B&Q: when the operating model fails
An Operating Model is a way of conceptualising how an organisation delivers a service to customers. It unites the seven basic elements of an organisation into a single cohesive whole.
The most important part of the operating model is the customer. Knowing who they are, what they need, and how to reach them is pivotal for everything else. The second element is the business strategy. This describes how a business will position itself in the market in the service of their customers.
Then we must look at the internal machinations of the organisation. The major business processes are codified sequences of activity that add value to raw materials. They ensure that everyone on the pitch has a number on the back of their shirt and that everyone with a number has an appropriate role to play. Then we have the shaping of staff capabilities into roles and hierarchies. As I have mentioned here, the structure of an organisation should be built around the major business processes so that structure and process are almost synonymous.
All businesses are managed by the processing of reports. The flow of this information is enabled by the technology systems architecture. The operational management of the value chain (the supply chain) determines how processed information is turned into action: orders, payments, contracts and so on. The whole model is held together by the leadership culture of the organisation, the way things are done.
We could therefore represent an operating model graphically, as follows:
Where there is an effective operating model there is a happy customer. Where there is an unhappy customer, one or more elements of the operating model have, to some degree, failed. The purpose of this essay is to examine a moment of operating model failure and identify the possible causes.
My case study is drawn from personal experience. In 2014 I was redecorating a bathroom to replace a leaking bath and associated plumbing. Having researched prices and styles I eventually chose a mixer tap from the B&Q store in Leeds, and ordered the large items - bath, bath panel, and waste piping - from B&Q’s online home delivery service. The bath and panel had credible reviews online and dispatch was promised “within one week”.
One day later, on 9 May, I received a text asking me to book a delivery date. I selected the first available, Saturday 17 May, and on the strength of this understanding, booked a plumber for the subsequent Monday. In the course of this correspondence it became apparent that B&Q did not have, as the website implied, a stock of baths and panels. Instead they were operating as a sales platform for other providers to flog their merchandise in much the same way as Amazon. In this instance the bath and panel were to be provided by PJH Group, a company specialising in bathroom wares. This did not bother me – I did not care who manufactured or delivered the items – only that they would arrive on time.
On Friday 16 May, the day before delivery was due, I was phoned by the B&Q call centre to be told that the bath panel would not be delivered the next day and, indeed, would not be available for some two months. In a frustrated exchange of calls, both B&Q and PJH blamed each other for the confusion. My problem was that fitting the bath could not be done independently of the bath panel. I was annoyed, and expressed this, but there was little that could be done. I gathered from talking to the call centre operator that the bath panels were still awaiting manufacture in India.
The following morning, a bright, cold Saturday in May, the waste piping was delivered along with the bathtub. The driver, from a courier company frequently used by B&Q, insisted that I sign a hand held device indicating everything had been delivered. I refused. Although the bath had indeed arrived, the legs were missing and there were no installation instructions. After another exchange of phone calls I was sent them as a pdf by email from PJH Group and was told by B&Q that the legs would be couriered to me within 5 days. Angry that my project plan was unraveling, I cancelled the plumber at two days' notice, to much griping on his part.
Having mulled on the issue overnight, I wrote a stiff letter of complaint to both B&Q and PJH Group. Surely they ought to have known when I ordered and paid for the bath panel that it was not possible to deliver it within one week. Replies duly arrived and I was again told the legs would be with me “within five days”, meaning the following Friday before a bank holiday weekend. That evening I made the decision not to wait until July for the panel and wrote an email on Tuesday 20 May to B&Q, copied to PJH Group, cancelling it. I would get one somewhere else, I said, and re-booked the plumber for Saturday 24 May.
Two days later, on the Thursday, and still believing that the bath legs were imminent, (fortunately, I was working from home) I became concerned that I had not received any acknowledgement to the email I sent cancelling the order. The money I was owed had not appeared in my account. I rang B&Q again and spoke to yet another operator who told me that the person who had managed my email failed to raise a repayment order. I expressed some element of surprise, after which he did so while I was on the line. When I then asked where my bath legs were, he rang PJH and assured me that they were "in transit and would be with me within five days". He was adamant that even due to the bank holiday, the legs would be with me by Tuesday 27 May. I therefore had to cancel the plumber I had booked for 24 May, to considerable further embarrassment.
I remained at home throughout the bank holiday weekend. I noticed that I was finally repaid for the cancelled bath panel on 25 May, but the bath legs were never delivered. On 28 May I made the decision, in conjunction with my plumber, that we could fit the bath using the legs from another bath and a panel from a more reliable supplier.
The totality of the experience was that having ordered three items from B&Q for home delivery, one was delivered one time, one was never delivered, and the last was missing a critical part of the construction. In order to complete my bathroom I had to pilfer the legs from the old bath, making it unsellable. The plumber did not bill me for the two occasions I cancelled but he would have been within his rights to do so. Dealing with the issue caused me considerable embarrassment and irritation at the wasted effort.
