Caltex Australia is in the midst of one of the nation’s most significant enterprise transformations. While cementing its position as the market leader in Australian transport fuels, Caltex is positioning itself to take advantage of the growing convenience market. It is transitioning remaining franchisee retail sites to company operations, developing new retail formats and growing convenience retail revenues, strengthening fuel customer loyalty, pursuing growth opportunities in international fuel sourcing and supply and enhancing each stage of its operations with intelligent technology in support of its goal of retail excellence.
The zeal for Caltex’s transformation traces to the very top of the company. CEO Julian Segal has a clear vision for the future of its convenience retail business. He told the Australian Financial Review that; “The customers of the future will log in to their Caltex app, arrange to pick up the dry-cleaning and select something for dinner. They then drive into the Caltex site and an attendant will come to the car with everything the customer has ordered – including their favourite coffee.”
There’s much at stake. The petrol and convenience sector is valued at more than $8 billion in Australia and is growing, yet it is fiercely contested.
By the numbers, Caltex sources, imports, refines and distributes the fuels and lubricants that meet one-third of Australia’s transport needs. It sells over 20 billion litres of fuel through its retail and commercial B2B channels each year. Through its network it reaches 3 million Australian customers each week and there are approximately 70,000 B2B customers using its StarCard business solution at around 2,000 branded and unbranded sites across Australia. Making it all happen are the 6,629 people who work for Caltex.
One of them is Viv Da Ros who joined Caltex Australia as Chief Information Officer from a Hong Kong based retailer in late 2016. Armed with Segal’s vision and Caltex’s core value – “we make life easier” – Da Ros set about refreshing the organisation’s computing infrastructure so that it had the digital foundations it needed to innovate, along with access to the data that would support its transformation objectives. He also had a clear vision of the improved operational efficiency that would benefit what is a multi-faceted business.
“Caltex is a number of things – it’s a refinery, it handles trading and shipping, it’s a fuels business, an infrastructure company, a supply chain logistics company, a retail business and a transport company. This means that the technology challenges and opportunities are different across our value chain but our strategy has also been about putting key principles in place that drive our overarching approach.”
Da Ros explains the two key themes he used to shape the digital blueprint and transformation roadmap for Caltex. “The first is to drive operational efficiency and the second is to think customer experience. Underpinning those two themes are three pillars, Run, Grow and Transform.
“Run is basically the maintain pillar and focuses on people, processes, mindset, and operational disciplines to ensure strong service provision. Grow is all about ensuring that we have the right core systems in place to deliver operational efficiency and customer experiences now, but also the right core systems that are scalable and sustainable for the future.
“Then there’s the Transform piece – how do we leverage our digital strategy and technology investment to transform the experience for the customer and as our core value suggests, ‘make life easier’?”
With the pillars defined Da Ros knew he needed technology that could scale with the business, had extensive geographic reach, a strong track record, and had a commitment to innovation and security.
Why the high focus on security from the get-go? Because in the same way that the brakes on a car are what let us drive fast (without brakes we’d all be crawling along) – systems security allows transformation at pace. “Our focus now is less about ‘keeping the good guys in and the bad guys out’ and more about leveraging cyber security as an enabler of digital commerce.”
Working with Microsoft, Caltex has deployed what Da Ros describes as a digital enterprise architecture – this extends beyond the platform itself to what he says is a “mindset”.
“This means digital principles and ways of working, test and learn, what sort of integration services we should have, web services, APIs, standardisation across the board. It’s not about isolating a digital lab or a digital strategy, but instead it’s about ensuring seamless connectivity between key systems, processes, operational workflows and customer touchpoints – everything is connected.”
“We’ve completely changed all the way our systems talk to each other. So, integration tooling, APIs, web services and connectors. Most of our IT estate is now in the cloud. Our cyber security program is in place to the point where we don’t look at cyber as a protector, we look at it as an enabler.”
With that platform, security and culture in place Da Ros and his team can focus on innovative solutions for customers. One example is the FuelPay app, which allows people to pay for their fuel with three taps of their smartphone. Since launch in the middle of 2018, the app has been downloaded more than 170,000 times and it has been used to purchase almost 9 million litres of fuel.
Caltex is also innovating across its core retail formats, integrating technology at its 59 The Foodary outlets across Australia, such as FuelPay, a coffee pre-order app, digital displays, good WiFi and streamed music tailored for the local audience.
“We also wanted to go one step further, so we’ve prototyped payment through number plate recognition in what we are calling the ‘express lane’. So now if you drive to our first The Foodary at Concord, you can drive into the express lane, fill up, get back in your car and drive away and your payment is captured through that recognition of your number plate.
