Why Uchumi needs innovation strategy

Opinion and Analysis

Former Uchumi Supermarkets CEO Jonathan Ciano. PHOTO | SALATON NJAU 

By BITANGE NDEMO

Once more, Uchumi is in the intensive care unit after Mr Jonathan Ciano successfully turned it around from the jaws of bankruptcy.

Last week, Mr Ciano was thrown out. His problem can be summarised as failure to heed the wisdom in Kenny Rogers’ song The Gambler, where he says, “You’ve got to know when to walk away.”

Truth be told, Mr Ciano was a great turnaround manager but not necessarily an innovation strategist. What Uchumi needs most right now is simply an innovation strategy.

Uchumi should have changed its business model a day after its successful turnaround. Its current model of buying and selling of merchandise is outdated.

Uchumi, Kenya’s first State-owned supermarket, is a brand that evokes pride and patriotism. Personally, I can still vouch for the brand, but it needs innovation around it.

Whoever comes on board as CEO must turn the supermarket into a technology platform for goods and services where suppliers acquire space and strive to meet required standards.

Their future survival depends on how much technology capacity they develop to manage the emerging trends.

Before rushing to hire a new CEO, the board must decide what is it they want Uchumi to become. If they want to increase shareholder value, my advice is that they need to learn from several technology platforms that have brought shareholder value within a very short period.

Take, for example, Uber, an American international transportation network company founded in 2009. It runs taxi companies globally without owning one taxi cab.

CNN Money estimates Uber to be valued at $50 billion (Sh4.9 trillion). YouTube, founded in 2005 and now valued at $45 billion (Sh4.4 trillioni), makes no content, doesn’t buy and sell content but it is the largest distributor of content globally.

The Uchumi brand must establish its niche and market itself in order to increase customer numbers that can be leveraged on volume to lower the supply chain costs.

Some of its competitors are already working towards such a strategy but the headache of maintaining low costs and continuous supply still nags the entire industry.

This is where opportunity lies to differentiate itself. Large supermarkets are notorious for delaying payments to suppliers but if the burden of inventory is passed to suppliers in return for prompt payments, it will be a win-win situation for everybody and a good strategy for retaining reliable customers.

The benefits for this proposed model include: improved product quality since it will attract quality suppliers; discourage carrying of dead inventory; greater efficiencies through reduced workforce especially the procurement unit which will become irrelevant; and, spurring development of new goods that would create more sustainable jobs.

These, I must say, are minimum reforms if Uchumi is to be salvaged. New and leaner competition such as Jumia, an online shopping mall, is emerging with very disruptive products.

It will be unwise to consider Nakumatt, Tuskys, Naivas and Foodplus as the only competitors. There are also newcomers like Game and Carrefour, which are even more experienced.

I further suggest that the board consults widely before making any conclusive decisions. There is wisdom in learning from its past turnaround. In his book Beyond the Shadows of my Dream, Martin Oduor-Otieno captures the behind-the-scenes efforts to turnaround Uchumi.

He writes: “KCB and team, together with the representatives of the PTA Bank, agreed to give Uchumi a lifeline and the opportunity to try and turn it around. They would work closely with the government and other relevant stakeholders in search of a strategy to revive this market chain. A task force was formed to oversee the whole process. Jonathan Ciano was recruited and appointed receiver manager. This became the most successful turnaround story in Kenya’s corporate history.” We must not ignore this institutional memory.

Jason Calacanis, an American Internet entrepreneur and blogger, once said: “You have to have a big vision and take very small steps to get there.

You have to be humble as you execute but visionary and gigantic in terms of your aspiration. In the Internet industry, it’s not about grand innovation, it’s about a lot of little innovations: every day, every week, every month, making something a little bit better.”

Uchumi needs a lot of little innovations in order to compete.

The writer is an associate professor at University of Nairobi’s Business School