be spread as effectively as possible. Not only for patients with COVID-19, but for all patients. The aim of the National Coordination Center for Patient Evacuation (LCPS) is to spread the workload and care capacities across hospitals. LCPS is being led by Bas Leerink and Bart ter Horst. The Dutch Army offers advice and support in the design, organization and operation. They are being strengthened by experts in the field of acute care, logistics, ICT, statistics and crisis management.

I interviewed Bas Leerink (partner healthcare at IG&H) and Bart ter Horst (director healthcare at IG&H) about their important roles in setting up and coordinating the National Coordination Centre for Patient Evacuation(LCPS) 

First of all, how are you doing?
Actually, things are going pretty well. Although the pressure and responsibilities are very high, it feels good to be able to contribute to society. And to be honest we both don’t believe we would have been very suitable for working from home anyway.

How did you get involved?
Bas Leerink: I got a call from the Ministry of Health(VWS) saying they were looking for someone to set up the National Coordination Center for Patient Evacuation (LCPS), and they thought that I might be the one. Before I could even react, they continued with: “o and by the way, we are gathering today at 2 PM”. So I immediately called some of my colleagues ,including Bart, and we both drove to Rotterdam. Once arrived Ernst Kuiper (CEO Erasmus MC) welcomed us.

Soon enough we found out that we had to start from scratch, because there was literally nothing except a piece of paper on the wall, which was as a matter of fact, almost completely blank.

What can you tell us about the cooperation between the different parties that are involved?
We got a very important and complicated task, so each party that is involved brings some of their expertise to the table, which is extremely valuable. For example: the Dutch Army is very experienced when it comes to crisis operations like patient evacuation, so we really benefited from their knowledge. Within 2 days we evacuated the first patients. This wouldn’t have been possible without smart collaboration between all involved parties.

What is it that IG&H offers then?
Probably our sector knowledge and ‘getting things done’ mentality. Not to forget that our tagline is “Make strategy work” and that summarizes exactly what we are doing here. We are not only analyzing or making advices on paper, we are here in the field creating a working coordination center, of course in close collaboration with all other parties that are involved.

It has been three weeks since the set-up of LCPS, what has been achieved so far?
Within five days we made the system operational. Which means we were able to answer requests of hospitals, track patients and organize the whole evacuation process. Not only did we evacuate Intensive-care patients across hospitals in The Netherlands, but we also evacuated some to Germany. At the same time, we started distributing medical equipment as well. Meanwhile the team has grown to a group of approximately 60 people that are continuously trying to optimize processes and keep a smooth information provision among all involved parties.

Can you paint a picture of a typical day at LCPS?
For both of us the day starts around 7 AM, with getting our first call of the day while being in the car or on a bike. Not a single day is typical at the LCPS, but thanks to the Dutch Army we have a “battle rhythm”.  So we kick every morning off with a commander’s update briefing (CUB). Followed by a commander’s intent in which Bas Leerink states the most important goal or topic of the day. Furthermore, important decisions are being made. Around twelve there is a consultation with all chairs of the ROAZ’s, that’s when we inform and ask about any updates in general regarding the patient evacuation. Around 2 PM we get an update about the forecasts, so we know what we should and can prepare for. Then there are a lot of phone calls to be made, up until around 4PM when the press conference preparation takes place. And at the end of the day there is another CUB in which we discuss the progress of the day.

The number of patients on the IC continues to drop, what is your take on that?
The average of patients on the IC in The Netherlands before COVID-19 were approximately 800. Now there are just under 1.300 patient with COVID-19. We have to watch out and not be too cheerful too soon, because immediately lowering measures can be very dangerous and lead to a resurgence of COVID-19. Also given the fact that the workload at the Intensive cares is still way too high, and has been for quite some time, we should be very careful about the sustainability of these scaled-up wards. So, despite the drop we are still working on automating processes to make them more efficient and less sensitive to errors and preparing ourselves to spread workload evenly and effectively across Dutch healthcare institutions.

Watch the episode about LCPS on EenVandaag

A takeover wave amongst Dutch insurance brokers is taking place

By Insurance, News

Private equity is growing its footprint in the Dutch insurance brokerage industry. An attractive financial profile, large consolidation potential and the possibility for ‘multiple-arbitrage’ led them to be responsible for 21% of all acquired revenue over the last two years. IG&H and PhiDelphi Corporate Finance jointly investigate the drivers for and impact of the M&A wave that is currently taking place.

