Innovation, Strategy and Operations

Radical Thinking

We are living in a shake-up moment of opportunity. Those stores, malls and brands surviving the ultimate shakeout will transform their models, driven by dynamics they have never seen before. Simply speaking, a tech-armed consumer has flipped traditional commerce on its head. The Radicals who maneuver through the eye of this persistent perfect storm are bellwethers for the industry and will propel their companies into the future.

Another week and another thousand or so upstart, tech-driven new businesses are celebrated and recognized in thousands of conferences across the country. Hundreds of them were featured at Shoptalk alone, last week. Fund-fueled by investors, hoping against hope, that one out of the ten they’re betting on, will stop losing money, and might even be the next Amazon (ha, ha!!), these upstarts go from one conference stage to another posturing their coolness. And, indeed, one out of ten may someday turn a profit.

But, while these upstarts are being celebrated, what about the unseen, unrecognized innovators within the traditional “old world” heritage companies, who are implementing radical changes in their companies to successfully compete in the “new world?” Where are these radical change agents?

The Radicals Awards

The Robin Report is going to seek them out and we are going to celebrate and award those who are driving major change. We created the Radicals Awards to focus solely on individuals who frankly have a much higher hurdle than the so-called tech-driven upstarts. They must fight through entrenched bureaucracies, old world cultures and antiquated processes and structures to effect the radical change necessary to transform their companies into new world business models. This differentiates our awards program over all the others out there. And we believe these Radicals will be big winners.

Are You a Retail Radical?

Two weeks ago, at Shoptalk, I announced The Robin Report’s launch of our Radicals Awards program. In collaboration with SAP, the Awards will recognize and celebrate individuals who are transforming “old world” retail models, brands and other consumer-facing businesses. We are very fortunate to have SAP as a partner. Their deep knowledge across all of commerce is badly needed during this epic convergence of technology and a new consumer culture. Accordingly, the Radical Awards program is benefitting greatly from SAP’s participation. Matt Laukaitis, Senior Vice President and General Manager, Consumer Industries, SAP had this to say, “This program couldn’t be more timely particularly its focus on the world of legacy retailers and brands that are in the middle of massive disruption and chaotic change. These entities desperately need radical innovators, who can envision their company transforming successfully into the new world, and have the leadership capabilities to create the new models. SAP has been helping many of these companies and their radical thinkers drive change and control their destiny for years. The Radical Awards program further emphasizes our mission to help businesses succeed in this transforming world.”

As a kick-off of the program, our event featured three incredible radicals: Chris Duffy, VP of In-Store Environment, Home Depot; Katie Finnegan, Principal, Store N° 8 – Walmart; and Daren Hull, SVP Technology, Stores and West Elm Digital at Williams-Sonoma, Inc. The conversation with these game changers was led by another radical: Mark Bozek, founder and CEO of Live Rocket, a firm that advises radical retail concepts that merge entertainment and commerce.

While the three radicals who participated in our event had different roles within three very different companies, the three fundamental, and necessary points conveyed by all of them (in their own words).

  1. The need for fundamental/radical transformation must be understood and completely endorsed by the CEO.
  2. They must view the funding and testing of such radical initiatives as investments rather than costs. One perspective was that if the testing of radical ideas did not often fail, then these radicals were not taking enough risk. In other words, the chiefs need to envision and lead major transformation, providing wide latitude and serious funding for the radicals charged with making it happen.
  3. Never before has the consumer been so powerfully in total control over all of commerce and each individual business. Every vision, idea, initiative and objective directly reacts to consumers’ desires. Among these three executives, it was unanimous that everything starts and ends with each individual consumer.

How to Think Like a Radical

So, the process starts from the top. Katie Finnegan explains, “To have startup Store N° 8 inside of Walmart It has to be a concerted buy-in effort from the top. CEO Doug McMillon and the Walton family have totally bought into what we ae doing, which mean the shareholders have buy-in. And they all know that It’s going to take five, six, seven years before anything I’m working on is actually going to have a material impact.” Daren Hull adds, “Collaboration is super important at all of our brands. Retailers by nature hire people who are also nice people who are good at working with people, and that’s been a bedrock of the industry. However, when you put people in the room and you’re trying to create a roadmap for five years from now and run that technical roadmap on a consensus with just nice people, that’s the death sentence.” He says that you need to bring cross-functional people together especially when things aren’t going well who will stand up to give you different points of view and different ideas. For example, “put a good group together with the field force with engineers, designer and the UX team, and great things can happen very quickly.” Katie agrees that you have to have people with different points of view at the table. Chris Duffy says, “One of our most important core values at Home Depot is building strong relationships. When you have a really good relationship with your peers, it makes it a lot easier to walk down the hall and have a very direct conversation with your peer about whatever just happened. And that’s something that creates velocity in a business because you get out of these massive email trails. Relationships facilitate a much more direct decision-making process.”

