Inside NZ retail chain Mitre 10’s digital transformation

Undertaking a major digital transformation for a large retail brand is a tough ask, especially after the COVID-19 pandemic, but when your stakeholders include 64 store owners that adds a little more complexity to the task. So, it’s not surprising that a session on home improvement retail chain Mitre 10’s transformation journey drew a lot of interest at SAP’s recent user group event in Auckland.

Asbjorn Aakjaer, programme director for the project at Mitre 10, says the business is two years into a business-wide transformation they’ve named Programme One. It includes a refresh of all the IT systems used to serve its 85 stores, owned by 64 people, and will result in an entirely new technology stack. “We’ve set about to change everything, from the foundation all the way up, including the way we work and the systems that support our work, with a focus on our customers and team members,” he says.

Multiple stakeholders for major transformation programme

The programme’s six priorities are:

• Future-proof the organisation’s technology.
• Exceed customer expectations.
• Lower the cost of doing business.
• Enable the teams to be better at what they do.
• Ensure everyone understands how the business works end to end.
• Maintain an entrepreneurial spirit.

Aakjaer highlights the last goal as especially significant given the organisation’s owner-operator model, which began more than 45 years ago when hardware stores across New Zealand decided to band together under the brand Mitre 10. It was inspired by a move by counterparts across the Tasman, and while there is a Mitre 10 in Australia, they are entirely separate organisations.

Mitre 10 CEO Andrea Scown appeared throughout the session in video excerpts, where she outlined the size of the organisation, pointing out it had a collective turnover of $2 billion a year, with 60% of its business in retail and 40% in trade customers. She describes the five-year transformation project as “traumatising”, noting the “significant burn rate of programme cost” at the current time, which is making everyone mindful of the responsibility to get it right.

The programme’s design phase is almost complete, with Aakjaer describing a process of first assembling a small group to scope the project, to reimagine what that business could look like, before embarking on an extensive consultation exercise that included surveying 3,500 customers. The working group looked at 80 functions to determine the multiple pain points that exist in the business, with a view to solving these as they planned for a “future business”.

Among the complexities that need to be addressed are that there are 114 stock files across the business, so there isn’t a single view of stock. As a result, the company’s support centre is sometimes less informed about what’s in the stores than their customers and suppliers are.

Internal communications important to gaining staff buyin

Aakjaer points out that digital transformation isn’t only about replacing the tools, it’s also about changing the way people work so the organisation can become more customer-centric. It’s therefore important to ensure Mitre 10’s 6,000 staff understand and support Programme One; as part of his presentation, Aakjaer showed a video created for that purpose.

There is discussion in the video of “quick wins” with regards to new technology solutions that provide immediate payback to staff. Examples are bringing in text notifications to customers when the products they’ve ordered arrive, and a product lookup app that enables staff to search for products on their devices when they are with customers on the shop floor.

Mitre 10’s approach to vendor selection

The video also featured what Aakjaer described as the organisation’s take on a gender-reveal party, with staff gathered for an announcement on what technology partner had been chosen. This was revealed by balloons that spelled out “SAP”. Aakjaer says that about 80 people throughout the business were involved in the vendor selection, so they wanted to reward them with a party for the announcement. “We wanted to make it fun and humorous,” he says.

Aakjaer says they didn’t set out to buy from a single vendor and were influenced by the Gartner Pace-Layered Application Strategy, a methodology which governs software applications through their entire life cycle. There are three distinct layers in this approach: systems of record, systems of differentiation, and systems of innovation.

SAP was chosen for the ERP system, which represents the “systems of record” layer in Gartner’s strategy. Mitre 10 has SAP Hybris for its product content management software, as well as SAP Commerce Cloud. Its transformation partner is EY. Vendor selection for its supplier portal and HR system is still under way. Aakjaer notes they have ended up with a lot of SAP technology because it was the most suitable and “you can’t nickel and dime a project”.

At the end its five-year deployment, Programme One’s success will be defined in three ways:

• If it makes it easy for customers.
• If it supports and enables staff.
• If it maintains the company’s entrepreneurial spirit.

Scown says that a large part of the successful delivery of the project is if the entire organisation can “deliver it together” in a way that leverages Mitre 10’s size and scale, without losing sight of the unique approach that each store owner brings to the business.