Push “blend”

It wasn’t very long ago that engaging with most brands meant dealing with their disparate pieces. One 800 number for order status, a different one for delivery. Websites and physical stores that often bore only a passing resemblance to each other. Getting bounced from one department to the next to resolve a customer service issue or get a question answered. And then needing to start over again with each person with whom we spoke.

Then–slowly at first–some companies began to realize that customers didn’t care how we were organized. Customers didn’t want to hear about the limitations of our “legacy systems.”  We may talk about channels, but customers don’t even know what that means. And they don’t care.

Upstart brands challenged the incumbents by attacking the friction in consumers’ path to purchase. Companies as diverse as Nordstrom, Amazon, Bonobos and Warby Parker made it their job to integrate the critical pieces of the shopping experience on behalf of the customer. They challenged the traditional verticality in retail and embraced the notion that brands are horizontal.

They assembled great ingredients and then they pushed “blend.”

As retailers we may be organized by the parts and the pieces. We may make decisions on discrete components. We may measure and tweak each variable in the equation.

But at the moment of truth, when the customer decides to enter our store, click on an ad, put another item in their cart or recommend us to a friend, she’s thinking about the whole blended concoction.

 

 

All in

There is no shortage of business bestsellers, insightful white-papers and Harvard Business Review articles regaling us with multi-point programs to drive successful growth strategies. Consultants abound–including this guy–pushing clever frameworks to guide your brand to the corporate promised land.

Best demonstrated practices. Core capabilities. Disruptive innovation. Business process re-engineering. We’ve heard it all.

Yet despite an abundance of knowing, there is a paucity of doing. The same companies with the same access to the same information–employing high quality, well-intentioned  executives–get widely (and sometimes wildly) different results.

Having spent more than a decade working in omni-channel retail driving customer-centric growth initiatives, I’m often asked which company is the leader in this space. I usually say Nordstrom.

I led strategy and multi-channel marketing at Neiman Marcus during the time Nordstrom began investing in customer-centricity and cross-channel integration. So I can spout chapter and verse about the differences between our approaches and all the opportunities we missed. But with Neiman’s announcement this week of their new customer-centric organization (better late than never!) there are a few key things to point out:

  • Neiman’s has a lot of catching up to do
  • We knew the same things Nordstrom knew when they aggressively committed to their strategy nearly a decade ago
  • Nordstrom acted, we (mostly) watched.

We can quibble about some of the facts and the differences in our relative situations, but when it comes down to why they are the leader and Neiman’s–and plenty of others–are playing catching up, it comes down to this:

  • Nordstrom had a CEO who fundamentally believed in the vision and who committed to going beyond short-term pressures and strict ROI calculations
  • They went all in.

In a world that moves faster and faster all the time, organizations are really left with two core strategic options: Wait and see or go all in. Most choose the former and end up going out of business or stuck in the muddling middle.

Going all in doesn’t mean investing with reckless abandon or rolling the dice. Most all in companies do plenty of testing and learning. But testing with a view toward scaling up or moving on is a sign of commitment and strength not uncertainty and weakness.

Going all in must start at the top, with an executive who is wired to say yes. An all in strategy is fraught with risk. Mistakes will be made. You need a boss who has your back.

Going all in necessarily requires a supportive culture, but without complete organizational commitment it’s not nearly enough.

Going all in doesn’t pre-suppose a journey without bumps in the road. All in companies know how to fail better.

Culture eats strategy for breakfast?

Commitment eats strategy for lunch, dinner and a late night snack.

 

Untethered

In the first decade of e-commerce’s ascension, with rare exception, the consumer was sitting in their home or office using a desktop computer to do their online shopping. It was a completely virtual experience where the advantages were clear: 24/7 access, wider selection, often lower pricing and so on. So were the disadvantages: inability to try on the product, no instant gratification, no sales help, etc.

Even as e-commerce began to chip away at brick & mortar stores’ dominance, the physical retail experience stayed basically the same. To reap the advantages of in-store shopping you had to travel to the store. Once there, if you wanted product information you had to track down a sales associate and hope that he or she knew what they were talking about. What you could buy had to be in-stock in that particular location. And when you wanted to buy something, you went to a sales register at the front of the store or located in a merchandise department.

With the explosion in mobile devices and smart phones the consumer decision journey is rapidly becoming untethered. Previously a digital shopping experience by definition meant you weren’t in (or close to) a store. But, more and more, what we once counted as an e-commerce shopping trip or sale, versus one made in a physical store, is a distinction without a difference. It’s now a bricks and mobile world.

Increasingly, store sales associates are untethered from their POS registers, lending them the ability to work with a consumer at the real point of sale and arming them with the digital tools that can meaningfully enhance the customer experience.

Today’s omni-channel leaders are keenly aware of how the un-tethering of retail is profoundly altering the consumer and competitive landscape.

