And then a miracle happened….

During my undergraduate days I remember watching one of my professors work through a mathematical proof on our lecture hall’s chalkboard. This particular proof involved quite a few steps. At one point, as he scribbled the formulas and described his process, several of us noticed that he had made a mistake, thereby rendering it logically impossible to derive the correct result of his efforts.

As he neared the hoped for outcome, the professor paused, apparently realizing that he had somehow gone astray. He looked back at his earlier work. And then back again at where he had left himself. The seconds creeped by as we all waited and wondered how he was going to own up to and undue his error. After a few more awkward moments he finally exclaimed: “and then a miracle happened.” And then, without further explanation, he skipped the last steps and wrote the desired final answer on the board.

Over the years, I’ve noticed twisted versions of this scenario play out in many forms, in ways big and small.

The company that says they are committed to growth and innovation, yet has no real process or meaningful budget to support this goal.

The friend who constantly laments their life situation, yet keeps doing the same thing over and over again, expecting a different outcome.

The sales forecast that’s based on faith, not science.

The talking head who meets resistance to his ideas and simply repeats himself, just more loudly.

The marketer who promotes average products for average people–and promulgates tired one-size-fits-all approaches–and waits for remarkable results.

The political leaders who think we can bomb people into loving and respecting us.

All of them have made fundamental mistakes along the way. All of them can’t own up to and address their errors. If they are honest, all of them are counting on a miracle.

Sure, there is a chance that lottery ticket will pay off. Maybe, just maybe, repeating the same unsuccessful tactics will finally yield a breakthrough. And perhaps there IS a divine force who–after they’ve picked the winner of this week’s SEC showdown and chosen among the Shias and the Sunnis–will turn His/Her/Its attention to whatever it is you are working on and fundamentally alter your course.

Perhaps.

Errant steps, periodic lapses in logic, flat-out mistakes and the occasional embarrassing failure are all normal parts of the human experience. And there’s no good reason to fight our humanity. But there are lots of reasons to examine our beliefs and challenge our default tendencies. There are plenty of reasons to get rigorously honest with ourselves.

From time to time, in some way shape or form, consciously or unconsciously, we are all hoping for a miracle to happen. There is nothing fundamentally wrong with hope.

But hope isn’t a strategy. And expecting a miracle to happen doesn’t really count as one either.

Nobody pays attention at first

Many famous and influential artists toiled in obscurity for the majority of their lives. In fact, some only found celebrity and critical acclaim posthumously.

There are plenty of examples of great spiritual leaders–Siddhartha Gautama and Muhammad come to mind–whose messages were largely ignored early on. It took many years for them to develop anything that could remotely be described as a following.

Most great entrepreneurial ideas are hatched in privacy–or among a very small tribe of like-minded folks.

You’ve never heard of the band you’ll be obsessing over in a few years time.

The next great writer probably hasn’t even written her first book.

And guess what? That blog you’ve been thinking about starting all these months. No one is going to read your first post. Or your second. Or your third.

Much of the time we’re afraid to bring our ideas, our art, our passion to the world because we fear others judgment or ridicule.  Somehow, we tell ourselves–despite never  having practiced–were supposed to be good right out of the gate. So often our ego protection tells us to not even start.

But most of the time, in the beginning, nobody is paying attention. And if we believe this and embrace it it’s actually very good news.

Because nobody pays attention at first, we get to try things out, experiment, be vulnerable, push boundaries, fail better.

Because nobody pays attention at first, we can create largely free of critics and trolls.

Because nobody pays attention at first, we get to practice, for real, not just in our heads.

If we fight through the resistance, if we begin to develop a following, there will be plenty of time for second guessing and reaction to how the world meets our work.

But right now, enjoy the anonymity while you can. And get started.

Escape velocity

In physics, an object’s escape velocity is the speed needed to break free of a planet or moon’s gravity and leave it without the need for further propulsion.

