Business

The man trying to reinvent a 116-year-old retailer

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Media captionRichard Umbers: "Change is not something that happens by accident"

Richard Umbers has not had it easy.

When he took the reins at Australia's largest department store chain Myer last March the group's profits had been stagnating for two decades.

His challenge was to reinvent the brand and bring the love of shopping in its stores back to life.

Just over a week into his new role, he had to warn investors that earnings would be lower than expected and admitted the firm had "lost relevance with some customers".

Less than six months later he had a plan, albeit an expensive one. His idea was to spend some 600m Australian dollars (£340m; US$450m) over the next five years transforming the company, whose value then was just A$700m.

The cost was indicative of the scale of the task.

The 116-year-old company had been struggling to compete with online shopping outlets and foreign brands such as Zara and Topshop.

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Image caption The arrival of fast fashion chains such as Zara have shaken up the retail market

Rivals were more advanced in their use of technology and customers' demands had changed, meaning the chain had no choice but to respond.

"We're in a period of time which is experiencing significant changes in the environment that we operate in. Industry as a whole, not just retail, has to respond to those significant changes, because they are disruptive in every sense.

"If we fail to respond to that, in all likelihood we lose relevance in an increasingly international, increasingly digital world, with people who have new perspectives on life," says Mr Umbers.

Image caption Having the right people in the organisation is crucial to changing how a firm operates, says Richard Umbers

His pledge to shareholders was that he would arrest its 20-year sales decline, promising sales would grow 3% a year by 2020, and that earnings growth would outpace sales growth by 2017.

The plan, as Mr Umbers called it, was the "New Myer".

But how can one person even begin to make such a huge change, especially at such an old company where the ways of working were long established?

Mr Umbers says it essentially required a wholesale restructuring of how the business operated.

"Which is not just about appointing individual positions. It's actually about changing the systems and processes that go on within the organisation.

"In fact, it's about getting the right kinds of people in the organisation, generating the right culture, having a really sound plan to be able to execute against."

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Image caption Myer employs about 11,000 people

Some of the initial changes Mr Umbers made were to create entirely new positions, including a chief digital officer and a data officer. Typically these jobs would be rolled into just one senior role.

He says the appointments highlighted the importance of technology in the new business, making it clear that it was not just a back office function, but part of the firm's "frontline toolkit" to drive sales higher.

"So while on the one hand it feels like a title change, actually it's signalling something very important about the future potential for the business and the importance of digital and data in the future journey of the business," he says.

For similar reasons, he also created a "chief transformation officer" role.

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Image caption Myer now sells Topshop clothes in some of its stores

And while the chain currently operates only in Australia, Mr Umbers regularly looks at what overseas retailers are doing to see if there is anything he can learn.

The firm's tie-up with British fashion chain Topshop, for example, originated from a trip to the UK, where Mr Umbers was born.

Myer has since taken a stake in its Australian franchise and now sells its products in some of its stores.

It has also instigated a cultural change programme called "self help" aimed at giving store managers and teams more autonomy over how they run the store.

Managers are now able to choose things such as some of the products they sell as well as the overall appearance of the store, for example, which Mr Umbers says has made them feel more responsible for the shop's performance.

"A large part of transformation for me is about how you engage the large majority of your organisation. It's got to be grassroots.

"If you do harness the masses of the organisation, in my view you stand a very good chance of success in transformation, he says.

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Image caption Sales are beginning to improve, the department store's latest results suggest

Mr Umbers' biggest lesson sounds simple: "Change is not something that happens by accident.

"Change is something that is a very deliberate process that you embark upon. When you put systems, processes, capability in place in order to get the right business outcomes."

It is a sentiment that Andy Penn, chief executive of Australian telecommunications giant Telstra, agrees with.

"Ultimately it's the job of a CEO to lead an organisation through change. That's one of the big parts of the job," he says.

Communicating the new direction of the company is also vital, says CEO coach Steve Tappin: "The key is to build shared ownership and unite the company around building a better future together."

It is early days, but in May Myer reported better-than-expected third quarter sales which were up by 2.1%, more than double the 0.8% sales growth of the same period a year ago.

Like-for-like sales, which strip out new store openings, were up 3.4%.

Evidence, says Mr Umbers, that the "New Myer" is moving in the right direction.

This feature is based on interviews by CEO coach and author Steve Tappin for the BBC's CEO Guru series, produced by Neil Koenig.

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