A View from the CEO’s Office, Part 2
This is the second half of my conversation with Sharen Turney and Jerry Stritzke, two brilliant CEOs I’ve had the opportunity to work with as a team as well as individually. Read the first half of our conversation here. We continue our discussion about operational excellence, this time focusing on the people aspect, the value of multiyear planning and the specific challenges that the retail industry faces today.
The Right People in the Right Roles
Sharen: Operational excellence leads to sustainable revenue growth as well as sustainable profit growth. Those two things together are very important. However, operational excellence also allows you to be a great place to work. If employees are happy, your business has a better chance to thrive.
Ruth: Right! He with the best talent wins.
Sharen: Yes. You may not even need first-string talent if you have operational excellence built into your processes. A lot of first-string players find it difficult to work and collaborate together.
Ruth: That’s very true. When we tackle consulting projects, we often step in to mentor and coach as members of the team. Whenever possible, it’s preferable to bring existing talent up to speed rather than replace someone.
Jerry: Business acumen is only part of the success equation. The other half is creative magic. If you’re a good operator, you understand what capabilities you need to win as a business, but you also understand where to create space for creativity. You need to create processes that support speed and creativity simultaneously.
Ruth: Operational excellence also ensures that your people understand how the business makes money and how their work impacts its success. That may be obvious at a senior level, but it is not always visible to members of the larger team. Articulating the “why” to everyone is crucial.
The challenges of omnichannel retail
Sharen: At the same time, you need to embrace complexity. People tend to run from that. Think about omnichannel: We've been talking about it for 20 years now – 20 years!
Ruth: We get so stuck with familiar systems and processes and “how we’ve always done things.” You have to really think through the systems you need to be effective and responsive. Retailers who had decent digital capability nailed it with COVID. They developed new ways of interacting with the customer very quickly. They could access their inventory, and they could please the customer. Their online businesses grew beautifully. That to me is operational excellence.
Jerry: That can be challenging if you’re an established business with a bricks-and-mortar history. All of a sudden, the lines between parts of the organization get blurred. You need to be able to see all your inventory no matter where it is. If your focus had always been having the right spot in the mall, can you pivot quickly enough to get eyes on your digital interface? What operational capabilities do you need to do that? How do you tell the brand story online as effectively as you’ve done in stores? It is really hard to get people in traditional environments to see that the game is different now and to embrace capabilities they hadn't needed before. Once they start seeing success, however, they get on board.
Ruth: We are in the world of “and,” not “or” when it comes to digital vs. bricks and mortar. It's all about making those two customer experiences reinforce one another. What are the capabilities you need? Should your stores, for example, have a larger back room that’s pleasant to work in where employees can take and fulfill online orders? If so, you also have to recruit and train your team to function that way. As we move forward, I see sales and customer care coming together as one team.
The concept-to-market process
Sharen: To Jerry’s point, a critical component of omnichannel is telling a unified brand story, and that starts right at the beginning. You need to bring designers, buyers and merchants together and say, “This is the direction we want to take the brand in 2021.” That way, when people start to put product together, you know it will make sense. That will result in more units per transaction. A well thought out process makes for an agile, empowered and high-performing team. There’s so much you can do to enhance creativity by getting some of these operational things out of the way.
Ruth: In other words, providing a process that allows people to bring their best work by recognizing and supporting the real drivers behind the business.
Sharen: It also makes articulating your vision easier. Visuals say a lot. When people can see a concept, they get it. Stores, supply base, design, service, ecommerce, advertising – everyone now has a mental picture of where you’re going at the beginning of the season. You’re giving them a springboard for working toward a common goal. Then you have a story well told and the magic that Jerry talked about.
Jerry: That’s one of the values of an operator background. You don’t come in with an answer. You come in and ask, “Where is this business?” Is it a startup or does it have certain capabilities already? What is the big opportunity you can unlock, and how do you move forward? I’m always wary of people who have an answer the minute they walk in the door. I’m a lot happier if someone comes in and asks, “What does success look like? What are the biggest challenges we face?” I’d rather have someone ask 15 questions than just tell me what they know how to do.
The value of multiyear planning
Ruth: That’s really wise counsel. Now we’re getting into the benefits of creating a multiyear plan , setting priorities and pacing. To succeed, you have to know what success looks like in three years so you can align your resources, build on what you’ve got and add capabilities to get there. I’m always shocked at how many companies don’t sit down and think through a few years ahead. That constant lurching forward often leads to friction with the entire company including the board, because leadership hasn’t explained to the collective teams what success looks like down the line. Show them a plan that details priorities and pacing! Engage each department in a conversation focusing on what they need to win.
Sharen: To my mind, a long-range plan is more like a stretch goal. It’s not what I’m going to hold you to in terms of compensation, but you have to visualize what’s possible. Otherwise, how would you know how much distribution space you’ll need? How would you calculate the capital investment for new stores or new technologies? How would you know if your supply chain can handle it? If you run the what-if scenarios, then all the operational pieces to support growth are going to shine right in your face. And if you don’t, you’re going to wake up one day and say, “Our distribution system can’t handle peaks in demand.”
Jerry: Modeling different scenarios is critical. It lets you come up with novel solutions and then see what works rather than depending on “how we do things here.” Thinking out of the box means more than just scaling what you’re already doing. It’s also looking out toward the horizon for possible disruptions.
Sharen: Without a long-range plan, you can waste a lot of investment. A plan gives you time to reimagine things. If people aren’t thinking three years out, you won’t have time to develop a creative solution. But when you plan ahead, you can make informed decisions calmly rather than in a mass panic.
Ruth: I’m hearing two things: First, the power of thoughtful questions, and second, that a multiyear operating plan is a CEO’s best friend for a few reasons. If you really want to know what your talent is focusing on, ask them to tell you what success looks like and see what they say from a product or revenue perspective. It’s a way to unite the leadership team with everybody in the trenches. The big magic is not the top-line operating plan by itself, but all the functional plans that support it. That’s when you get three clicks down and you hear all the pain points as well as the innovative ways your talent would solve them to create new opportunities.
Sharen: Looking ahead a few years provides an opportunity to consider all the opportunities available and put together a robust testing and learning agenda to see which ones are most likely to pan out. I could be passionate about one idea, but if testing and learning revealed that your idea would mean more sales and profit, that’s the one to put into play.
Jerry: In a period of change, that discipline is even more important. The rules are changing, and you need to learn them.
Ruth: Well I think we’ve gone a long way toward defining what those new rules are: Make sure you have the right people in the right roles, build your omnichannel strategy from the ground up, and my favorite: Create a multiyear operating plan. Thank you both for a great conversation. I look forward to the next one!