In business, understanding escape velocity is critical as well. There is a point when a brand’s positioning starts to gel, when enough of the early mistakes are in the past and when the underlying economics become clear. There is that critical moment when the obsessive core starts to coalesce and remarkability begins to work powerfully in a brand’s favor. Formerly insurmountable challenges start to fade. Customers (and capital) become abundant.

While randomness and serendipity pervade virtually all situations, it’s not terribly difficult to glean what has to be true for any brand to achieve escape velocity. Still many companies fail to do it.

For some, they are too busy putting out the daily fires to take the time to think it through. For others, perhaps there’s a subconscious fear that the analysis will reveal the futility of their current efforts.

Yet finding the time and the courage are crucial. The gravitational forces of the marketplace are powerful. And only the competition wins when a brand crashes back down to earth.

 

Omni-channel’s migration dilemma

The shift in retail to a more omni-channel world is dramatic and profound. And since the term “omni-channel” gets thrown around a lot–often vaguely or carelessly–let me be clear about what I mean: more and more customers are becoming engaged in utilizing multiple channels–stores, mobile, online, social networks and the like–to explore, research and transact.

One important implication of this phenomenon is that many consumers are becoming what I call “blended channel” customers; sometimes choosing to transact in physical stores, sometimes buying online. And they commonly use multiple sources to aid in the decision journey, regardless of where their ultimate transaction may be recorded.

Their loyalty is to the brand, not a channel.The pressure, therefore, is on retailers to become more channel-agnostic, break down their operational silos and create a frictionless experience across channels if they hope to win over this growing cohort.

So, at one level, it’s easy to understand the retail industry’s frantic quest for so-called omni-channel excellence. But the success from omni-channel will not be evenly distributed–and for reasons that go beyond a given company’s willingness to invest or their capability to execute well.

What many leaders and analysts fail to appreciate is that as customers migrate even a small portion of their purchasing from physical stores to digital channels, a number of important dynamics come into play, and a huge dilemma may emerge.

It’s important to understand that the transaction economics of physical stores and direct-to-consumer (D2C) are quite different. Brick and mortar is mostly a fixed cost business characterized by lots of capital tied up in real estate and the supply chain, married with some relatively high costs just to stay open and staff the store during typical open hours. By contrast, above a basic scale, D2C is highly variable. In most cases, it costs more or less the same to take an order, process it, pick it out of central inventory, pack it up and ship it, regardless of whether the item is priced at $15 or $150. Generally speaking, the higher the average order size, the greater the profitability. If you sell cheap stuff on-line–particularly if you can’t recover your shipping costs from the consumer–good luck making any money.

So if the variable economics of the digital channel are superior to brick and mortar–everything else being equal–the more customers become omni-channel in their behavior, the better a brand’s economics become. This is one of the reasons you’ve seen brands with higher average order sizes (e.g. Nordstrom, Neiman Marcus) investing aggressively in building out their e-commerce capabilities for over a decade.

If the marginal economics of the digital channel are worse than bricks & mortar AND the brand is growing slowly or not all, a real dilemma emerges. On the one hand, changing consumer preferences essentially demand investments in omni-channel capabilities. And this is no cheap date. Yet as customers migrate from stores to online, the overall economics deteriorate in the aggregate. Worse still, a dramatic shift away from physical stores to e-commerce will make many stores questionable economic propositions. Yet, closing those stores may cause the loss of some or all of a blended channel customer’s business. It’s easy to see this as the start of a downward spiral (I’m looking at you RadioShack).

From a consumer’s point of view, the deployment and improvement of omni-channel capabilities is a bonanza. From a retailer’s point of view, the rush to all things omni-channel–without a clear understanding of the underlying economics, the different behaviors by different customer segments and how physical channels interact with digital channels to deliver a remarkable total customer experience –can lead to some very serious mistakes.

 

Note: For an insightful and data rich discussion of many of these issues, I wholeheartedly recommend Kevin Hillstrom’s blog: http://blog.minethatdata.com/

The big stall and your angle of attack

Many brands, particularly in retail, seem stuck in a persistent malaise. Earnings report after earning report detail tepid sales and mostly flat-lined profits. The accompanying press releases describe the consumer as “on the side-lines.” Others opine that shoppers have adopted a wait-and-see attitude toward spending. The CEO of The Container Store recently concluded that we are experiencing a “retail funk.”

