In conversation with Herculano Rodrigues of THG Ingenuity

Teresa Owusu-Adjei:

Welcome to the latest episode of our Business in Focus podcast. I am Teresa Owusu-Adjei, I am a financial services partner and head of legal at PwC. I am your host for today. Really excited to bring to you the next episode of our “In Conversation with” podcast. These feature discussions between our people and our clients about the impact over the last 18 months on their organisation. We’re going to explore what we’ve learned from the disruptions that we’ve experienced over the last year, and how we can take those lessons forward to help us navigate future challenges. We’ll also discuss how we work together with speed, imagination, and care to deliver results that really make that difference. Joining me today in our virtual studio are Carl Sizer and Herculano Rodrigues. Hello to both of you. I wonder if I could just get you both to give me a brief introduction. Herculano, can I come to you first please?

Herculano Rodrigues:

Sure, hi Teresa, my name is Herculano Rodrigues, and I am the category director for THG. What that basically means is I work with our largest clients, helping them to support their D2C (direct to consumer) growth. I also lead our digital strategy team, who help optimise digital strategies for all of our client’s at Ingenuity. I am really happy to be here and to be talking to you today.

Teresa:

Thank you, and I am going to come back in a moment to actually ask you a little bit more about THG Ingenuity, but before I do that, Carl hi, do you want to say hi to everybody?

Carl Sizer:

Hi Teresa, hi Herc, great to be here today. I am the management board member. I was answerable for our regional practice across the UK, financial services partner as well. Teresa, slightly different agenda for us today, but really looking forward to the conversation.

Teresa:

Great, hi. Herculano, you started off by explaining exactly what it is that you do at THG ingenuity. I wonder for those of our listeners, who don’t understand exactly what the company does, if you could just give us a brief overview of what it is that you do?

Herculano:

Sure thing Teresa. THG Ingenuity is essentially the technology division within THG. What we do is help brands with a complete digital transformation through a simple E-commerce platform. What that basically looks like is we help brands from looking really at things across four key pillars, so everything from understanding the technology, the operations, the digital brand services, underpinned by data are services that we provide to clients, to help an end-to-end Ecommerce proposition.

Teresa:

I’d love to understand from your perspective, just what the disruption over the last 18 months has meant for Ingenuity and what have been some of the challenges, what have been some of the successes?

Herculano:

Sure totally. If we take a step back and you look at, okay, March 2020 we all go into lockdown. That means every single shop in the UK closed except for essentials. It really disrupted the consumer patterns of how people would shop. Obviously, there was a lot of additional disruption in terms of working and all the other factors of what we do on a day-to-day basis, but what it really meant for retailers and for brands was their main channel that they have to connect with their customers was scuttled. What we’ve found is, over the last 18 months since March last year, the number of businesses that wanted to launch direct to consumer, so they can get their products into the hands of big consumers has increased massively. What that means was, in terms of challenges, the biggest challenge was, most of these businesses that we worked with or that we work with, they’re not really set up for direct to consumer. They have a traditional retail value chain, and their E-Commerce was a small proportion of their business, but what COVID really did was give you a window into how the future is going to look like in terms of shopping, and consumer behaviour. It enabled, brands had to really pivot their business models ridiculously quickly around, ‘okay how do I launch an E-commerce site if I am a food and beverage company,’ where E-commerce generally use to go through the pure plays or through some of the grocers, but actually how do we launch a pure play, getting to the hands of consumers was a really instant pivot. What that really meant was, what we had to do was really upscale on the amount of fulfilment and also the amount of people in our business to help us help our customers accelerate their direct to consumer business. What that really meant was, it was genuinely helping businesses to pivot their business models, create new businesses and new operating models, to be able to get closer to their consumers, to be able to sell their products. There are many benefits, and I can come on to that little bit later, but the key thing that they really wanted to do was, to be able to sell their products to their consumers, to get the consumer engagement, and also to start to capture data.

Teresa:

Our jaw almost dropped with the 3000 people that you hired in 2020. Carl, can I turn to you, having heard what Herculano has talked about in terms of that quick pivot that they have to do. We talk a lot about speed, imagination, and care, but particularly focused on speed and maybe supply chain disruption and transformation, would love to get your perspective from what you’ve seen over the last year from your clients?