A takeover wave amongst Dutch insurance brokers is taking place
Dutch firms active in insurance distribution (‘brokers’) are interesting to various types of investors. Due to this wide variety of potential buyers over 65 large public transactions have taken place over the last two years, and 2020 has already kicked-off with multiple impactful transactions. Recent developments regarding the coronavirus will impact this trend as is discussed below.

The sector is changing as a result of this M&A wave. Valuations have risen to as much as 14-15x EBITDA for the largest advisors and nearly all market segments are concentrating. The overwhelming interest in the sector might come as a surprise as the sector suffers from decreasing commission rates and increasingly stringent legislation. IG&H and PhiDelphi Corporate Finance investigate who are the buyers and sellers, what drives them and what the outlook is for the M&A surge.

Private equity creates foothold, but brokers remain the largest buyers
Incumbent managing general agents (‘volmachten’) were the most active buyers, both in number of deals as in sum of acquired revenues. These brokers can create value relatively easily by transferring regular brokerage portfolios towards their mandated portfolios, while deduplicating the operation from costs.

Out of all acquired volume, 21% has been acquired by private equity (PE). Their share of deals in terms of numbers is low (6%), but these are often impactful transactions involving large brokers. Large quantities of ‘dry-powder’ looking for investments and an attractive, predictable, financial profile make large brokers attractive targets. Next to these drivers the potential for ‘multiple-arbitrage’, where they profit from the fact smaller brokers trade against lower multiples than larger brokers, is often used to create financial value.

M&A wave to continue on the longer term
Drivers of the current M&A wave such as synergies in both the top- as bottom-line and ageing boards of management will be relevant in the future as well. On top of that, there is still room for further consolidation from two points of view. The first is that most segments are still highly dispersed with a large longtail of smaller brokers, which are often inactive. The second view considers concentration: most non-life segments are nearly not as concentrated as the Group D&A and Pension segments, indicating there is room for consolidation amongst larger brokers as well.

It is evident that the coronavirus will impact the wave on the short to mid-term. All investors are dealing with more urgent matters like managing current businesses and capital availability is likely to decrease on the short term as well due to uncertainty. On the longer term, when business goes back to normal, the identified value pools and drivers will however pursue to exist.

An important precondition for successful continuation of the M&A surge is long term customer value creation. IG&H and PhiDelphi see two successful strategies: extensive backwards integration, and/or as part of a strategic move to create a broad ecosystem in which insurance brokerage is just part of the solution provided to customers.

If you are interested in the sector or would like to discuss the findings in depth you can contact:

Jan Pieter van der Helm
Director Financial Services at IG&H-
E: janpieter.vanderhelm@igh.com, +31(0)622554190

Harald Miedema
Partner at Phidelphi Corporate Finance
E: miedema@phidelphi.com, +31(0)611517340

If you want to read the full paper in Dutch, please find it here.

 

 

 

Blog 4 – ‘Ensure financial agility and make your business model future-proof.’

By News, Retail

A conversation between Henk Hofstede (sector banker Retail – ABN AMRO Bank) and Robert Spieker, Maarten Vaessen and Myrthe van Hoek (IG&H Retail), about how retailers can rebound from the Corona crisis.

Question 1: What are your most important observations on changing consumer demand in the retail sector, due to the Corona crisis?
In Food Retail, as the weeks of hoarding in which we reached ‘Christmas peak results’ are gone now, we are moving to the new normal. The online sales channel is quickly growing, which results in capacity problems and fully booked delivery timeslots. Most slots are used by existing customers who buy online more frequently, since only 4% of the demand increase comes from new users. There are ample new opportunities in food retail. Specialty stores are expected to benefit from the crisis in the short term. Customers like to treat themselves and spend more on home consumption, since they are not able to visit restaurants. However, if the crisis lasts longer, demand will shift towards the value segment. Food retailers facing a decline in demand, are the ones partly dependent on customers from Belgium or Germany, I.e. at the borders of the country.

