Hi there, my name is Natalie
and today I'm joined by James Matthews
who is the CEO of Ocado Technology.
-James, lovely to see you. -Great to be here.
Thank you so much for joining us in this new video conferencing world.
This is new for me. I don't know if it is for you
but I'm certainly getting used to this way of chatting and connecting.
I was just saying that in a weird way
speaking in a public audience in person is less nerve-wracking than this setup.
This is all new to all of us
-but it's a crazy world. -It is, isn't it?
So, to kick us off, can you give us an overview of your business
and how it's been impacted by the global health situation?
Sure. To give you a quick overview of Ocado
it's a slightly complex business.
But to give you a bit of our history, we started as an online food retailer
an original .com boom Web 1.0 retailer in the early 2000s.
And that was our business for most of our history.
But over the last few years, we have learned that
the technologies that we developed to power our online business
are applicable to other retailers around the world
and as other supermarkets go through their digital transformations
move online, etc.
that we have a great end-to-end platform
that we can offer to them.
And so sitting here today, Ocado essentially has three business models.
We still own half of the retail business that we started.
We have a joint venture with another business in the UK.
We have a logistics business
where we employ a five-figure number of frontline workers
drivers, people who work in our warehouses, etc.
And then we have a global technology business
which sells technology, intellectual property, know-how
-to now nine retailers around the world-- -Wow!
helping them launch their businesses.
And each of those three businesses has been affected in different ways
by the current crisis.
So, our retail business, the demand has gone through the roof.
It makes sense that the ability to get food delivered directly to your home
without having to venture out is incredibly powerful at the moment.
And so there, we've been coping I think admirably
growing our business incredibly rapidly in the circumstances
but we still have a multiple of the amount of demand
that we can possibly fulfill.
In our logistics business
we've got all of the many changes we've had to make
to account for people working in a safe way
whether that is cleaning regimes of vans, the on-site testing, temperature checking
safe distance at work
to allow people to get food to people's homes in a safe way.
So, that's been a huge effect there.
And for our global technology business
there it's been a recognition among our clients
or prospective clients, our investors
that the shift to getting food delivered online is…
it was already there, but it's going to accelerate.
And so in terms of how people are looking at our technology business
they see that the opportunity is bigger now in the shorter term
than we imagined it was previously.
Absolutely. And to confirm, you are the…
James, you're the CEO of
the Ocado technology side of those three parts
-of the business that you explained. -
I have about 2000 people in Ocado Technology
who are developing the platforms
that power all three of those previous businesses
so they power our own retail business, power our own warehouses, etc. in the UK
but I think most importantly in terms of our overall story
power the global technology platform that we provide.
-And it's worth having further context-- -Right.
that technology in Ocado's terms is a very wide-ranging definition.
In Ocado Technology
we have people who are designing steel girders
to support physical warehouses in seismic activity
-mechanical engineers, robotics-- -Wow!
as well as software
the sort of technology that's most commonly talked about.
And so it's a broad end-to-end platform that we're developing.
How do you think your future plans have changed
in light of this situation in recent months?
The core of what we do has remained the same
and so to some extent the current crisis sort of affirmed the path that we're on
and has highlighted the extent of the opportunity there.
And so in our line of business
I don't think there's been a big shift of
"The core product we're building is not the right one.
We need to adjust it for the new world."
We were in the situation where we had the right product for the new world
as it were, in the current context.
I think what it has done is
it's definitely made us look at our priorities
in terms of we have our fingers in many pies
investing in lots of technologies in lots of spaces
some of which are
well outside of the grocery online model.
And so there are clearly huge amounts of opportunity.
So, as the opportunity grows
we have to reassess: "Oh, is that bigger than we thought?
Do we need to put more investment in there?"
And we're quite lucky in that we are in investment mode
and so this really has just accelerated how we think
about how quickly we can bring some new products to our customers.
We can have a bit more confidence investing now
because, as I was saying
everyone, all our key stakeholders and shareholders clearly believe that
the opportunity is accelerating.