Radical thinking in a legacy retail organization has its challenges. Chris says, “The downside of a legacy in retail is you tend to have very entrenched org charts in a business and unfortunately sometimes customers will see the seams in those org charts in their experience whether its online, in the store or through the supply chain. That can be tough to overcome and it takes a very intentional effort to try to train the leaders of a retail environment to think about the end game in the value chain not just in context of their org chart, but in the context of the broader customer experience and the value offering.” Daren adds, “The hardest conversation anywhere is trying to explain to people that what they’ve been doing that made them famous needs to change.” Katie says, “Change is hard and you have to be willing to disrupt yourself from the way you did things previously.” Daren explains, “There are very few people I’ve met in retail that don’t want to do the right thing. It’s in their DNA. But you have to try to get people to understand what that first step is to get engaged and then have a passion for something other than the passion they’ve been having for an x-number of years.”

Being a radical working in a legacy organization has its benefits. Katie says, “What’s really important in a unicorn opportunity is that you have to have the balance sheet with cash to be able to do this in ways that are not impacting your overall EPS and your earnings. You need enough long leash to do it right. If not, you’re always answering to short-term demands and you’re fundamentally making different decisions.” Daren agrees, “The great thing about having a legacy company is you don’t have to go out and look for capital all the time. When you’re in startup, part of your flexibility is driven by the existential questions you run into every single day … like am I going to be around tomorrow? That forces people to move with more flexibility and speed. So how do we take that flexibility and make that happen in a company that has the capital, values, legacy and people with extreme depth in their positions? That level of experience is such a gift for a legacy company.” Chris adds, “Home Depot has a super proud legacy.

Over 35 years ago, our founders built this infrastructure of 2000 warehouses that we call stores today but really points of distribution for us. And 90 percent of the American population lives within a 10-minute drive to our stores. I think we are just now starting to see the vision our founders had. We just need to think about our assets and legacy and all the things that have made us great over the last 35 years in a slightly different light. And that can be a challenge.” Daren adds, “If you have a big balance sheet, you also have the opportunity to create efficiencies in other areas using technology and then to take that success and reinvest. There are certain things you can jump into that only take days, weeks and months. If you can show that a small group of people focused on doing something tangential to the core business is creating efficiency and you keep your hand on those dollars, you can create fairly quick system of recycling those dollars into other things that are new. The key is to show people how to do the work as opposed to talking about how to do the work.” Katie agrees with the need for sharing success. “We have a whole strategy about how we approach the external world, but about 65 percent of our efforts are actually internal PR. Because keeping the internal groups happy and showing those short-term wins and incremental benefits is how we get the ability to do what we are doing in the long term.”

Retail Radicalism

What exactly is retail radicalism? Katie explains, “I think radical thinking is about things 10+ generations out, not just focused on the near term or getting blindsided or distracted by what’s commercially viable today. You’re not just focused on the small incremental things. It’s unfortunate that we have to use the word radical at all. You have to be that in order to survive. The second you’re comfortable, you’re gone. If you’re waiting to be told what you need to do, it’s almost too late. If you wait for a signal from a customer to ask you for something new, you’ve probably missed the boat.” Daren says being radical is about changing the conversation. He explains “Where I’ve been lucky to have had some successes is by coming into work every day and thinking I’m wrong. I use the analogy of the Beatles. When you think of the legacy of the Beatles, do you think of Love Me Do and Hard Day’s Night? Or do you think of Sgt. Pepper’s Lonely Hearts Club Band and Let It Be? This is a group of people who created their market share on something super popular, but to keep that long horizon of their legacy, they had to listen to their customers and evolve with them and evolve their distribution. They did everything listening to their customers. Is it being radical? I think it’s being able to eschew what you know to work, always in search of something else that may work better. There’s never been a time to new things so cheaply. So how do you push people over the edge to try new things?” Chris adds, “When I think about retail and radical, at the Home Depot we talk about having one foot on the dock and one foot in the boat. We still have to run a really good business today in our stores and our warehouses, but we still need to be thinking about what’s around the corner and what the future will bring five to six years, then maybe eight to ten years out. The pace of these changes has accelerated so much that the flexibility required to have one foot on the dock and the other in the boat is at such a premium today.”

What does it take for a radical team to be effective? Daren cites Coxe Distinguished Professor at Dartmouth College’s Tuck School of Business Vijay Govindarajan’s Three-Box approach to innovation. “If you have a team that’s innovating you can use the three-box framework: focus on what are you doing right now; in the center box, what can you make go away, and the third box what you can use from what you are doing now that you can use to invent further out in the future. If you can have that balance, your people will see you like any other team with, as Chris said, one foot in the boat and one foot on the dock. Show how four or five people off the reservation can solve a specific concrete business problem that can spread across all your business brands. Share what they did and the gains they made. It’s a simple start and opens the conversation to scale it up. We need to get people excited and have an open conversation.” Katie cautions about how to have those conversations. ”Email is so toxic. I’m based in San Francisco. Marc Lore is in Hoboken and everyone else is in Bentonville. I flew 5000 to 6000 miles a week. It was grueling, but I was in person, vulnerable and had an eye-to-eye conversation.”

Chris has the last word, “We don’t do radical for the sake of radical. We don’t do digital for the sake of digital. We try to be really vigilant to connect our efforts to real business problems to improve the customer experience. What has been super helpful is to create a framework for our people to maneuver within– from experimentation with a lot of runway into proof of concept, to pilot and then scale. We just need to I think the future for retail is bright, it’s just going to be different.”

Our take? If you celebrate and support the radicals in your own organization, your pathway to the future, which will certainly not be a straight line, will be bright. We’re betting on the radicals.

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