Carl:

That piece around speed has been absolutely important this year. The speed of disruptions, speed of change, organisations when we first talked to them, a number of them were in a bit of a mode of panic, what do I do, where do I go, but actually, the opportunities that came around suddenly manifest themselves. We had organisations changing absolutely massively to really deliver to what it was the consumers actually really wanted. That really needed that speed of change and diversity of thought. It needed a lot also of innovation and imagination to figure out how to do things differently. Actually it’s quite remarkable, isn’t it, that you in this example here recruited 3000 people, who would’ve thought in a very digital perspective that was what was needed, but actually it was need to supply this huge change in customer demand, but actually that was really focused on what it was that customers really wanted. That concept of care for the customers, cares for the consumers, that was about how do organisations think about what is it consumers really need in this very different world that they find themselves in, and how do they set up the business model, the operations, the supply chain to deliver to that need. An absolutely massive fundamental change on one now that will clearly stick, and stick for the better in a number of different ways, but it’s fundamentally putting business models in quite a different position.

Teresa:

Herculano, just going back to something that you said around a lot of these businesses had never had a D2C model, and so they have to pivot quite quickly, in terms of when you think back, the challenges that you have as an organisation in making that happen, are there some lessons learnt from that?

Herculano:

The learning for me is, you really need to take a step back and think what is it that the customer is trying to get to, what is it as a business we can do to try and get to where the customers are, and how do I organise my business in the appropriate way. For me, it is always around, taking that step back and figuring out where do we start, what is the right proposition for our customers, why are we doing this, and how do we execute this? The bit about E-commerce is really difficult. E-commerce is not easy. You have to have the supply chain, you have to have the understanding of the consumers, you have to compete in a really tough environment when it comes to advertising and getting people to come to your site. To think of all of those key variables, many businesses are not set up in that way of, ‘okay well, why do we want to have a D2C in the first place, how are we going to advertise differently, and how is our supply chain going to evolve in a way, which allows us to support that D2C?

Some very simple examples. Most businesses when they are shipping products, if I think of a CPG business, and we take nutrition bars, most businesses will have those readymade for shelf packaging in supermarkets. They didn’t think, okay well we might need to make smaller packages for consumers, rather than buying 25 or 30 bars, we need to make smaller packaging. Actually, the idea around, well how do you get your supply chain right, by thinking around, well what is the point that you’re trying to achieve, how do you organise around that individual goal? Essentially, what we’re doing in these businesses, and I am sure Carl can speak eloquently about this as well, as you’re setting up a new business within major conglomerates, these aren’t just small divisions that have been running in the past, these are really brand-new businesses, which need a new set of KPIs, a new operating model, and a new way of working.

Teresa:

I want to come to Carl in a moment, but Herculano, if I could just ask you one more on that, what do you think those businesses what would they have learnt, do you think when you talk to them now for the 12 to 18 months on?

Herculano:

It’s a really interesting question, because it depends on the business that you talk to, because we have a range of businesses that are at various stages of maturity in their D2C journey. The reality is most businesses are on a D2C journey. The reason is, they are trying to capture, essentially, getting closer to their consumers. One of the best learnings that I think most businesses will take is the ability to capture first party data in terms of understanding who your consumer is, how often they go online, what products they purchase from you, why are they buying them from you? Having that data, then allows you to do two really important things. Firstly, it allows you to optimise your marketing in future in terms of being able to design personalised marketing, because you have better customer awareness, and better customer understanding, and you can target them more personally, is the first thing. The second thing, in the reverse of that, is actually using that data to help with your new product development.

One of the most interesting things about THG as its own businesses is being able to utilise that data to understand your consumers, has really helped us to drive our new product development. We’re able to do new product development at scale and at pace, because of capturing that consumer data, and also because we’re virtually integrated. If we look back over the last 18 months, most businesses that we work with in Ingenuity are going to be looking at, how do they take that customer data and use that in a more effective way when it comes to just getting extra value from it as well.

Carl:

Teresa, just to build on that very quickly, because it’s that data led piece that for me has really fundamentally changed the way that businesses operate in the direct-to-consumer model. We’re doing a lot more work now, really looking to analyse the data that is coming out of various different systems and data points that people are using to really get an understanding of what is it that customers want. You can make some quite interesting business decisions clearly off the back of that, but it plays into supply chain and how fast you need to be reacting to different consumer demands. Data analytics now used to be a bit of a nice to have thought for organisations, in this new world, it is a must have. If you don’t have it, you’ll either be inefficient in terms of the cost that you have and the amount of storage of supply of raw materials, or you will be cost ineffective when you’re actually servicing the clients, because actually you’re not delivering real time, you’re not delivering at the speed and pace that they really want it, and therefore you lack the consumer demand that you really need in order to generate the revenues your after. The data analytics side has been the fundamental shift that definitely won’t go back and will only enhance.