In non-food, we see a large drop in demand, especially in physical stores. Industry associations report an average drop in demand of 70-80% with stores. With fashion’s seasonal collections, the ultimate mix between postponed and revoked consumer shopping and buying is decisive. Problems occur for retailers who are both not able to get rid of their current inventory and need cash to plan- and buy for the next seasons. DIY stores and garden centers do well, they enjoy significant sales increases. This is also true for drugstores, since we all foster our personal health. Online in non-food is increasing by 20-40%. However, this increase typically does not offset the offline decline. Thuiswinkel.org reports an online share within non-food of on average 17%. The crisis accelerates online growth, not only for its convenience, but also because it is considered to be safer. Time to invest in the development of online channels. If not alone, then with partners or through platforms.

Retailer take-away: Put yourself in the customers shoes and make sure you have a thorough understanding of the underlying shifts from offline to online, between postponed and revoked consumption and between categories and price segments.


Question 2: Which scenario’s in terms of crisis length and impact do you currently foresee and how do these scenarios differ for the retail (sub)-sectors?
ABN AMRO Insights, the economic bureau, currently foresees a crisis length of 3 months and a recovery of 3 months. However, implications of a crisis length of 6 or 9 months, instead of 3, are being studied. Therefore, we ask customers to make scenario projections of their liquidity, based on the base case (3 to 6 months) and stress-test and include darker scenario’s and timelines (6 to 9 months and beyond). We expect all measures to be quantified and agreed with key stakeholders such as government, banks and supply-chain. Of course, we will differentiate how we look at these plans depending on the retail sub-sector and the exposure to store versus online.

Retailer take-away:  At retailer board level, make sure you craft in-depth well thought through scenario analyses (3-6-9 months), including the impact on cashflow and liquidity, and revisit them at frequent intervals. All measures to be quantified, with stakeholder commitment.


Question 3: Due to the crisis, a lot of retailers are facing financial challenges. As for the credit applications you receive, do they mostly reflect financial distress or also retailers who are well positioned and looking for opportunities to invest to strengthen their position during this crisis?
Almost all credit applications reflect distress, these types of applications are getting the bank’s full attention. The most distressed cases have priority, these include the retailers who will get in trouble within two weeks without further action taken. All clients of ABN AMRO automatically receive deferred payment of interest and repayments for the next 6 months, to strengthen their cash position. However, we need to stay realistic, in the end, we cannot rescue everyone. We need to be selective and decide whether the retailer’s business model is sufficiently future proof. Is the company in liquidity problems, as a result of the Corona crisis, or did it already have problems before the crisis? Confidence in survival of the retailer for the mid to long run, with support of the government, the bank and commitment of suppliers and real estate partners, preferably without firing people, is needed.

With capacity becoming available to move beyond handling the most distressed cases, we are eager to process credit applications that reflect opportunities that emerge out of this crisis. When we do so, we assess if the business model is future proof and resilient as well as past performance. In the end, every retailer needs to make sure its financial position is robust and in good shape. Do your homework well. If you conclude being short on cash, we jointly assess if and where the bank can help. The willingness is there, but we always need to check be resilient for the uncertainty the current future certainly holds.

Retailer take-away: Pro-actively develop an integral, future- and crisis proof plan and make sure you build-in financial flexibility.


Question 4: A lot of retailers end up with financial challenges – which can only be overcome together with real estate, suppliers and internal retailer stakeholders. How, from a banking perspective, to best resolve these challenges with the different parties involved?
Closing the financial gap in this situation, is something you cannot do alone. You may need to involve government, suppliers, real estate. And, of course your bank.

Recent media discussions are focusing a lot on real estate. Retailers ask for a reduction in rent or even a stop, while real estate agencies have their own obligations towards banks as well. You do have to collaborate. If the owners of your store assets collapse, who is going to sublet the coming period? A “covenant” – a non-binding agreement – has been made by retailers and real estate companies, which advises real estate agencies to dismiss rent payments until the 20th of April. I think covenants like this are key, collaboration in the sector is a must. Other possibilities are deferment of payments or switching from monthly to quarterly based payments. All partners in your ecosystem are in the same game, you cannot just move the hot potato around.

Retailers must ultimately decide themselves how to close the gap. Cash is king in a crisis, but make sure you really reach and build commitment with your partners. You also need each other after the crisis. Last week, the media reported on credit insurers reducing the amounts they are willing to insure, implying wholesalers – who often already face uncertain demand – need to change their conditions. In other words, they expect their retail customer to pay more quickly. Of course, I understand these credit insurers, they have to reduce their risk exposure. It can be logically explained. If you want to prevent all of this from happening, then ultimately the government will need to also create a safety net under credit insurers. This week, the government announced that credit insurers will also be protected by government security, this will resolve this problem for now. Beyond this, there are also for example discussions taking place about the possibilities for a fund to support retailers that are future proof.