Irate, I wrote to B&Q telling them that I held them responsible. It was fundamentally weak to blame PJH and they should feel obliged to honour the warranty on the bath and repay me at least 50% of the cost for the trouble they had caused. In the end they refunded nearly 80% to placate me, although this was in coupons that could only be redeemed at a B&Q store and would not be delivered for a further four weeks.
So B&Q had a customer (me) ready to buy a product in a channel that we both enjoyed for its simplicity and cost (online shopping). But what went wrong with the operating model for the story to end in such acrimony and financial loss?
Looking at governance webpages of B&Q’s parent company, Kingfisher (kingfisher.com) it is clear that the organisational strategy concentrates not on customer experience, but shareholder value. Whereas funding is, in my understanding, an element of operations management aiming to serve the paying customer, the B&Q model is the opposite. The buyer is a source of cash to ultimately enrich the shareholder.
The website is strewn with verbiage about growth, value, and expansion and mentions almost nothing about customers. The one place they feature is a page titled ‘Our strategy – Creating the Leader’. Underneath this heading is a four-step growth plan, the first of which is called ‘Easier’. Reading on, one finds that this concerns making it simpler to separate paying customers from their money through ‘omnichannel’ retailing. In an energetic use of measurable KPIs, performance is gauged through sales figures rather than any analysis of satisfaction.
I would argue that customer satisfaction in DIY retailing is a function not of access but quality and price. A quick glance round the B&Q trading website (diy.com) reveals a tellingly poor set of customer reviews on every own brand product. Crown non drip paint, for example, scores five stars, as does Unibond tile adhesive. But anything from one of B&Q’s own ranges, whether paint or flooring, lawnmower blades or loft ladders, the customer feedback is at best neutral and at worst, shocking. “Do yourself a favour,” one reads, “pay a few pounds more for something decent.”
Looking at the corporate structure it’s interesting to note that the highest level of governance is channelled through Kingfisher’s subsidiary brands (B&Q, Koctas, Srewfix, Castorama, Brico) supported by a finance function, a productivity function, supply chain management (called ‘sourcing and offer’), and group level internal communications (the first time I have ever seen this appointment at Board level). In other words the business concentrates on financial performance, internal reporting, and brand promotion. If one is to hope that the CEOs of the subsidiary brands are the champions of their customers, I would advise caution. Kevin O’Byrne, the newly appointed B&Q CEO, rose to this position by having been Finance Director in every one of his last three appointments. It doesn't look like he has spoken to a customer in the last ten years and he certainly never responded to the email I sent him last year.
Operationally, B&Q online operates as a trading platform for other partners to sell through. This is not explained on the website and it is only after one has paid that the confirmatory notes explain who is actually providing the goods. In other words, B&Q carries no stock and outsources all of its online supply, charging a premium for doing so.
I can see why. They employ over 20,000 staff and have vast real estates and stock levels all around the world. Many of these estates were bought, according to former CEO Sir Ian Cheshire, on long leases at the height of the property boom. But the woes of the store based business should not affect its online arm. We must be able to tell, with modern inventory management software, whether items are in stock or not. I can only imagine that because B&Q has chosen to partner with companies like PJH Group, that their respective IT systems are not linked. That is the only thing that would explain the utterly chaotic management of my order.
In summary therefore, B&Q have built a strategy around shareholder return. They have structured their online business as a sales platform for companies like PJH Group, but their management systems are incompatible and there are no business processes to manage the inventory. The structure of the organisation is a function of legacy conglomeration and the leadership culture internally and financially focused.
It is reported in the media that Sir Ian Cheshire turned round the fortunes of Kingfisher Group, driving an increase in net worth of 20% and a doubling of pre-tax profit. As he handed over to the new CEO, Véronique Laury, 2014 was proving a difficult year for B&Q and Kingfisher by extension. I am interested to follow how she performs. My belief is that the organisation’s operating model is fundamentally broken and that B&Q will undergo considerable market challenges if it fails to recognise the importance of the customer in how it operates. There are, after all, two more case studies of former Kingfisher brands that failed to do so. One was called Woolworths and the other, Comet.
In the meantime, if you need a plug or a plank of wood, go to a builders’ yard or a plumbers’ merchant. You’ll get a better product for a cheaper price and a smile into the bargain.
Bibliography:
The Daily Telegraph viewed 12 February 2014, http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11277279/Interview-No-easy-answers-for-the-grocers-says-Sir-Ian-Cheshire.html
Kingfisher viewed 12 February 2014, http://www.kingfisher.com/index.asp?pageid=193&board=executive&person=veroniquelaury#person
B&Q viewed 12 February 2014, http://www.diy.com/departments/colours-non-drip-interior-exterior-white-gloss-paint-25l/578199_BQ.prd?tab=reviews