Strategic deficit is the amount of time, capability, commitment, and energy necessary to bridge the gap from where you may be right now, compared to the most advanced of your current and potential competitors.
A few weeks ago, if asked the question of Australian retailers, particularly the FMCG retail gorillas, Woolworths and Coles, I would have said several years and more resources than they seem to be prepared to allocate, but more importantly, there is a complete shift in mindset that is required.
Now, if asked the same question, with the news last week of the $US13.8 billion purchase of Whole foods by Amazon, I would suggest the strategic deficit has just doubled, perhaps tripled overnight. Not only has the deficit blown out, but the rate at which it is accumulating is accelerating given the huge $16 billion investment Amazon made in ‘Technology and Content’ in 2016, the horse has not just bolted, it is over the hill. Not all of that $16 billion will be directly impacting their ability to deliver groceries, but a fair chunk of it will be applicable, and the rest will be learning in other areas that they will be able to leverage over time.
Back in August 2013 when Jeff Bezos bought the Washington Post for $250 million cash, many were asking “What does he know about the newspaper business’?
The Post had been one of the icons of journalistic excellence, one of the true ‘newspapers’, but had crashed into successive losses in the face of digital disruption.
Bezos bought the Post, not for Amazon, but from his own funds, it is a personal investment, and therefore perhaps better even that Amazon itself as a signpost of his commitment and what may come elsewhere.
In this National Public Radio report on progress at the Post, there are some useful signposts that may be applicable to Amazons recent purchase of Whole Foods. However, it can be summarised into a few words:
Technology that makes the customer the absolute focus of every single decision and action is the essential foundation for success.
Now, many of the same people are asking ‘What does Amazon know about the fresh produce retail business? My response is ‘Wait for the implementation of Amazons brand of technology directed at the produce consumer, and we will find out”. I would be pretty sure that Amazon has a range of pretty good ideas to be tested at Whole Foods, that will see the hurdles of home delivery of fresh and frozen food overcome.
I am sure Coles and Woollies will be watching, but so was the newspaper business watching technology eat its lunch for a decade before they had any idea of how to address the challenge, and even now, seem incapable of doing anything about it.