This interview first appeared in the February/March 2017 issue of Logistics & Materials Handling.
Global megatrends such as globalisation, urbanisation and digitisation are forcing Australian logistics businesses to commit to a new, much more comprehensive mindset.
In a move to renew the company’s focus on innovation and future growth, Linfox founded a stand-alone Development, Strategy and Innovation (DSI) business unit in late 2015. A year on, Logistics & Materials Handling spoke to Chris Hemstrom, head of the ambitious project, about the essence of innovation and the role of creativity in modern business.
Q: It’s been a little more than year now since you became head of Linfox’s new DSI unit. In a time where the term innovation is seemingly losing traction – the Prime Minister’s 2016 Innovation Initiative was deemed too elitist to be successful, for instance – how do you ensure people understand what you’re trying to achieve?
A: That’s an interesting question. To move away from that innovation buzzword, I’d like to think of DSI as an organisational development tool. Our goal is surprisingly simple: to make sure we are delivering value to our client base. Our strategy is therefore much more focused on understanding our customers, their requirements, and how we can best help them than on innovation per se or simply acquiring more business. In fact, you may be surprised to learn that Linfox has shrunk the number of customers we have by almost two-thirds since the GFC (Global Financial Crisis, ed.), while the business has grown quite substantially in terms of its scale. In focusing on fewer customers, we’ve been able to create more value for and grow with our existing ones.
Q: Surely that doesn’t mean you’re not open for new business?
A: No. All we do within the DSI team is look differently at the concept of business development. Part of the reason why DSI was formed was to help scan the market, help identify work with potential new customers and understand what it is they’re after, of course. But we don’t approach it in a transactional way where we create a new service and then try to sell it as much as possible. Rather, we try and understand where there might be a gap in the market, where there might be a problem that someone else hasn’t been able to solve but that we might be able to handle. We look at that both from the perspective of deploying our existing capabilities and services as well as building new capabilities.
Q: Can you give us a more concrete example of that process?
A: One area that we’ve done a lot of work in, for example, is developing and deploying efficient warehouse management systems. We have a long-standing relationship with SAP here, which has a very sophisticated core technology that has been developed over a long period of time. At Linfox, we’ve got special expertise in how to run warehouses and how to deploy their systems, so together with some external suppliers, we have created some very efficient routines, if you like, to make modern warehouses more efficient. In fact, in a first for Linfox, we’ve recently secured two contracts to provide SAP warehouse management system maintenance, support and rollout services to two customer sites – I think many 3PLs are not quite as engaged in the R&D side of things as we are.
Q: So it’s more about the way you approach a problem – a mindset issue, if you will?
A: Precisely. We’re using the design thinking process developed by the Hasso Plattner Institute (HPI) at the University of Potsdam, Germany, and Stanford University, or at least the methodology behind it. It was originally intended as an innovation method for products and services, but has advanced to a completely new way of seeing people in relation to work, of imagining the concept of work and of posing questions about how we want to live, learn and work in the 21st century. To translate it back to what we do, we’re basically saying ‘we want to understand how we can work at the leading edge of technology and bring new efficiencies into our businesses instead of just taking what we’re offered.
Q: That’s quite an academic approach for a privately owned logistics business. Do you sometimes think you are doing everyone else’s work?
A: No. We’re an early mover who is actively bringing promising technology companies into the transport space – that’s all. Without us bringing some of them into the market, they probably wouldn’t have arrived yet. I suppose when you’re a leading player, you need to go down that path to keep moving. If you lead and keep leading while everyone else is trying to get to where you were two years ago, you always have an edge. At the same time you help bring up the standards of the industry at large. I’m hoping we are, anyway.
Q: In that context, does the push of disruptors like Amazon or Uber in the logistics space worry you?
A: We do recognise that the world is changing very quickly. Every day now you’re reading about Amazon and how it’s going to take over the world, and you’re reading about Uber and how it’s going to take over part of the transport chain. What we’re saying is that that may be true, but we’re still in the game. We think we’ve got some different ideas that could add value. To get that across, we have quite an extensive program of talking to our customers and to prospective new customers – not in a sales-y sort of way, just to learn about their problems – which we call our discovery process. Again, it’s not a sales program. It’s a program of understanding how industry is changing. Quite often it’s us that instigate change by just asking the question. That’s probably why I am not all too worried about Uber at the moment.
Q: You are not standing still either, though. Linfox has recently launched a multi-million dollar partnership with Monash University to advance the transport industry’s innovation agenda and provide more education opportunities for the Linfox team. A result of the work DSI has done?
A: It’s been a team result of course, supported by DSI. The Monash University partnership is a critical part of a longer-term strategy for the business to make sure that there is a structured education program for everyone that works in the business, because we believe it will bring value to the customer at the end.
Q: So it’s not just a leadership program, to pick up on the elitist debate once again?
A: Absolutely not, no. Linfox College, our current internal education program, already touches everyone in the business, and our ambition is to expand on that. In fact, Linfox College allows family members to be educated as well as part of the program. There’s quite a substantial array of different courses for them. What we’re trying to do with Monash simply adds more pillars to the program, so we can enable people to go up from doing employment-based courses or single unit courses to Bachelor’s or Master’s degrees, or even PhDs where that’s relevant. But, at the same time, we also get access to the expertise within the university system, and Monash is, as you’re well aware, one of the top universities, not only in the country, but globally. Being able to get access to its research team and its ways of looking at the world will also help us in our innovation and R&D agenda.