Herculano:

I can build a little bit further than that as well Carel, because I am fascinated around this concept of data. In my experience, what we sit with most businesses at the moment is, a lot of businesses, probably don’t know about 80% of the data that they have is there for, and how to use it, least do they know exactly how to augment that to better come up with the full cost and full product demand to then improve the supply chain. Putting my analytics hat on, it is really interesting, because most businesses probably spend about 60% to 70% of analytics around cleansing data, and trying to augment that, where actually not even in the stage where lots of businesses are being able to use it to do some predictive insight, to really predict what the future demand is going to be. I am really fascinated to see how that’s going to evolve in terms of how businesses create the right data ecosystems within their organisation.

Teresa:

You just alluded to this a couple of minutes ago about that customer insight. I just wonder as the journey of the pandemic has changed over the last 18 months, Has the insight that you have been getting, or your customers have been getting, have they changed, and if so, how?

Herculano:

It can go in many different strands. Naturally, what the data is telling us is that consumer behaviours have changed dramatically. If you think back, if we look at how we are traditionally forecasting before, which is 12 months, maybe 18 months, maybe even 24 months, if you are a fashion retailer into the future, in terms of demand, COVID really just broke the ability to forecast so far into the future. We can’t just plan out like we used to, and we have to create new, more flexible models of data, but also using that data then to inform your supply chain, and build more flexible and more fluid ecosystems, when it comes to your supply chain as well.

Carl:

The creation of the ecosystem there, Herc is also quite an interesting concept, in actually by using the data you can start to, as you say, inform other suppliers and distributors as to what it is you need, and that in and of itself helps to build other organisations, communities around it. I think about your business up in Manchester, and how that has filled a bit of an ecosystem, it is built for the supply chain, it will no doubt continue to grow other businesses locally around that. That concept of an ecosystem in a certainly more virtual worlds is also in field through the pandemic, which probably didn’t exist before, and is something again that will be very much everlasting.

Herculano:

Indeed, if you think about this Carl, what we normally do if we’re doing some digital strategy, we could traditionally start to understand, ‘well, what’s my product, what’s my promotions, what’s my place, and you have your standard to the four P’s, what we will involve now is, it’s not just the standard four P’s of doing an analysis on a company as you put them on to a digital proposition, we also need to look at, well what is partnerships and what is the business’s purpose. The partnerships piece is really interesting, because no longer if you think about how you can compete in the future, are you going to be able to compete just on your own, it is about building the ecosystem of partners, whether that be from, if you think of E-commerce, it’s everything from payments, through to fulfilment, through to your partners like Facebook and Google, which is the demand generation, to get people to come to your site. It is really around building that robust ecosystem, is part of it, but the other part is actually internally within our business, but also the business that we work with, is how do we create that right partnership of ecosystem mentality with your partners that can help you to scale and grow quickly, and what is the ways of working that you build in place, and what are operating models that you build to really truly scale at pace. That’s the real shift that I’ve seen as well over the last 18 months, particularly and that has even accelerating even more since the beginning of 2021 as businesses had really started to, ‘okay, what does the future look like, how are we going to come out of this pandemic, how are we going to have new relationships with our consumers, how are we going to connect with them more frequently, how are we going to connect them and engage with them even more, and it is around the ecosystem partnership at scale.

Teresa:

As head of region Carl, just listening to what Herculano has said about their challenges. I know, they are different international business, but a lot of the conversation that I’ve had with others on the podcast over the last few weeks, may be have has had a London centric view, by picking up on some of the themes we talked about so far, what have you picked up from our regional base clients that maybe, if you take the angle of speed, imagination, and care maybe resonates with some of the discussion, that maybe what if some of the differentiates that you have seen from our clients?

Carl:

There’s an interesting piece here about how the UK in totality and outside of London have an opportunity through skills creations, skills development, and what businesses need to actually get sensitive excellence or hubs of skills and capabilities in different areas that don’t necessarily need to be in London, they can very much be in different other parts of the UK.

Herculano:

It used to just be London centric, but it has really evolved quite a bit. We’re just now launching literally just the keys got transferred and the lights went on this week. We launched our new purpose-built campus, called Ikon. It’s not just fulfilment. We actually also have a lot of digital capabilities there as well. We have a studios team, who are creating digital content, creating digital campaigns. It’s a really creative space, which is normally probably found in London and we also have our very large digital services team there, who are going to be doing again, traditional, maybe potentially in London or agency-based jobs in London, going to be based out of Manchester as well. The final piece is, we also expanded our fulfilment and also personalisation, print on demand should I call it, for those capabilities up in Manchester and around it. It is really interesting to see, they are speaking to my colleagues, the number of people we’ve on boarded, who are based out of the Northwest, and just the talent that is there is quite rich as well.

Teresa:

We’ve launched our new office in Belfast, just wanted to hear a few words from you actually in terms of our investments in the regions, because it sounded very similar to what Herculano was saying about their investment in the Northwest.

