Innovation · Leadership

The crushing force of retail insularity

Urban Outfitters is the latest retailer to be called out for the insularity of its board leadership. And rightly so. The lack of diversity, measured on just about every relevant dimension, has been a persistent and intractable issue for many large company boards.

It’s hard to imagine an industry that is more in need of outside, diverse and challenging perspectives than retail. New technology, shifting consumer desires and disruptive business models have been wracking the industry for more than a decade, with the pace of change only seeming to accelerate. We now face profit squeezes, layoffs, store closings and bankruptcies at unprecedented rates.

Yet few of the legacy retail brands being hammered (some to the point of extinction) by these seismic changes have done much, if anything, to bring in Directors with deep knowledge of the changing technology, business model and consumer landscape. I warned about this five years ago, spurred on mostly by noting the appalling lack of relevant expertise on the J.C. Penney board to effectively challenge the reckless “hail Mary” strategy being promulgated by then CEO Ron Johnson. While clearly Penney’s needed to do something bold to get back on track, it should have been obvious how wrong-headed many of the ideas were. A stock that traded around $40 per share when Johnson started now trades at under $6.

The insularity on the part of corporate boards is but one issue plaguing traditional retail. The last two retailers I worked for as a senior executive, as well as many of the consulting clients I have advised, suffer mightily from a culture of insularity that extends beyond board composition. Show me an organization that is losing customer relevance (and resultant market share) and chances are you’ve shown me a company that is inwardly focused on process, budget allocations, cost reduction and intramural warfare between rival internal factions. These brands know appallingly little about the competition and potentially game-changing technology. They lack deep and actionable customer insight. Mostly, they are paralyzed by analysis and unwilling to take the risks that today’s fast-moving retail industry demands.

Extreme insularity within retail organizations is, arguably, the single biggest barrier to a brand making the changes necessary to thrive, must less survive, in what some call the “retail apocalypse.” Providing leadership opportunities (board or otherwise) to folks with diverse backgrounds is, in my mind, a moral imperative. But more than that, it is just smart business. Action must be taken, not just lip service. As Jack Kornfield reminds us: “The trouble is you think you have time.”

urbanoutfitters-storefront

A version of this story recently appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

One thought on “The crushing force of retail insularity

  1. The retail Apocalypse as u call it, isn’t because of technology. Sears Holding Co. was the industry leader in technology. They had alternate fulfillment solutions before any other National retailer. JCP, also had forward thinking technology. Macy’s was one of the first department store chains to proactively and aggressively drove the digital beast. All of these guys focused to much on tech and ignored their stores, customers and assortments. All three of the aforementioned giants forsaked regional assortments and focused on discount as the main throttle to drive consumers in. All the while retailers such as Zara and H & M came in with fashion forward, price right apparel with assortments changing monthly. So conversely the majority of hurting retailers focused too much on technology as the savior and forgot what actually draws customers into the stores. Assortment, customer service, clean bright easily navigable stores

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