Transcript - Ian Cheshire, CEO of Kingfisher plc
Nicholas O’Regan, Professor of Strategy and Innovation, talks to Ian Cheshire, CEO of Kingfisher plc and discusses the company’s growing success during the recession and the challenges ahead.
Q. How much of Kingfisher’s strong performance during the recession can be attributed to operation issues?
Ian: I think the experience of the last two years, proven all by markets, is that we haven’t had much help from the markets. So I suppose the irony is that we’re a DIY company and we’ve had to do a DIY job on the business, and it's been focused particularly on our margin and cost initiatives. But also trying to think about how we can take advantage of harder times. So, a lot of reinvestment into stores, but much more targeted capital investment programmes where we can see quicker paybacks and a great, very extreme focus on cash. The big thing we’ve done over the last two years is basically paid off £1.6 billion of debt, and that’s really been the key to giving ourselves the flexibility now to go forward and invest.
Q. With stores throughout Europe and Asia, to what extent do you see your customers' needs as the same?
Ian: Well I think there we're probably on 80/20: Western Europe has quite a high degree of commonality and increasingly we’re driving towards a common range. But historically we’re a very diverse company with Castorama in France, and B&Q in the UK. I think those global influences remain but there are always local adaptations and retailing is still very much a fundamentally local affair: I mean 80% of customers still come from within a 20 minute drive time, so you can’t be too specific, but the fact is a power drill’s a power drill and it's globally sourced.
By contrast the business in China is fundamentally different. There’s no DIY as such in China. If you afford the product, you can afford someone to install it for you. As a result you have to fundamentally adapt the offer, so I think there’s a Western Europe commonality, but I think when you go much more further afield you have to much more careful.
Q. What are the key challenges facing Kingfisher?
Ian: I think our key challenge now is we’re 18 months into a business turnaround story that we’ve got to deliver. That’s still priority number one, so delivering our value programme that we set out has got to be key. I think the thing we’re now focusing on is life after 2012, which is the ten year vision which is trying to create a growth story. In consumer markets, which are generally lowish growth fundamentally, how do we come up with a strategy that unlocks more value? We particularly have to look at that in the context of a very diverse set of individual operating units around the world and how we weld them together into one retailer, taking advantage of £10 billion of sale. That is basically a different model for working and that’s the thing we’re working much more closely on at the moment.
Q. What are Kingfisher’s distinctive competencies?
Ian: I think we fundamentally have got sort of three main areas, but I think there are others. Fundamentally we’ve got a retail proposition, so understanding customers and creating propositions that work for them. The second piece is a global sourcing proposition which I think is increasingly fundamental, not just for retailers but all businesses these days, and the final bit is that we’re very focused on our people and developing them. We are a high service environment compared to say a traditional supermarket, and we believe that if we get the service right, fundamentally the sales will follow. That’s the thing we’ve been, certainly in the UK we’ve been focused on in the last two years.
Q. How important is innovation to you in terms of products and profits?
Ian: Absolutely critical. One of the problems we’ve actually got is home improvements have become fundamentally boring and there hasn’t been a real wave of innovation. We haven’t got this fantastic supplier base that’s inventing flat screen TVs or coming up with the iPad. So we as retailers are now saying, "well if the manufacturers aren’t doing it, we’re not doing it" - then it’s not really surprising it’s not happening. We are now fundamentally upping our investment and innovation, particularly because we think the overall markets are flat so the only growth is going to come through newness. So, actually innovation is currently the top of our list of strategic priorities.
Q. How important is the ‘Green Agenda’ to a company like Kingfisher?
Ian: We actually think it’s fundamentally very important for us, but for two reasons: I think it starts with being a massive commercial opportunity, the whole environmental refurbishment of housing, particularly in Europe, is at least a £10 million market in the UK and probably an addition to that in Europe. What that means is there will be money spent and we’ve got to come up with an offer for it. But it also means that if you want to sell those products you’ve actually got to walk the walk yourself so you have to fundamentally ask yourself, "How saleable is my business model? What’s my impact?". So we’re now putting that in one of our four key themes along with innovation; the environmental agenda is also one of our four key themes coming forward.
Q. What are the key issues a Chief Executive has to focus on?
Ian: I think one that I’d pick out is making sure you are focusing on something, because the quickest thing you can do is be blurred into a hundred thousand minds of events and actually staying focused is not insignificant. The second thing for me is really we lead through teams, and it’s about creating and developing teams. If you’re spending your time worrying about that you’re probably doing the right thing.