Retailer take-away: You cannot manage through the crisis by yourself. You must ensure commitment through collaboration and partnership within your retail sector with key strategic partners and competitors, including banks and government


Question 5: How would you recommend retailers, who both face significant demand uncertainty and need to buy their merchandise ahead of time (e.g. due to seasonal buying), to make their buying and financial commitments at this moment in time?
That’s a devil’s dilemma. Nobody knows what the situation will really look like in 3 or 6 months from now. A sold out or empty store will mean no revenues but having the wrong or too much merchandise put will put you in the wrong place also. Consumer confidence is critical, we need to see it recover. You need to look at smart buying, of course assuming you have the liquidity you need. Focus on buying the most current ranges, the runners and never out of stocks that will always sell. Lower your exposure towards more trendier ranges and collections. The role of buying will be more important and strategic than ever. You have to stay on the safe side, making the right agreements and commitments with your suppliers will pay off.

Retailer take-away: Smart buying now is more important than ever before, to make sure you can take the next hurdle through demand planning for uncertain fall 2020 and 2021 consumer demand.


Question 6: Before the crisis a lot of stores where already “under water”. The crisis causes a further reduction in sales per store, in the rebound we may not return to the level of sales per store we saw before the crisis. How do you currently look at the need to revisit the store network and footprint?
Until right before the crisis we indeed already saw store vacancy increasing to 7%. A lot of retailers where facing downward pressure on store profitability, due to on- and offline competition, increasing price pressure and often by falling behind in much needed innovation. For some retailers the Corona crisis will be the final push into the graveyard of retail. Part of offline sales will come back, but not everything. We certainly project further online growth. Before the crisis we projected an online CAGR of 15%, we see this accelerate. The implication is that we will see further store closures. We jointly have to prepare for thickening urban shopping areas. Retailers once again have to revisit how their store format can differentiate and remain relevant with clear value added to the consumer. You have to include the 1.5-meter economy perspective. What can I do in a store, where we need to keep 1.5 meter distance, does it influence store lay-out and merchandising? What to change? We already see a lot of creativity and examples which will help adjust to this new reality.

Retailer take-away: Reconsider how your store format and store network can remain relevant in the 1,5-meter economy, focus on differentiation and value added and be creative.


Question 7: For many retailers the safety and health of their employees has become an important priority. However, at the same time personnel cost are now even higher as a share of overall business, as stores have reduced opening hours and traffic has fallen dramatically. How do you look at this, what are the implications?
Both in business services and retail we see that healthy profitability is a result of a healthy company culture. Having the right personnel (customer oriented, with expertise and genuine interest in their customers) attracts consumers to the physical store. You should no longer regard personnel as a cost item, but rather as a source of revenue growth. Before the crisis, retail was facing problems to attract enough good personnel. A further rationalisation of the store footprint will take place in retail, hopefully the labour shortage will imply that people laid off will quickly find a new job in retail. This crisis will force us to look differently at the frontline, store personnel from now on. To give more appreciation and acknowledgment. Possibly, we may see pay increases. In the 1,5-meter economy personnel will be a differentiator and driver for revenue.

Retailer take-away: This is the moment for a robust plan and approach to develop skills, culture and align proper pay to retain and develop store personnel for the 1.5-meter economy.


Question 8: Looking ahead, do you see any major tipping points over time, that will cause certain types of retailers to no longer be able to keep their head above the water?
The longer the crisis lasts, the more the consumer will shift away from the high end, more luxury segments. Groceries, clothing and home entertainment are in a good place, but other retail segments will be at risk. The crisis impacts employment and therefore buying power and income. Price consciousness will increase. It depends on the situation of each specific retailer, on their financial position and the type of merchandise focused on. Retailers that have not been leveraged to the max and that still have financial muscle allowing them to take pro-active strategic and commercial decisions are advantaged. Financial viability and agility are decisive. Retailers that do not have this viability and are typically highly leveraged are at risk. They cannot handle headwind, they can only overcome their challenges by growing again. Which will be tough. The past couple of years we observed a sprawl of new retailers and formats. In the crisis, and in the rebound, a downward correction will take place. You have got to prepare yourself for all different scenario’s, not only the optimistic one.