Carl:

Yeah, the Belfast and Northern Ireland example is a fantastic example of an ecosystem coming together. It’s really been a story of the decade of creation. We started with 700 people, serving our local market, we now have a business of two and half thousand people. Actually a lot of that growth has really come in the last four or five years, but actually that has enabled us then to work very closely with local universities, to create again the skills and again there is quite a big technology focus on those skills and capabilities, but it’s not necessary to deliver to the local market. It’s actually to deliver more across the entirety of the UK and actually in some cases globally, but that just demonstrates how actually everything in the world has come that much closer. We can service greater areas, greater numbers of clients from certain locations, but in creating an ecosystem, and as I said Belfast is a great example, with it now being amazingly our largest office outside of London, and that you’d have never said necessarily would have been in Belfast or Northern Ireland in the first instance, but the reason it is, and the reason it’s worked, is because we’ve worked really well with local government, with academia, and with business to make sure the skills that are created are the ones that are needed in the local marketplace, and then service further out across the UK. Great example of the ecosystem really being built and one that will be replicated in a number of places.

Teresa:

As we come towards the end of our podcast, I wanted to do a bit of forward looking with both of you, and really picking up on some of the themes that we’ve talked about over the last 20 minutes or so, and looking at particularly that pivoting that you talked about Herculano, and what your customers have learned, as you look forward over the next 18 months?

Herculano:

If I start with our customers and our customers in Ingenuity, are very large retailers, and we have UK retailers like Homebase and we also work with a lot of CPG brands across the spectrum, and we also work with beauty brands. Every brand you can imagine in terms of trying to sell to consumers, and you get a really interesting view on how they see the world. I keep landing back to this point around the conversations that we’re having is, we need to be everywhere commerce business, which basically means we need to be where our customers are. We need to make sure that we are reaching them and we are engaging with them as frequently and as positively as possible. Lot of our brands that we’re speaking to, they are around this ecosystem play this everywhere commerce, it is not just stores anymore, it is not just about how do we only sell to our consumers through our traditional channel, it is around evolving those channels. Those channels in 12, 18, 24 months’ time from today, if we say for example, in the middle of 2023, we believe everywhere commerce will also incorporate things like social commerce, where Tik Tok is predicted to be over 200-billion-dollar GMP retailer by the end of 2022, Instagram, doing huge strides in the US, and again going to be a massive retailer by the end of 2022 in the US at least. This concept around everywhere commerce is making sure that you are able to connect with your consumers, you build enough brand awareness. If they identify a product that they want or they’re trying to solve a problem, which is, ‘I need to buy some food or like to buy a new sofa,’ it’s making sure that you are at the front of minds of your consumers, at that point of when they’re thinking about making that purchase. Then most importantly, is you make sure that it’s available, and it’s convenient, and there’s real value there. Those three things around availability, convenience, and value are still the hallmarks of any good retail business. In fact, we recently have done a survey of our customers. In terms of consumers, we asked them what’s most important, and it was those three things. I will go back to this thing in two years’ time. I genuinely believe that the winning brands of the future will be the ones that are at the right points of the customer journey in this everywhere commerce world.

Carl:

Just to build on that Teresa in terms of where the future is, what I can only really say there is it’s is all about transformation, whether it is transformation of older businesses, more mature businesses, and needs to go through big transformation in terms of change to keep up with, some of the newer businesses or even for the newer businesses just to keep transforming to stay current, and ready for the consumers. As you look forward, that customer led transformation journey will be something that all organisations will be on, and that need to partner with, whether it be software houses, or other alliances, they need to form locally. That will be a real part of the transformation journey all of these organisations will need to go on, to make sure they are fit for the future, and fit for what will inevitably be quite bit of change I’m sure coming through as we work out what the new normal will look like, which we know will not be the same as it was pre-pandemic.

Herculano:

Carl, you alluded to Ingenuity’s future. It is making sure that we are there, helping that brand to grow and get there. One of the phrases that I really like is Peter Drucker, came up with this phrase “innovate or die” and he said this over 20 years ago. That phrase is even more true now than it was 20 years ago, of how businesses need to continue to innovate and evolve the way they connect to the consumers through their operating model, through their transformation, with building the right ecosystem, and to get closer to build value for their consumers.

Teresa:

That’s a great way to end the conversation. I really enjoyed that Herculano and Carl, thank you so very much for such an insightful discussion. As I said, that’s the end of another In Conversation With episode in our Business in Focus podcast. Thank you to every one of you for listening. Don’t forget to subscribe to keep up to date with future episodes and please tune in again soon.

Participants

• Herculano Rodrigues
• Carl Sizer
• Teresa Owusu-Adjei