EXPECTATION2020 B
Digital at Scale

Digital divorce from Coop’s 60-year-old business model

In the same way that supermarkets replaced the classic grocery shops, digital development is set to radically change how Danes buy their convenience goods. Morten Holm, CIO of Coop, talks about how to focus on creating digital value for Coop’s 1.8 million co-owners and find the right balance between rapid development and stable operations.

 

In a few years, digitalization will make the shopping trip to Fakta, Kvickly or Dagli ‘Brugsen a completely different experience. According to CIO Morten Holm, Coop – a cooperative and the largest retailer of consumer goods in Denmark – is in the process of renewing its business model with the help of modern infrastructure, better use of data and new digital channels.

Disruption on the shelves
For Danes, their daily shopping trips have not noticeably changed since the first FDB supermarket opened in Esbjerg back in the 1950s. At that time, a far-sighted management team introduced customers to self-service experiment based on American models, and created the greatest disruption of Danish grocery shopping since the start of the Danish consumer association movement in 1866. Morten Holm expects digitalization to disrupt supermarkets on the same scale. Danish shopping habits are already changing dramatically. The supermarket of today is under pressure from two trends; partly from online retail, which is creating a great deal of competition in the non-food product range; and partly from the convenience food wave. Four years ago, the average Dane ate in restaurants or ordered takeout once a week. This has now risen to twice a week in the major cities.

"The family evening meal and packed lunches are at the heart of the Danish grocery trade, but people seem to be less willing to cook themselves and now buy more goods online. With people visiting them less often, much of the demand for supermarkets in their current form has been removed. So, supermarkets need to reinvent themselves. This is what lies behind Coop’s ambitions for digital development", says CIO Morten Holm.

Your local digital store
Reinventing the business model for a 160-year-old company with proud traditions and roots in the cooperative movement is obviously a challenge. But from Morten Holm’s point of view, these very traditions and the customer community are Coop’s greatest strengths – and they bring with them both obligation and inspiration.

"We are owned by our members. This means that 1.8 million Danes have actively chosen us and are committed to our business. There is a huge value in that interface. We know our customers well, not least locally – and we need that knowledge to put together the right kinds of deals", says Morten Holm.

As an example, he mentions the Scan & Pay feature in the Coop app, where customers can escape the queue by handling payments themselves. This benefits both the customers and the store because it saves time and releases staff for other tasks. Equally important, it opens a real-time communication channel while the customer is pushing their shopping cart.

"In the long term, Scan & Pay will allow us to offer customers a good red wine that goes perfectly with the steak that has just been scanned. It might also disclose the CO2 footprint of the item, making it easier to buy more climate-friendly products. We need to preserve the consumer’s free choice while also using digital channels to provide facts that help customers make informed choices", Morten Holm explains.

Mainframe’s golden anniversary
Coop’s digital transformation needs a strong foundation. A year and a half ago, the senior management team initiated a radical technical reboot. This included Denmark’s largest S/4 HANA solution, where the entire value chain and operational core such as purchasing, promotions, returns and accounting are to be standardized and modernized. Modernization is being carried out as a smooth transition, with With Morten Holm CIO, Coop the various categories being gradually moved over to new systems. It is far from easy to get the old systems to coexist with the new ones. This means there is a strong focus on business stability. The older systems are often customized to support internal digital processes, which can be highly complex.

"Some of our systems are more than 40 years old and we recently celebrated the golden anniversary of our mainframe system. This runs around 800 batch jobs every night that we don’t actually know a lot about as the original developers have long since gone. We need to be 100% certain that we will not disrupt operations before we can shut a system down", says Morten Holm.

Agile development at the farmhouse
On the development side, Coop established a new development unit three years ago that is physically separate from the rest of the company.

"We bought an old farmhouse which, in true start-up tradition, involved table soccer and agile working methods. Here we have brought in 35 new people who work on digital projects in close dialogue with our members. We have outsourced our technical development to Ukraine, where we can recruit PhD graduates relatively cheaply. It is important to keep costs down in recognition of the fact that many digital experiments fail to end in a finished solution", says Morten Holm.

After three years, Coop’s agile development environment has produced a number of successes that have become popular in a short time. Now the focus is on integrating them with the existing infrastructure and many internal systems. This has to be done in the right way every single time, which is where Morten Holm puts his faith in the more operationally-experienced part of the IT team.

"When new products such as Scan & Pay are launched, the data sources need to be properly linked, and we must be able to handle several hundred thousand transactions in half an hour. Here, we involve more of our “wise heads” in the process because they have the necessary technical IT discipline in their DNA. So, the art is to combine solid IT practices with innovative out-of-the-box ideas, and maintain the right balance between creativity and focus on operational stability", says Morten Holm.

Morten Holm’s best tips for the agile CIO

  • Make sure you understand your customers, your industry and your business model – not just in its present form, but also its future potential. Stay in close touch with the other managers and keep a sharp eye on how technology can support the development of your business.
  • IT is a “people business” and talented employees make all the difference! Coop has recruited 91 new IT staff over the past years. This has added brand new skills to the company and the value created has virtually made hiring them cost-free.
  • As a company, you need to both understand and master the technology to a much higher degree than previously. In the past, IT was done as cheaply as possible and preferably outsourced. However, the new reality of today places entirely different demands on business knowledge levels, not least around your data.

 

Digital Facts about Coop

  • The Coop app is one of Denmark’s most popular, with over 1.4 million downloads and 300,000 users per day during busy periods. New features are added every month.
  • Today, around 3% of Coop customers buy their products with Scan & Pay, but Morten Holm expects half of all customers to use this feature in a few years.
  • Coop invests heavily in security and compliance, especially when seen against the huge amount of data in its customer-facing solutions. For this reason, security and compliance are ongoing issues at boardroom level.