So, what does this mean
from a digital transformation projects perspective?
In my 15 years at Ocado
I'm not aware of a project we've done under the guise of digital transformation
to the extent that we were a digital-first online-only business
-as it were-- -It was part of the DNA from the start.
But where it's incredibly relevant
is the digital transformation that our clients are undertaking.
And so we are, sort of, a provider in some absolutely enormous…
think tens of billions of dollars of expenditure
digital transformation projects
on behalf of the world's biggest retailers.
And for those projects, what we've…
and it's early days…
everyone is assessing, is the new normal temporary?
Is it going to last a long time?
What exactly, when we return to things, does it look like?
And our clients are going through those same thought processes.
But in general, the projects they had under way with us
they were, on average, previously cautious
and wanted to see the gradual rollout
and were quite relaxed about seeing a gradual move over
whereas now in their home markets
the demand for the services that our platform enables
-getting food into people's kitchens online-- -Of course.
is accelerating
and so what we can see quite rapidly
is that each of those clients is more interested in going faster
looking at what they're going to invest.
And so for those digital transformation projects
I think it's going to have a very real effect
that will play out over the coming months and years.
For Ocado, I don't think it has the same…
I think, as I was saying before, we happen to have a model
that now fits quite well with the way the world is changing
and so it's really more of the same than an acceleration of that.
We've heard a lot from customers across various industries
that there will be this new normal
new customer behaviors dictating new business practices
new ways of working.
Have you begun thinking about what this new normal will look like
for your industry and your company?
So, kind of a combination of the two.
Yes, I think
it's fair to summarize that whatever is going to happen
it's clearly playing out over a longer time frame
than perhaps people thought at the beginning of the crisis.
And even if the world develops a vaccine
or some big "silver bullet" solution to this
it's still going to have a behavioral impact
on the way that people approach their life.
And it's highly likely that
some of the consumer behaviors that are happening now
just become embedded, as it were.
I think, in general, this is most applicable
in industries that were already undergoing a transformation
and this has now represented an acceleration.
You can use other examples of industries with nothing to do with what I do
so if you take digital streaming of movies
clearly that was an enormous thing that was happening anyway, right?
That was a transformation that was ongoing.
However, the movie theatres, the cinema chains still had the premieres.
It was still a big part of that ecosystem.
The current crisis has accelerated that move to digital only
and even if the crisis is resolved
it's hard to say, will it roll back to where it was?
I think probably not.
And I think parallel to that in the industry that I'm in
I very much hope it will be the case that
we'll all be much freer to go about our daily lives in the future
and going to a store will not come with a sense of fear anymore.
However, the behaviors that people have picked up during these months
and it could be many months to come
I think, will represent a permanent acceleration
of people moving to digital services.
And so to my earlier points
that hasn't led us to think that we need to invent any new products and services.
We felt like we were building the right core platform.
But whatever the new normal is
we anticipate that it's going to have a heavier reliance
on the kind of services that we provide.
Yeah, you're absolutely right.
And I think you mentioned about behavioral changes
and I think you're absolutely right.
We can focus on that kind of technology change
but you're right.
It really is this core focus on the user
and how are people and how are users interacting with our technology
how is that changing?
And then of course, like you said, an opportunity for us to move even faster
in a lot of industries
and accelerate those digital transformation projects even quicker
as opposed to potentially putting them on the back burner.
So, that's great news.
It actually leads really well into my next question.
Have your plans to pursue ambitious projects changed?
Have they been delayed or canceled?
Or has the situation brought to light
even more reason for 10x thinking and innovation?
We are fortunate to be in that latter camp
where from a business perspective
the situation is accelerating
not causing us to have to face cutting back on things.
And so some of the products that we have lined up
and had lined up anyway
but we now really want to look to accelerate
are things like our robotic picking products.
