Tony England gives an insight into how Wolesley salvaged itself and became a leading US based business.
Moving an organisation to focus the majority of its trading efforts into another geography is on the radar of a number business leaders in the UK at present. But back in 2008 this was not a common scenario. CIO Tony England has been on this journey and joined the Horizon CIO Network to discuss how he re-plumbed the Wolseley business and took part in a name and market change.
England has just completed his career with Ferguson plc where he has been leading technology since May 2006. Back in 2006 Ferguson was known as Wolseley and a leading wholesale supplier to the building trades. To you and I it was best known for its trading estate brands Plumb Centre and Parts Centre. Like many organisations in the construction sector, 2008 and the credit crisis was a dark time and the organisation suffered. At the same time Wolseley had embarked on a major ERP programme that was not going well and getting an inordinate amount of news coverage in the IT press, by 2017 though Wolseley became Ferguson plc and the USA was its predominate market and in June 2018 it was able to pay out US$1bn in shareholders as a special dividend as the business rides high on economic growth in the USA.
As a business Ferguson/Wolseley is perhaps the UK Nokia, it has changed focus a number of times, cutting its cloth to suit the economic environment of the time, it was formed in 1887 as a sheep shearing machine maker, by 1911 it was a car manufacturer as mass automotive transport began to fill the streets of the UK and in the post war boom years of the 1960s it moved into building supplies by entering the heating products market.
Ferguson entered the Wolseley family in 1982 as a US subsidiary and the organisation began divesting itself of manufacturing abilities to focus on distribution. In 2008 as the construction industry entered one of its worst recessions and Wolseley Group issued a profit warning, made 6000 people redundant and sold off its Build Centre brand.
In 2009 I recall reporting how a major SAP implementation was put on a “slow down” in order for the business to preserve its cash. That programme began in 2007 and was expected to be completed by 2011.
“90% of our profit is in the US, so it was very clear that the CIO role should be in the US,” England says of how he was busy recruiting his successor across the pond when we meet. Ferguson already operated HR and legal from the US and IT was next.
England arrived at Wolsley just as the business signed the SAP implementation programme with systems integration giants Accenture.
“I realised that this was a lot of different business models all at different levels of maturity and therefore the SAP programme was a one of those ‘the Emperor’s new clothes moments’,” he says of the early warning signals. “Those that had raised their concerns had fell silent and then the 2007 and 2008 slowdown hit, which meant the project was put on hold.
“We had to take some drastic action.” The drastic action wasn’t just about an SAP implementation, it was time rebuild the entire business and led to the CEO and CFO departing. Ian Meakins joined in 2009 as CEO and brought experience of FMCG from Procter & Gamble and Diageo as well as retail experience from chemists chain Boots. Meakins asked England to move from CTO to CIO and gave the technology leader a seat at the board.
England says it is critical for CIOs to be members of the Executive Committee if they wish to influence future business strategy. He believes the majority will find their skills and experience are well suited to the role “they should find that it is a role that feels natural for them”. “They will be used to thinking strategically and have been leading teams in an industry (IT) where rapid change is the norm”
As the organisation mapped out its new direction, England drove the change in the IT function but also led the mobilisation of the broader business strategy programme. “The latter seemed like a natural fit as it built on the credibility I had built driving organisational change and project/programme management within the IT function”
“In technology you are used to working on projects for the very first time and it is often the first time you have ever deployed something. So you ask, ‘what are the vehicles for getting to a change?’”
As the business recovered – post recession, England and his IT team continued to execute against a future state IT enterprise architecture blueprint, which recognised what the legacy systems did well and “focused on reducing their footprint over time driven by business priorities rather than wholesale replacement”.
Wholesale to online
As the business evolved it began to acquire specialist retailers such as Improvement Direct (now Build.com) in the US and BathEmpire (now Soak.com) in the UK, having recognised its existing wholesale businesses provided exactly the sourcing and supply chain capabilities these retailers need to grow more rapidly.
“In the business to consumer (B2C) arena there is now a breadth of new providers that have no legacy of technology and business,” he says of consumer sales channels, but as CIOs in a number of sectors have told Horizon’s network and podcasts, there are many organisations with a great front end service that are brought down by an inability to manage a good supply chain.
“You don’t need a major retail footprint any more. For me it is about recognising that and then targeting the segments where you can add value. A pure wholesale distributor is going to struggle now.
“You have to think about how you differentiate. In wholesale you really have to think about how you add value. Today we are seeing a lot of pre-installation services, for example can air conditioning be built off-site and you are therefore becoming a service provider.
“The US business has made more progress and the US market as a whole has embraced that thinking,” England says.
Pre-installation and being the supply chain to a disruptive online player are major changes to a business model and will impact the lives of those running a Plumb Centre branch and their ability to hit the targets they are incentivised on, especially in the face of digital disruption.
Ferguson is now well placed to exploit a range of opportunities that have the potential to further disrupt the market. However, getting there over the last 12 years hasn’t been without its challenges. These challenges included “existing management being heavily invested in existing business models. This shouldn’t be a surprise it’s what they understand and have built careers on”. As a result, it is important to think about reward mechanisms for incentivising the right behaviours and organisational design. “It important to recognise that it might not be possible to change the existing organisation to embrace the new ideas in time and it may be necessary to build a new organisation alongside”.
Appropriately training and incentivising staff has been key to turning the counter based B2B business into a true omni-channel business. “It has been important for staff to understand how to sell business solution rather than just product and be comfortable trusting the systems to serve the customer rather than feeling they need to own all the transactions in the branch”.
“It was important to understand how we could use technology to solve business problems directly for our customers if we were going to be perceived as adding value to their businesses beyond the supply of product. As a result, we built a number of mobile apps including one for boiler maintenance which presented exploded parts diagrams for specific models of boiler directly integrated to the e-commerce platform to make ordering parts very straight forward,” he says of respecting digital and face-to-face customer service. The model Ferguson used is similar to what CTO Neil Brooks at Autodata has used for the automotive sector and he explained on the Horizon CIO Podcast.
“I view that as that as turning the supertanker,” England adds that a twin focus meant they had horses in all the races as he puts it. “As the threat of disintermediation grows you can’t afford not to go direct to the customer,” England says that part of the recovery of Wolseley/Ferguson was an honesty about its strengths” “We are very good at supply chain and sourcing and it is a case of what channels can we look at.”
Along the way Ferguson has reinvented the way existing channels operate. “In the US there are 200 showrooms that include a chef, and the chef visits you once your kitchen has been installed. The chef, in store, can upsell.”
Having discussed the survival of Wolseley/Ferguson, naturally our conversation turns to the digital challenges that so many vertical markets and their CIOs face. The CIO believes many organisations have not yet realised the cultural change, whereby brands have less value. He believes the next generation of customer are less brand orientated.
“Rating sites are not clearly seen as a threat, but they are. Future businesses will be asset and employee light as organisations ask ‘does it make sense to have a big internal capability.”
“I have spent the last nine months recruiting my successor in the USA,” he says as he moves towards a portfolio career and to spend some time on a his Dartmoor smallholding.