“We’re running an extensive trial to collect data and draw insights to determine how much further we deploy it through our network,” says Da Ros.
Turbo charging the digital transformation is Caltex’s digital lab, called the C-lab, led by Has Fakira (see breakout). Da Ros asks; “What does the C stand for? It stands for Customer, Caltex, Creative, Collaboration, Connected and Cool – it’s a number of things to us.”
Because of the cloud-based foundations and Agile culture that Caltex has fostered, the company can leverage the innovation team in the C-lab and move quickly from concept to deployment.
Da Ros says; “We recently visited some convenience retailers in China and mobile checkout is extremely common. So, within weeks of our visit, we were able to deliver a prototype of mobile checkout and mobile payments, and are now working on selecting appropriate sites for live trials.
“Digital electronic shelf-edge labels – we’ve prototyped these in our lab too and are currently considering sites for trial. All the digital signage in our sites are done through our C-lab. So, the connectivity through our ERP systems in terms of pricing and promotional offers and the like makes these innovations possible.”
Microsoft Azure provides richly featured foundations
Caltex Australia relies on Microsoft Azure as the underlying computing platform for the business, with Windows and Office 365 deployed group-wide. Communication and collaboration are supported by Skype, Teams and Yammer. The Caltex Intranet is built on SharePoint Online and Power BI handles reporting and analytics.
“We’re increasingly using platform as a service, software as a service and web services to improve our speed and our connectivity and optimise our costs as well,” says Da Ros, adding that cloud computer architecture is an important strategy for Caltex as it delivers improved speed, agility and flexibility.
“The dispersed nature of our business, within Australia and overseas means we need to provide our staff with anywhere anytime capability in terms of access to IT and digital resources of the company. Through our Office 365 suite and the associated collaboration platforms we can work anywhere anytime, and we can access data immediately through OneDrive as an example. So that’s a big plus for us.”
Has Fakira, Caltex Head of Digital explains that the depth and breadth of Microsoft Azure Stack offered the best fit, and richness of functionality that Caltex was seeking. Azure’s road map and capability in areas such as cognitive services was also important given Caltex’s plans.
“Facial recognition is a big thing for us. And we are increasingly seeing a world where your face will be your payment,” Fakira adds.
Cloud makes Caltex so nimble that it can spin up new services in 45 minutes, rather than the months it could take when the company had to buy and install new servers on premise. “That’s a big competitive advantage for us,” says Da Ros.
Having anytime anywhere access to data is also a game changer as it provides instant insights about customer behaviour and trends, which is particularly important in Caltex’s The Foodary retail outlets.
Beatrice Bowen is Head of New Business and Innovation and believes that the digital foundations now in place ensure that Caltex will develop into “A beacon for fresh food, good coffee, top up shopping convenience, and convenient services.”
Caltex today has approximately 800 company-controlled retail sites and 3 million customers a week using its retail outlets. As Australian demographics shift, with an increasing number of two-income, time-strapped households, Bowen sees a growing role for Caltex as a convenient outlet offering not just fuel but fresh food, healthy fast food, parcel collection and a range of other services.
“The petrol and convenience sector is valued at over $8 billion annually and has had consistent growth over the last two years. We also know that the sector remains underserved in Australia when compared to international peers and that the trend for consumers is toward convenience shopping.”
To compete effectively with rival retailers, it needs to digitally distinguish itself. It will, she believes.
“I think the customer experience will be frictionless – through the use of smartphones and apps – facilitating faster shop through FuelPay and number plate recognition and other Caltex apps we will be launching.”
Besides its own C-lab, Caltex recently used a three-month accelerator program called ‘Spark’, designed in partnership with corporate accelerator, Slingshot, to recruit and work with innovative start-ups that bring fresh thinking into Caltex to support its ongoing transformation.
As a result of the Spark program, Caltex has a partnership with start-up business Halo to develop an on-demand fuel delivery service that can be ordered using an app. It’s also continuing to explore its options with CarBar, which could see cars for sale showcased or dropped off for sale at Caltex outlets; and sustainable packaging developed by Pak360.
As an early adopter of new technology, Caltex is also actively exploring opportunities to leverage AI and virtual agents, such as to streamline customer service, and is excited about the future of augmented and mixed reality. Caltex recently implemented robotic process automation and at last count it had successfully automated 23 processes across the business realising significant benefits in efficiency, speed and accuracy.
“We invest the saving back into the retail business or the fuels business – it’s about technology as an enabler,” says Da Ros.