So, just to explain a bit of context
among the parts of our platform are automated warehouses
that have robots running around picking up food
ultimately bringing them to a human who then picks and packs groceries.
We now have live, in a small way in our own operations
robotic picking cells that do the final part of the process
so actually pick up the yogurt, put it in the customer's order.
And we have a lot of teams working on this
and we have teams working potentially years out on innovation.
And so whether this is on the physical side of things
the end effect is on the robot arm.
We've got Version 1 in play now.
We've got three future iterations being worked on in parallel
as well as the core of the magic really
which is the vision systems and the artificial intelligence
that power the picking process.
We were already working it
but we just intend to accelerate that significantly
because it goes without saying that
in an environment where you might be worried about social distancing
some of these automation products and techniques will only enhance things
and our clients are going to be
more interested in them now than they were previously
on top of the efficiency that obviously inherently comes from this automation.
So we're lucky to be in that in that latter camp
of "How do we double down on some of this innovation?"
rather than thinking about things to cut.
Yeah. Well, James you started off by saying that you couldn't see into the future.
But from hearing what you just said then
it sounds like you absolutely…
you're creating the future in terms of this space.
Its really interesting to see how you're using applied machine learning
and vision to optimize process.
Extremely interesting.
So, from a technology perspective
customers tell us that infrastructure
agile dev, and data are all key to moving fast
and responding to change.
Where will you focus your efforts at Ocado Technology in the coming months
to build your technology capabilities and platforms in your space
to remain agile?
I think in the last couple of months
we've undergone a huge change in how we work as a business.
Obviously, different organizations were already on different trajectories
in terms of things like remote working and flexible working, etc.
We had an incredibly office-based culture.
The vast majority of our technology was built by teams in person.
And we've obviously now undergone…
and I've been incredibly pleased at the rate that we've adapted
and we're carrying on as we were.
However, it's brought to light the need to do more remotely
not just in terms of getting technology built
-but in terms of operating our platform. -Of course.
And that causes us ultimately to invest in more technology
to help be efficient.
And actually, all this stuff will be good for the long term
regardless of if we all return to the office.
A good example we've got is that we have robotic analytics
by big hives of robots that are in our warehouse
and we have a huge amount of data automation and analysis.
But we also still have human operatives that give oversight
and they are now operating from their desks at home
-their couches-- -Wow!
controlling fleets of thousands of robots
and that's an area that we really had to think about
as this whole crisis took off
because we were reliant on eyes and ears on the ground
in those facilities.
It's things like that which, as I say, will be useful, period
and it was something we were going to have to do anyway
because as we have 40, 50 of these operations around the world
in all these different time zones
we were not realistically going to be sending people to each of those locations
so we always knew that we had to get to the point
where we had a central mission control, as it were
and automated more and more.
But this has accelerated it.
And so I'm pretty proud.
I think we're a very agile organization in general
and things like this, as daunting as they may seem
don't phase us much when we get into it.
But I think the really cool stuff is then when you see
"Oh, great, not only is that a different way of working
but we can build something new here, a new tool, some new automation
that allows us to work more effectively in this way."
And then realize that, "Hey, it was a better way working, period
regardless of the initial catalyst that made us develop in that way."
Yeah, awesome.
I was recently reading this book called
it's all around the adjacent possible
and it sounds as if it's very similar to what you're talking about here.
You start off with one innovation
then that spawns a whole bunch of other…
or kick-starts a whole bunch of other innovative projects.
It seems like Ocado Technology has been really thriving in this time
in terms of resilience
but also in the very stable technology foundation
that you've had that has allowed you to kick-start this 10x innovation in your space.
So, like I said earlier
you mentioned that you weren't able to see the future
but I can certainly tell you
I feel like myself and the people listening have had a glimpse into the future today
talking about robots, machine learning, process automation, mission control.
This has been very, very interesting.
I've learned a lot.
James, thank you so much for joining us for this conversation.
We've had James, the CEO of Ocado Technology.
Thank you so much! I've really enjoyed chatting today.