For others–the relentless defenders of the status quo–it’s their thinking and willingness to act decisively that needs to be untethered. Hopefully that occurs before their business model becomes unhinged.

 

 

No managers were hurt in the making of this strategy

A number of years ago my team crafted a proposal to re-organize our company around the customer.

It was apparent that more and more consumers were using multiple touch-points to engage with our brands. Our analytics team had calculated that 50% of our customer base had made a purchase from both our physical and e-commerce channels during the past year. Researching online before shopping in our stores was increasing dramatically. And one of our key competitors had embraced “channel-agnosticity”, was investing heavily in cross-channel integration and starting to grab market share.

We, on the other hand, were locked in silos. We had entirely distinct and decentralized organizations for our online and brick & mortar operations. Separate channel inventory could not be accessed on behalf of the customer. Metrics and incentives were channel specific. Despite “knowing” that a high percentage of our best customers received direct marketing campaigns from both of our separately managed channels, virtually no effort was made to coordinate these consumer communications. In fact, our opt-out rates were greatest among our highest spending customers. To us, the call to action was clear.

So we pitched our CEO on a plan to address these issues. It was a dramatic shift to be sure, with a fair amount of complexity and numerous assumptions about how we would ultimately justify the investment.

Yet, what my boss focused on was how several key executives would be impacted and how they would react if we were to embrace the proposed customer-centric transformation.

“John is going to be angry. Sally would have a lot fewer people reporting to her. How can we move Paul over here, Linda (his boss) will be upset. I promised Tim a CEO title.” And so on.

Needless to say, none of the most critical recommendations were implemented. Eventually, under a new CEO–and mounting evidence of how the company was falling behind–most of the proposed changes were made. By that time I–and every single one of the personalities at issue–had left the company. And market share had continued to erode.

I don’t mean to be callous about the individual concerns and needs of folks working in companies. But the reality is that consumer needs have evolved radically and traditional approaches simply don’t work. The evolution (or revolution) in your strategy is certain to shatter the status quo and be painful for some (or all) of your managers and executives.

Yes, it’s inevitably going to hurt some of your people. But not going through the pain is ultimately certain to hurt your customers–and your results.

It’s a stark choice. But the choice seems clear.

 

 

 

 

Omni-channel: Fix it in the mix

I’m just back from the intimate little affair known as the National Retail Federation’s “Big Show.” Of course if you’ve ever been, you know that it is, in fact, far from intimate. The multi-day extravaganza in New York’s Javits–from the Hebrew, meaning “non-existent mobile connectivity”–Center features thousands of attendees, hundreds of exhibitors and buzz-words aplenty.

In many sessions, barely a minute could go by without a speaker uttering “omni-channel” this or “omni-channel” that. Yet the attentive listener would quickly conclude that not only was there often more heat emitted than light shed, there was also a fair amount of out-and-out hooey and semantic mumbo-jumbo.

Let’s get a few things straight, shall we?

First, omni-channel is no different from what many leading retailers have been investing in for years: the vision of a customer-centric, anytime, anywhere, anyway, seamless experience across channels and touch-points. Call it “channel-agnosticity”, “frictionless commerce” or “multi-channel integration”, it’s all more or less the same. Customers don’t care what you call it, they care what you do with it.

Second, the point is not to simply add more channels. The “omni” part of “omni-channel” is about being intensely relevant in all the channels your customers care about and making the experience frictionless for her as goes through her decision journey. I heard one executive say they were the best omni-channel retailer because they sold in more channels than anyone else. That’s very misguided thinking.

Third, participating in, or being pretty good within, all the channels that your customers employ is not enough, nor is having a decent experience across all channels for your average customer.

Winning in omni-channel is all about the mix. The mix of customers you serve. The mix of products and services you offer. The mix of media employed to drive engagement and loyalty. The mix of channels where consumers can learn and transact. And so on.

To be sure, there are some foundational ingredients of winning in this evolving omni-channel world. Possessing a single view of the customer and the ability to uniquely identify, track and reach individual customers regardless of where and how they engage with you is critical. Without breaking down organizational silos (and the culture, incentives and metrics associated with them) you won’t get very far on your transformation. Making your entire brand’s inventory available to the customer at all points of sale (supported by easy, channel of choice returns) is rapidly becoming the price of entry.

Yet without the capabilities and commitment to treat different customer differently, your omni-channel strategy risks being an also-ran.

Many of the NRF’s Big Show presenters and vendors were pushing ingredients. Ingredients are essential, as is a good recipe. But the customer wants the finished product. And it’s the mix, that perfect blend, that really makes something special.

Fix it in the mix.

Easy or good?

It’s far easier to run your business with a paint-by-numbers operating model.  Why risk the vagaries of human interaction?