Data’s digital feedback loop
The data that is collected across the group can also be used to create a digital feedback loop to inform strategy and new service development.
Caltex collects data when someone picks up or puts down a nozzle, at the point of sale it knows whether someone is paying cash, card, via the app, or using StarCard, how a pump is performing. All that data feeds into a data lake hosted in Azure where it can be analysed, interpreted and acted on by Caltex’s Actionable Insights team.
“We have a Retail Ready Dashboard. So, every single data point comes back and is presented digitally on an easy to read and interpret front end. So we can proactively monitor availability of all technology in our retail sites to ensure an ‘always-on’ customer experience,” says Da Ros.
Fakira stresses Caltex’s commitment to ensuring consumer privacy. Access to personal information is controlled by Azure B2C Active Directory, which tokenises personal data to protect it.
While data is a powerful ally, design thinking techniques also play a strong role in shaping strategy and the transformation agenda at Caltex – for example experience designers spending time at retail sites to observe customer behaviour noticed that people would often glance up when filling their car to check on the length of queues at the cash register.
On occasion they would hang up the fuel pump before the tank was filled and go in to pay when they detected a lull in the queue. With the FuelPay app Caltex has reduced queues and boosted customer satisfaction.
The same sort of customer focussed thinking informs Caltex’s B2B operations, underpinned by the StarCard network and platform.
Fakira and his team are currently finalising a new app for drivers who use a StarCard that will do away with the need for people to remember their odometer reading and pin number. Drivers will be able to use a biometric form of identification – fingerprint or face – via the smartphone app to finalise the transaction.
Digital transformation has been an important ally for the success of the massive change program rolling through Caltex according to Da Ros.
“Culturally it has become a crucial part of our DNA.”
C-Lab: Caltex’s catalyst for change
Has Fakira was happily ensconced at Woolworths, working on consumer facing digital solutions when Caltex came knocking. It was working on its Convenience Retail strategy and Fakira’s background in design thinking, forward-facing retail apps and consumer digital solutions made him a natural fit as Head of Digital and leader of the C-Lab for a fuel company undertaking profound transformation.
How do you decide what apps to build?
Has Fakira (HF): We spend time observing our customers to get an understanding of their underlying needs rather than jump to solution mode based on some internal assumptions on what we think is right – that’s basically what design thinking is.
Can you innovate effectively in head office?
HF: Running a team using innovative ways of working is really difficult within a traditional corporate office. Purpose-designed space is needed for cross functional agile teams to deliver shippable solutions iteratively. This really helps us to attract the best digital talent.
How did you find the right place?
HF: I looked at over 25 locations but the pivotal point was the NSW Government setting up the Sydney Startup Hub. I pitched that Caltex is a 118-year-old traditional fuel company that needs to work differently to find ways to make life easier for 3 million customers a week, at hundreds of locations. We were also very keen to work with the start-up community. We now have a full stack Agile workforce that can work on any problem that we decide to throw at the lab.
How are you set up?
HF: We have C-lab Innovate and C-lab Deliver. So the principle is two zones, one team. The C-lab Innovate space is where we bring in business groups, customers, other parts of the technology team and we work on finding the right problems to solve. There may or may not be a digital outcome. It’s really important we don’t assume there’s a digital solution – we follow our structured process to understand the need before working out what to do about it.
And Agile is important why?
HF: An agile mindset allows us to act quickly and iteratively by delivering early working prototypes to support test and learn activities that give us valuable user feedback and if it makes commercial sense we will take it to scale.
Describe the space
HF: We have 50 desks, 500 square metres in a wonderful heritage listed building. A huge chunk of that space is allocated to collaboration areas. We have core team members together with people from other parts of our business and also technology partners. We’ve had up to 45 core team members in the space and we run three to five parallel work streams.
And how do you test your ideas?
HF: One method that we use is called Wizard of Oz testing because there’s lot of stuff going on behind the curtains to make an experience appear to work normally. Sometimes the only way to prove that someone’s really keen to use what you’ve got is by putting it in their hands and observing the behaviour change. Asking survey questions doesn’t really cut it in this day and age.
We do a lot of journey mapping – what the customer is doing before, during and after an experience – and we focus primarily on the moments that matter. We may also come up with solutions that have nothing to do with digital.
Can you share any examples?
HF: Our favourite test and learn was the initial work on FuelPay. We built a very basic app in just a few weeks to allow a driver to enter a pump number after filling their tank. The store staff then entered the price into an iPad app to simulate a fully integrated solution but there was actually an air gap. The group of test customers were not aware as our aim for the test was to understand if customers would remember to use it whenever they fill because it was a much more convenient solution.