Retailer take-away: Make sure you have both financial and commercial agility and resilience. Renew focus on the value segment and the value elements of your proposition including price, range, marketing communication and promotion.


Question 9: Which lessons can we learn from the Corona crisis regarding the retail business model?
Dual sourcing. For example, we have become too dependent on China. Retailers need to shift their supply-base and perhaps move it closer to their base markets and reduce over dependency. It is not all about the lowest price, but also about delivery reliability and quality. Step up investment in long term relationships along the supply chain. Strengthen eco-systems with your partners, because as already said, you will need each other after the crisis as well.

Retailer take-away: Intensify supply chain / strategic partner cooperation, shift to more locally sourced and less centralized supply, and prepare for the new.


Question and conclusion of the conversation: If you could give one piece of advice to retailers – for both the coming weeks and the near term – to rebound from the Corona crisis, what would it be?
Cash is King in times of crisis, but also do try to reinvent yourself at the same time. There are opportunities emerging all over, but decisions have to be made to stop or change certain activities and adjust elements of your proposition. The most important topics we discussed are future readiness, financial agility, creativity and cooperation in the supply chain with your stakeholders. Furthermore, it all depends on how fast we take control over the virus, how fast governmental measures are going to be eased and how fast consumer trust can be re-established. Prepare yourself for the new normal, for now we call it ‘the 1,5-meter economy’.

With special thanks to Henk Hofstede,

Robert Spieker
Partner at IG&H
E: robert.spieker@igh.com T: +31622791962

Maarten Vaessen
Partner at IG&H
E: maarten.vaessen@igh.com T: +31653571666

Author: Myrthe van Hoek (myrthe.vanhoek@igh.com)

Leadership during crisis: Work together to weather the storm

By News, Organizational transformation

From the local bakery to the multinational corporation, the corona crisis requests strong leadership at all levels. Leaders have the important task to navigate their organisation and employees, and therefore society, through these difficult times. Question remains: how to approach this kind of responsibility? We have identified three best practices for effective leadership during a time of crisis.

#1 Show empathy and remain connected
Employees are your main priority as a leader. Therefore, it is essential to show empathy and compassion for the personal and professional challenges employees currently face. Acknowledge the complexity of the situation and emphasize that you are in this together. This requires special attention by being supportive and showing appreciation towards your employees. Recognition can be sparked by contacting your employees regularly. Ask them how they are doing, how they feel about their workload and how their needs can be addressed. By setting an example, employees will start to check-in with each other as well, which will foster team spirit. During the check-ins, it is paramount for leaders to stress the importance of a healthy work-life balance. Additionally, you should encourage your employees to take time to relax to stay physically, socially and mentally in good condition.

#2 Communicate frequently and transparently
Besides showing empathy and remaining connected, these uncertain times call for clear and transparent communication. Take a fixed moment every week in which you provide transparency about the impact of the crisis and the outlook after the crisis. Clarity sparks confidence and creates a sense of security among employees. Make sure, just like our prime minister, to emphasize that you will constantly adapt to the latest insights as not everything can already be foreseen. It is important to be cautious with regards of the terminology you use in your communication, as words have a big impact on sentiment. It is recommended to emphasize on solidarity (by using words like ‘we’ and ‘together’) and faith (by using words like ‘collective flexibility, ‘our future’ and ‘your power’).

#3 Provide future perspective
Apart from the challenges we are currently facing, the coronavirus outbreak also provides ample opportunity. It is for a good reason that the Chinese sign of crisis is similar to the sign of opportunity. Translating this to leadership means addressing risks is equally important to addressing opportunities. Take time to reflect: What can our organisation learn from this situation, is it time to change directions? This helps to provide a realistic but positive future perspective to your employees. Creating perspective will increase trust among your employees and will rekindle motivation to contribute to this collective (renewed) goal. Challenge employees to explore creative ways to turn the apparent challenges into opportunities. To make those ideas work, ensure a dedicated approach: identify critical success factors, make sure to accelerate fast and evaluate continuously. Besides, daily check-ins with the team will foster collaboration. Read more information about how to design this in a digital environment. By enabling employees with enough space, time and mandate to make it work and by focussing on (small) achievements, collective energy will increase, which is necessary combating the corona crisis.