It’s far easier to craft a one-size fits all marketing plan. Why invest in complicated customer analytics and the complexities of managing vast numbers of different campaigns?

It’s far easier to focus on efficiency rather than effectiveness. Doesn’t Wall Street reward brands that run a tight ship?

It’s far easier to remain product or channel focused. Organizing your business around customers–and the realities of the omni-channel blur–means blowing up many existing processes, metrics, incentives systems and management structures.

It’s far easier to focus on the certain short-term fix, rather than commit to a long-term program of testing and learning and building foundational capabilities. After all, how can we be sure we will ultimately generate sufficient ROI?

The problem is that easy is not the same as good.

And good enough is rarely good enough anymore.

Remarkable. Relevant. And built for me, rather than built for everyone, is what it will take for just about any business that cannot win by price alone.

And like it or not, easy is not going to cut it.

 

My Top Ten Blog Posts of 2013

As I take a break until the end of the year, here’s a recap of my top 2013 blog posts, in order of popularity.

1.   Neiman Marcus & Target: A glorious failure.

2.   JC Penney: Trouble on the home front.

3.   Math is hard, for JC Penney.

4.   Sears: The world’s slowest liquidation sale.

5.   JC Penney: Gloat edition.

6.   The multi-channel customer is your best customer. Duh.

7.   No pottery, no barn, no crates, no barrels.

8.   The world’s first omni-channel executive.

9.   Blaming the hole.

10. Silos belong on farms (redux). 

On a special note, my most viewed post of the year was actually from 2010. Fail better got a huge boost from being featured in Seth Godin’s Krypton course. Thanks Seth!

Thanks as well to everyone for reading my blog, challenging it, promoting it and just simply paying attention to my ramblings. It means a lot.

May you and those closest to you enjoy a wonderful holiday season.  Namaste.

 

 

 

 

Silos belong on farms (redux)

If you attended last week’s Shop.org conference you heard the term “omni-channel” thrown around quite a bit. In fact, an entire break-out session track was devoted to retail’s latest and greatest buzzword.

As is true with most conferences, attendees were regaled with pithy anecdotes of burgeoning success. “If you would just follow our play book you too could achieve your omni-channel dreams”, seemed to be a common theme.

Often lost amidst the breathless case studies and clever frameworks, was a simple and powerful reality. If you desire to be customer-centric–and it’s hard to imagine why you wouldn’t want to be–you cannot have fragmented data, uncoordinated marketing programs, channel-centric metrics and a decentralized organization. Period. End of story.

Silos belong on farms.

Three years ago I wrote about the concept of one brand, multiple channels, but I am hardly the first person to espouse this view. So why is there still such a gap between the knowing and the doing?

As is so often the case, the answer is at the nexus of leadership and fear. All the noble experiments and clever PowerPoints in the world get you nowhere unless change is driven from the top. And this innovation agenda requires radical acceptance of the reality that slow deliberate change is, in fact,  the most risky path.

The inconvenient truth is that most CEO’s are afraid to invest in technology with uncertain ROI and fear push-back from their direct reports who have thrived in a silo chieftain world. Letting go of age-old performance measurement systems and taking funds away from legacy marketing programs, even in the face of obvious ineffectiveness, seems scary.

But if you want to be really scared, take a look at what the competition and the most coveted consumers are doing right now. Brands like Nordstrom are winning precisely because their leadership began busting silos nearly a decade ago, well before a clear ROI could be calculated. And, increasingly, consumers are directing their loyalty to brands that engage in frictionless commerce.

Silos belong on farms. Silo busting belongs first on your to-do list.

 

 

 

 

Blurred lines

We can argue about which statistics you find most compelling.

Is it the percentage of customers who research online before buying in store?

Is it how much more valuable the multi-channel customer is versus one that shops in only one channel?

Is it the percentage of your customer base that makes a purchase in both store and e-commerce channels each year?

Perhaps you’ve done research where consumers have told you that they think brand first and don’t even know what the heck a “channel” is.

Or maybe it’s the dramatic growth in the use of mobile devices to research and transact that really grabs your attention?

At this point the details hardly matter. The lines between sales channels, customer touch-points and marketing media are blurring more and more each day. Fighting this is like fighting gravity.

Where the fight needs to occur is within your own organization, challenging the rigid lines of your technology, the way your customer data is structured, how your organized and how your teams are incentivized.

Becoming a truly customer-centric brand requires accepting the omni-channel blur, busting your organizational silos and committing to being completely and utterly channel agnostic.

Customer-centricity.  You know you want it.

 

JC Penney: Trouble on the home front

Ron Johnson’s tenure at JC Penney is the (horrible) gift that keeps on giving.

Amidst recent rumors of another CEO change, continuing Board drama and potential liquidity issues–not to mention the little challenge of pulling the core business out of its steep descent–now we have Johnson’s much vaunted Home strategy landing with a resounding thud.