I freely admit I don’t know a lot about aerodynamics. But what I do remember about why planes stall mainly has to do with their speed and the “angle of attack” of the wings. The reasons we are seeing a big stall in retail are similar.

The lack of speed comes from little to no growth in discretionary income. Combine that with a consumer wariness toward spending after a brutal recession–and an uneven recovery–and we have little forward thrust. There is little reason to believe that this will change markedly anytime soon. And, of course, no brand can do anything to change these macro-economic factors.

The angle of attack is how you approach the market–and this is entirely within your control. Confronted with a lack of acceleration you can choose to follow the herd, taking a one-size fits all approach, making average products for average people, engaging in a race-to-the-bottom price war and so forth. Best case: you hold your ground and your results are in line with your industry segment–which is to say strikingly mediocre. Worst case: inadequate speed and an insufficient angle of attack cause you to plunge to the ground. Not very appealing.

Perhaps you’ve noticed that even in the worst of times there are still some clear winners. Perhaps you’ve noticed that somehow, even when the stock market goes through its gyrations or consumer confidence wanes or weather conditions are not conducive to seasonal apparel sales, somehow or other, a few brands manage to shine.

Maybe these brands are less concerned with the speed of the market and more focused on their angle or attack?

Maybe if you are losing lift, you might want to stop doing the same things over and over that got you there in the first place?

 

Just because you killed Jesse James . . .

“Just because you killed Jesse James, don’t make you Jesse James.”

- Mike Ehrmantraut to Walter White, Episode 3, Season 5 of Breaking Bad.

Just because you’ve shot down my idea doesn’t mean yours is better. Defending the status quo can be necessary, but mostly it’s an excuse to stay trapped in our fear.

Just because you sit in judgment of all the “idiot” drivers and “slothful” welfare recipients and “feckless” politicians, doesn’t actually do anything. Though your fragile ego may get a hit for a few seconds, putting others down isn’t a solution. And it certainly adds nothing to the level of discourse.

Tearing down something else isn’t the same as your building something worthy or interesting. So instead of complaining, let’s see your plan.

Being the critic is mostly a place to hide from the hard work of leading us to something new and meaningful. So instead of judging, let’s hear your ideas.

Eliminating the competition may make life easier for a bit, but eventually our art, our projects, our passions have to stand on their own merits.

The universe is listening. And waiting.

 

The obsessive core

Every great brand has an obsessive core. The person who camps out for hours before the next iPhone is released. The Harley Davidson fanatic who sports the logo tattoo and is dressed head to toe in Harley gear. The frequent shopper who willingly pays full price and is an incredible source of great word of mouth. The raving fan. You get the picture.

The great thing about most obsessive core customers is that they are highly profitable and help acquire new customers at a low-cost. If you lack such a passionate group, chances are you are making average products for average people. Good luck with that.

Yet brands blessed with an obsessive core–or even a bit less enthusiastic but significant group of “heavy-users”–are often led astray.

Many luxury brands–including my former employer Neiman Marcus–tilted too heavily towards their obsessive core shopper and neglected other important, profitable customer segments. When the recession hit, the day of reckoning was harsh indeed.

Most high-flying e-commerce companies gain their initial traction with an obsessive core. By focusing on an underserved niche that loves to shop online, these brands can often quickly and cost effectively acquire thousands of profitable customers. Alas, as we’re starting to see with many companies that have attracted millions in venture capital funding, growing profitably beyond that initial core is not so easy.

Unfortunately, the factors that create the obsessive core, the raving fan, the incredibly passionate brand advocate, often cannot be scaled.

Unfortunately, in our quest to exploit the seductive virtues of the obsessive core, we can lose sight of the big picture.

The key, I think, is to not let ourselves become obsessed with this group, but to place them in the appropriate context.