Would you like to talk about working in a digital environment within your organization or use the momentum to get a head start? We are more than ready to help you explore new opportunities! On our website we will share more blogs, hand-outs and other materials related to efficiently working from home.

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How Retailers can rebound from the Corona crisis – 3) The breaktrough of online shopping as the new standard

By News, Retail

It is not the first time that the world has been shut down through the outbreak of a deadly virus. In 2003, SARS forced people in China to stay at home as well. It turned out to be the trigger for B2B start-up Alibaba to move into consumer markets. They launched consumer shopping website Taobao (similar to the Dutch “Marktplaats”). At the time, JD also was a small company with 12 electronics shops in Beijing.  Revenues plummeted due to SARS as all but one of the stores had to be closed. The founder, Richard Liu, took drastic measures and turned towards a primitive version of ecommerce. He advertised his goods in forums, had employees manually write down orders, send text messages when the order was ready and personally delivered them to customers close to the office. Ever since, both Alibaba and JD have rigorously focused on offering consumers access to products from home. Today they both rank amongst the world’s largest retailers.

Just like SARS, the Corona outbreak leads to a drastic change in consumer lifestyle & behaviour with a strong boost in e-commerce – this time on a global scale. This blog addresses the opportunities and challenges this implies for retailers, and how to respond both short-term and long-term. In short:

  • Corona accelerates the breakthrough of online shopping as ‘the new normal’
  • Retailers struggle to quickly scale up e-commerce due to staff shortages, limited stock availability and inflexible logistics operations
  • Key short-term opportunities include use of underutilized stores as ‘dark stores’, radically re-allocate the workforce and instantly optimize assortments
  • Longer term, “think digitally” to reset your business model profitably(offering, stores and capabilities)

E-commerce is flourishing: the accelerated breakthrough of online shopping as “the new normal
Due to the Corona outbreak, consumers stay at home and are looking to create safety and comfort for themselves and their families. Online shopping addresses these needs perfectly. China has seen the number of consumers shopping for online groceries almost double in February (source: South China Morning Post). In the Netherlands we see the same figures. In certain sectors online demand levels are already similar to the holiday season (Thuiswinkel.org). Drugstore and personal care products have grown between 50 and 100% in recent weeks. Items that make life more enjoyable, such as sports, DIY and garden items, show growth rates between 20% and 40%.

The massive switch to online is expected to (partly) be a sustainable consumer behaviour rather than just temporarily. In 2003, the SARS virus accelerated the breakthrough of digital telephony and Internet.  Similarly, the heritage of Corona will be lasting confidence in online shopping and drastically enhanced adoption. New target groups such as elderly people are discovering the convenience of online grocery shopping. Sectors where online is still in its infancy are accelerating by offering new digital services. Examples are numerous and include e-health apps to track corona-related complaints, online (home) education applications and fitness video streaming as an alternative to gyms.

This crisis is creating new consumer habits that will likely stick. This means a hard reset in consumer behaviour: online shopping becomes the new standard in many areas. Therefore, now is the time for retailers to really take a leap forward in e-commerce.

Growing pains
Scaling up an e-commerce operation is not easy and meeting customer needs can be particularly challenging these days. For instance, for many retailers delivery times in e-commerce fulfilment have increased from same or next day to multiple days or even weeks. Why is this happening?

  • Personnel shortage in warehouses and parcel depots: at present approximately 15% of own- and temporary staff have fallen out due to Corona measures. For manual operations, this often leads to a direct drop in productivity. Food retailers are getting priority for labour because of their vital function in the chain – affecting other retailers even harder
  • Low stock availability: Supply chains have been severely interrupted leading to long delays in inbound replenishment orders from a.o. the far east. In addition, consumer needs have changed instantly, making forecasts unreliable. Taken together, this has drastically deteriorated inventory availability levels for many retailers.
  • Inflexible logistic structure: existing DCs are often inflexible to switch between offline and online logistics due to fixed mechanization. In manually operated DCs it takes time to set up new picking locations with supporting IT. For many retailers, E-DCs are separate from retail DCs, resulting in additional inventory allocation and movement complexity.

Fasten your seatbelt: innovate around new customer needs 
How can retailers better deal with the abovementioned challenges? We list some immediate actions that are already successfully being pursued in the market now.