And this blunder is, in many respects, the most misguided element of the “transformation”, the biggest opportunity wasted and the most vexing to fix.

The boldness of the new strategy was admirable: rip-up a chronically under-performing large section of the store, add new experiential elements, upgrade presentations and, most critically, bring in exciting, differentiating brands. Yet here too the misguided thinking evident in Johnson’s vision for the rest of the store is made abundantly clear.

After months of construction, tens of millions of dollars in investment and lots of hype, what we discover is a well-organized, beautifully designed space with lots of unproductive, poorly conceived merchandise. And don’t get me started on the Martha Stewart, Macy’s fiasco.

As I’ve opined before, at the core of Johnson’s erroneous strategy was trying to change Penney’s customer base too quickly. That huge miscalculation is evident in spades in the Home re-think. Brands like Jonathan Adler, Bodum, Conran and Ordning & Reda may have immediate recognition and appeal to some affluent consumers and design aficionados, but the notion that they would quickly be relevant to the Penney customer is simply nuts.

Even a brand like Michael Graves, which certainly had some success at Target, might be expected to convert reasonably well at the outset, but it’s hard to imagine it has much drawing power in the grand scheme of what is desperately needed.

Aside from these broader strokes, there are many major tactical blunders. The Bodum shop is a case in point. While the section is distinctively and attractively presented, much of the product is way too expensive. Did somebody really think many people were going to buy $200 coffee makers at Penney’s from a brand they’ve never heard of?  Other choices would be funny if they weren’t so costly. The Bodum shop (and website section) seems to believe the world is ready for a French press revolution. Maybe Williams-Sonoma or Sur la Table can lead that movement, but at Penney’s it’s just a big mark-down waiting to happen.

The Happy Chic by Jonathan Adler shop is also eye-catching, but the product assortment is way too specific to have the impact and productivity it needs. The Michael Graves and Martha Stewart shops are filled with a bunch of random stuff at odd price points.

Throughout the rest of the home section there is ample evidence of Johnson’s specialty store strategy taken too extremes. Some product is just too expensive for Penney’s core (Conran), some product is so narrowly focused in design point of view it can’t possibly be productive or contribute to a coherent view of Penney’s desired positioning.

Another issue throughout much of the new areas is lack of product density. The design does a nice job of showcasing product, but it’s Retail 101 to be mindful of having enough product and enough transactions to give yourself a chance of being profitable on the space. At Apple this “negative space” mentality works when you have strong traffic and products that cost hundreds (or thousands) of dollars.  But when one is selling $15 picture frames, $20 throw pillows and $3 dinner plates, well, not so much.

The investment in space for product demonstrations, design advice and customer service is just sad. It’s clearly an expensive exercise in productivity drain and customer irrelevance.

Some Wall Street analysts have been acknowledging the serious problems with Penney’s home business, but minimizing its magnitude because home represents “only” about 12% of revenue. And given the damage that’s been done to the rest of the business it’s fair to say that in the immediate term it’s hardly the #1 priority. But that misses the broader point.

Let’s remind ourself that prior to the Ron Johnson fiasco, Penney’s did not have a sustainable long-term strategy and plays in a retail market sector that’s been growing slower than inflation. They need a ~30% sales increase and vastly improved margin performance just to get back to where they started pre-Johnson. That means that all aspects of the store have to work. It’s also important to note that the Home store represents more than 12% of the space, and even though Penney’s has a huge opportunity in e-commerce, the reality is that today they have a relatively high fixed cost business and there is tremendous financial leverage in making the brick and mortar Home business productive.

For any department store developing top-of-mind preference and driving cross-shopping is paramount, so success in Home–or any department for that matter– is about more than traditional financial mechanics.

The most vexing issue of course is what does new (kind of) CEO Mike Ullman do now? In the immediate term he’s been focused on the right issues: trying to pull a rabbit out of the hat for the Fall season, driving more urgency and impact through promotions and creating near-term financial flexibility.  And to be fair, it will really be the Spring season before we can get a good read on whether Penney’s is getting any real traction on un-doing the mess that Ullman re-inherited.

Unfortunately for Penney’s the home category may well be the hardest and costliest piece to fix. Going back to where they were (which is largely the path they are now on for the apparel business), is not a viable option. More investment will be needed, either to build consumer interest in the new brands while they evolve the assortments, or to re-envision the space to be consistent with whatever JC Penney 3.0 turns out to be.

Regardless, a few things are clear. First, there are no easy or quick fixes. Second, immediate concerns over leadership (CEO and Board) and liquidity aren’t making the task any easier. Third, and most critically, for Penney’s to claw back lost market share and have any chance to fight and win in an intensely competitive omni-channel world, patience, new thinking and significant investment will be required.

Let’s hope they get that chance.