Mothercare’s group managing director David Wood likes a difficult job. From working as Tesco’s UK CMO during when it posted the biggest loss ever recorded on the UK high street to taking on the job as boss of Kmart as the US retail giant was struggling, he admits “enjoying” the challenge.
“Not many people want to run into a burning building. I happen to enjoy it and have a merry band around me that like the same,” he said, speaking on a panel about leadership at an event in London earlier this month held by consultancy Oystercatchers.
“Part of that running into the burning building is the quick assessment and recognition that the business could be beyond the tipping point. What I mean by that is the current business model is not going to get it out of trouble. The philosophy of continual improvement in that environment is not going to work.”
It’s a good job Wood likes a challenge as turning around struggling Mothercare is a job that has defeated a number of bosses before him.
He joined Mothercare in April, initially as CEO after the board ousted the incumbent Mark Newton-Jones. At the time, Mothercare had just issued the latest in a long line of profit warnings and revealed it had called in KPMG to advise on restructuring.
Fast-forward a couple of months and the board reversed that decision, reinstating Newton-Jones and moving Wood to the role of group managing director. That came as the retailer restructured, with plans to close stores and cut costs as it revealed it had slumped to a £72.8m loss in the year to 24 March, with same-store sales down 1.3%.
What was clear was that the retailer’s strategy to turnaround the business – focusing on improving store formats and its digital offering, while cutting costs – was not delivering. And that Mothercare needed a wholescale rethink on how to compete in a challenging retail environment.
“If you just try and make something more effective and more efficient that is inherently broken [it doesn’t work]. You need a dramatic and quite swift paradigm shift,” he explained.
“You have to sink the ship rather than steady it, sometimes you have to cut the arm off to save the patient. It is back to that tipping point where in the businesses I’ve been in more recently they haven’t recognised that their current model wasn’t going to get them out of trouble.
“You’ve got to break the model. Engage the guys around why you need to break the model and then you’ve got to rebuild it. So, it’s less about steadying the ship, more about focusing the effort behind a clear plan, getting a sense of confidence and optimism as to why that needs to be the thing to do, and rebuild the ship.”
Wood did not lay out exactly what the new strategy is but said getting “confidence and momentum” back into the business was critical. He admitted the reputation of Mothercare had been “challenged” but that re-engaging staff and colleagues was critical.
For example, Mothercare wants to empower its store managers so they feel able to provide an “unparalleled” customer experience, whether that be by running their own Facebook pages or being ambassadors for the brand in their local community. That has now been made a key company KPI.
You have to sink the ship rather than steady it, sometimes you have to cut the arm off to save the patient.
David Wood, Mothercare
“One of the things I am pushing through at the business is giving stores confidence. We don’t get it right every day, we want to get it more right than we get it wrong, but if we do get it wrong then heroic recovery [is needed],” he said.
“Feel liberated to do whatever it will take to win back that customer if we feel we have lost them or not served them in the way we think we can. Giving the licence to do that. And it’s now a measure in the business in terms of heroic recovery and how we are doing that.”
Mothercare is not the only brand struggling on the high street. The likes of House of Fraser, New Look and Carpetright have all agreed CVAs (company voluntary agreements, a way of cutting rents) with landlords, while John Lewis just posted a 99% drop in profits.
Wood said to work in British retail now, people need to be “tremendously resilient”. But despite the challenges at Mothercare, he believes it “deserves” to have a place on the high street, even if it has “just slightly fallen on the wrong side of the customer for too long”.
Wood is credited with returning Kmart, once a huge player in retail, to profit. And he said he sees three key reasons why companies start to fail.
“Businesses start to fail when they stray from various things. Firstly, their core business. Secondly, their customer. Thirdly, they ignore the competition,” he explained.
“A lot of transformation is centred on getting back to the core of what the business truly is. Kmart in the US was a market leader in discounting… But it tried to be something it wasn’t. We pared the business right back, right-sized it, and focused in terms of reinventing what the DNA of discounting meant for the business.”
For that to work, however, Wood believes you need clarity, confidence and optimism.
“You need clarity of what you are trying to achieve and it needs to be underpinned by alignment in terms of ‘that is where we need to be heading’. You need to create confidence in the business and execute some small things and get some momentum behind the business. As long as tomorrow is better than today and the day after is improving, because momentum breeds confidence,” he said.
“Clarity, some confidence that we are doing the right thing, and then a sense of optimism that things can be better.”