Turn stores into ‘Dark Stores
A ‘dark store’ essentially deploys an underutilized (or even closed) store as a picking and delivery point for e-commerce orders. By converting your stores into small e-commerce warehouses you open up your entire store network to online shoppers. Beside boosting product availability, this can offer a fast home-delivery alternative for instance via a bicycle courier. The effects can be significant: from improved customer satisfaction and additional revenues from an instant proposition, to lower pressure on central E-DC operations and improved working capital. Benefits that can last beyond the current crisis.

To set this up, a system must be installed that creates pick orders for store staff (linked with existing ERP and WMS systems). Store employees need to be trained as order pickers and a place is required where consumers or couriers can pick up orders safely. To manage this operation, it is essential to have dashboards with real-time availability information.

Re-allocate your workforce

Chinese retailers have been successfully redeploying store staff in a radically different way. Employees were used as online influencers to reach their customers. Communication platforms such as WeChat (Chinese variant of WhatsApp) and Ding Talk were used to help multiple customers simultaneously via live streams.

This setup was pursued earlier this year by a cosmetics company called Lin Qingxuan (>2.000 employees) in the Wuhan region where all stores were closed. Using store staff as online influencers, sales levels increased by 200% compared to the previous year (source: HBR). Other examples range from re-training store staff for logistics roles to expanding customer service teams.

In case of scarcity, the solution might be found at other companies. For example, Chinese tech supermarket HEMA resolved the need for temps through using employees of restaurant, hotel & cinema chains in China.

Optimize your assortment
When Corona set foot in the UK, Amazon immediately reprioritized and switched assortments online and in their DCs. Non-vital products such as spring clothing were exchanged with high-turnover products such as soap, detergents and household products. In this way, consumers were provided with essential products, while at the same time higher efficiency levels were achieved.

Beyond the crisisimprove the profitability of your business model to hit back
The big challenge in the long term is moving towards a radical digital proposition with a profitable business model. We see 3 main themes to move to an optimized omni-channel setup:

1)Re-think your e-commerce offering 
Some key questions that should be answered are:

  • Assortment: what new products or services does your target group need? What product (combinations) do you offer? How will you deal with Low-value products that are costly to deliver at home?
  • Reach: how do you reach your target group online? what is your company’s story?  what communication channels are most effective?
  • Proposition: from what order-amount is free shipping offered? what kind of service window do you offer your customers? Like Amazon and bol.com can a subscription-based proposition increase your customers loyalty?
  • Operations: a highly efficient and cost-effective fulfilment operation is an absolute pre-requisite to achieve business profitability. How can higher degrees of mechanization and automation help improve your operation? How can (partial) outsourcing and workforce flexibilization contribute to further cost optimization and service improvements?

2)Re-define the role of the store
As e-commerce continues to grow and demand shifts from offline to online, it will put more pressure on the profitability of traditional stores. In China, retailers have already made radical choices by cancelling offline campaigns & promotions and replacing them with digital marketing, chat programs and innovative O2O (online orientation and payment, offline pick-up) partnerships. Ultimately, stores are no longer just a place for inventories and transactions, but much more than this. Advice, experience, return, pick-up, introductions, consumption and promotion can be key elements of the (new) role of the store. What do your customers need and what will you offer? How will you generate value out of this offering and channel? What value can this provide for your brands and suppliers and how will they contribute (financially)?

3)Become truly digital
Retailers such as Amazon, JD.com and Alibaba have repeatedly shown the way towards a digital future. One of the most prominent capability that sets them apart is their extreme Technology focus. They deploy highly flexible systems, tooling and dashboarding that supports their way of working and ensures IT integration for seamless omni-channel experience.  Additionally, their customer propositions are highly personalized and constantly updated by deploying advanced analytics and algorithms. All is enabled by a very flat organisation to assure maximum flexibility and fast decision making.

The Coronavirus is a tremendous challenge for all retailers, but one thing is certain: online shopping will be “the new normal”. When successfully setup, this can make the difference in how successful a retailer is coming out of this Corona crisis. And it will be worth it once the next crisis arrives.

Contact
Jasper van Rijn
Partner at IG&H
E: jasper.vanrijn@igh.com T: +31653376760

Maarten Vaessen
Partner at IG&H
E: maarten.vaessen@igh.com T: +31653571666

Author: Evelien Kip (evelien.kip@igh.com)

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