Ocado CTO: IoT revolution to dwarf mobile's impact on business

Online grocer Ocado's chief technology officer (CTO), Paul Clarke, says the Internet of Things (IoT) and, in particular, the way IoT will touch the home in the years ahead, will be exciting for businesses and consumers alike.

But the CTO, who has worked for Ocado for the last decade as the company has built its reputation in a crowded sector and grown like-for-like (LFL) sales each year, thinks most organisations are asleep "or partially asleep or dozing" to just how transformative this new technological revolution is going to be.

Speaking at an exclusive breakfast briefing at Salesforce Tower in the City of London, which was attended by Essential Retail and selected trade press, Clarke detailed his predictions on how smart technology is going to evolve in the coming years and how he believes Ocado is riding the innovation wave in this space.

"I think it's going to dwarf what happened with the mobile phone revolution and I think it's going to fundamentally affect so many different businesses," he asserted.

"It will disrupt some [businesses] and create new ones. There's a whole smart cities, smart countries and smart infrastructure agenda. It's massive."

Some major steps have been made in the retail-IoT space in recent months with Amazon bringing its Dash Button to UK Prime members, allowing customers to replenish goods from brands such as Ariel, Andrex, Gillette and Nescafe with the single click of a button on the Wi-Fi-connected device. Accompanying that move was the arguably more significant launch of its cloud-based Dash Replenishment Service, which provides a set of APIs to white goods and household appliance manufacturers to connect them to the Amazon ecosystem.

The service is aimed at everyone from large corporations – including Bosch, Samsung and Whirlpool – to hobbyists, and the APIs can place orders on behalf of the customer while Amazon leverages authentication, payments, customer services and fulfilment.

Clarke acknowledges there is a "war of the home hub" taking place, with "all the big players" having a stake or soon to have a stake in that battle. Much of this fits into a trend he describes as the "broadband of grocery", and his clear passion towards this subject suggests there are imminent announcements from Ocado related to this space.

"The impact of smart homes, smart kitchens, smart appliances is going to be huge," he explained.

"We are very well set up to be the replenishment engine of the smart kitchen, whether it be on a Nespresso machine or a dishwasher, or whatever. It will be an amazing source of data for us, in terms of understanding our customers better in order to know more about what they do so we can get better at delivering what they want and when they want it."

He also revealed Ocado is working on some solutions in this field, but stopped short of saying exactly what they are. However, he said the online grocer has some ideas that it feels "go beyond" what is already available on the market.

It would seem that Ocado is positioning itself to get involved in the "war of the home hub" in some form or another.

"We have some exciting ideas – some of which we've been off patenting – of the things we can do in the smart home," he explained.

"It's about having better access to the data that allows us to get into the minds, with their blessing, of our customers. We aim to get better at the broadband of grocery."

Clarke said the IoT revolution will be about "playing nicely" with a number of different manufacturers and hubs, and he added that voice recognition technology will feature in much of this forthcoming innovation.

From a business strategy perspective, Ocado has been under City analyst scrutiny for some time now, facing questions about its viability in a crowded supermarket space – particularly as it only made its first profit 15 years after it was founded and four years after its 2010 IPO. Amazon, of course, followed a path in the US of gaining market share over profitability for some time.

Lately, as Ocado has doubled up as a standalone grocer and a technology infrastructure business providing the backbone to Morrisons' eCommerce operation, the company has faced criticism for failing to add a second big grocery name to its Ocado Smart Platform (OSP) despite holding a multitude of meetings with interested parties and investing vast resources and manpower into technology and software development.

Clarke noted the "shortcut" to eCommerce that Ocado has given Morrisons is what the company wants to replicate with other retail partners.

"We've been talking to very large grocery retailers around the world, we always say in every continent apart from Anatartica and warzones, and the level of interest has been extraordinary but these are very big, virtuous decisions for these companies because in many cases this is their future – so the level of due diligence and discussion is significant."

He added: "You should definitely not judge the level of interest by the people we've signed.

"In fact, the [upgraded] Morrisons deal we announced a few weeks ago is an OSP deal – it's giving them a huge amount of the OSP software running in the cloud and giving them part of the bandwiidth in the future warehouse in Erith. Effectively we've signed our first OSP customer."

Underpinning this drive to sign up more partners is a stoic determination within the business that has arguably been required ever since its launch in 2000. Clarke describes the company as "a special place" and is positive about the people, culture and "strong vision and leadership", which has arguably been needed in the battle with much bigger players operating in its sector.

"We've had to stick to our guns and we've had to put up with people writing stuff about it'll never work," he said.

"We've grown every year LFL in an incredibly competitive market which has suffered with deflation – we must be doing something right. We're going to stick to our knitting. But the duality [of grocer and tech company] is going to remain important to us because that's what's allowed us to be the best at the world at what we are."

As a purveyor of goods and services, developer of its own technology and provider of infrastructure support to third parties, a good question to ask is how do you define Ocado? It's not an ordinary retailer and it's not a tech vendor, so how does Clarke himself explain its raison d'etre?

"We are taking really hard problems, using technology in creative ways to solve them then building on that technology and operating at scale and taking those four things putting them in a formula, and doing them again and again," he said.

"It's about perfecting the art of scalable and reproducible disruptive innovation. We've seen that a number of times over our history."

Clarke says Ocado is "uniquely placed" to offer third-party grocers around the world a shortcut to eCommerce that will stop their competitors from gaining the upper hand in online retailing. There's no denying Ocado's technology team has developed some of the most advanced software used in the retail space today, with more to come in the two new warehouses set to open in the near future, but for the grocer to take its next giant step forward it will be up to other businesses to identify that for themselves.

Read more about Ocado, its technology offering and how the company works with technology partners, on Essentialretail.com next week.