Leadership and focus on customers is key to retail survival

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Chris Sheryn, senior consultant at SA Partners, argues retail leaders should focus on strategic, ‘blue sky’ rather than ‘bike shed’ thinking, and understanding the consumer in the economic downturn

Chris Sheryn: focus on talent management and customer values

This winter, when the talk in the Dog and Gun moves away from Bobby Moore or Pele and onto a comparison of history’s greatest leaders, one name I would encourage to include on your beer mat is Abraham Lincoln. Old Abe may lag behind more familiar characters and history has not painted him as the charismatic and innovative leader he was undoubtedly. Lincoln was frequently portrayed in the press as a political lightweight who had been lucky to gain office and lacked the strength and decisiveness necessary to meet the challenges of the day. Famously, when challenged by a journalist to respond to calls for action, he illustrated the value he placed in strategic planning:

“If I had eight hours to chop down a tree, I would spend six hours sharpening the axe.”

As Lincoln managed to save the union and abolish slavery in a single term in office, perhaps his view of the value of strategic leadership in the face of a crisis is worth consideration?

The current economic environment is one of the most challenging for over a decade and retail is not escaping the effects of the downturn. Negative media coverage, retail price deflation, and customers who have short arms but deep pockets, combine to make the retail landscape scary indeed. As customers and markets look for reassurance, there is value in clear and consistent strategic direction from company leaders.

Even in good times there is a temptation for senior managers to live on the adrenalin of the here and now – the agenda is set by events and the rush of resolving today’s problem today can be addictive. One of the first casualties can be the non-urgent but important time spent in medium and long term strategy. This tendency may manifest itself many ways – a managing director who dives into micro-management, a sales director who muscles in on sales presentations, or a head of marketing who ponders an advertisement’s aesthetics.

The role of the leader is to ‘see the field’ – to understand the wider implications of events on broader objectives. This cannot be achieved if low level, operational activities dominate to the exclusion of quality time spent in planning. If things weren’t bad enough for the harassed leader, the implications of spending time in the weeds has deeper implications. The human brain is not equipped to toggle between right brain, creative development work and the detailed, logical left brain activities. People cannot flip instantaneously from ‘blue sky’ to ‘bike sheds’ issues; these are different mindsets and require a distinctly different focus. So the loss is compounded with a physical and intellectual reduction in capacity.

The effects on the people inside the organisation
It is also worth considering the impact on employees when leaders seek the safe and warm refuge of the coal face. Managers working down a level can cause significant damage to effectiveness. Accountabilities can be compromised, decision making lines become blurred and the effects cascade throughout the organisation. This can make short term problems more acute.

An even more profound effect lies in the organisation’s ability to attract and retain the best talent. Increasingly people are seeking autonomy and purpose in their chosen workplace – they want to belong to something greater than themselves. If the hand on the helm feels unsteady or is absent, it can be perceived the leader has lost confidence in the business’s ultimate direction and a rudderless ship is not a fun place to be.

Confidence is a precious and fragile commodity and an absence at the top can cascade throughout the organisation at speed.

How should leaders be spending their time?
There is no denying retail is an acutely operational market – more than almost any other sector, the consumer is in-your-face. Shoppers are increasingly fickle and competition is fierce. When the competitive skirmishes are a daily, and in many cases hourly occurrence, the strategic plan takes on a more fluid nature.

Understanding what the customer wants and figuring out a way to provide it profitably has always been a reasonable starting point for anyone seeking to make money – most leaders know that and can talk about their historical view of their customers. But here’s the rub – customer value is not constant and the downturn means it is not getting any more stable. Product and price only ever appeals to one aspect of the customer’s value set and the sluggish response of markets to fierce price wars confirms there is more than one dimension to the problem.

It has been interesting to watch retailers and suppliers lean hard on the price and promotion button as sales slowed over the past year. There is a place for price in order to drive awareness and volumes but it is a panacea when it assumes the only thing that effects sales is price, which is quite a narrow view of customer value.

A renewed drive towards understanding customer value in the retail environment will be the difference between those companies that thrive and those that merely survive.

It is a tough question and one which requires vision, focus and operational distance to answer.

Take the children’s publisher, Golden Books, as an example. It wanted to grow sales. Like most companies, it merchandised display sections by price point. The offer was aimed squarely at the parent because it made sense to appeal to the person with the cash. Price promotions had little effect but then it invested some time researching its customer values and how they may have changed over time. It discovered it was focusing its promotional efforts in the wrong direction- about three feet too high to be precise. Parents weren’t the customer, they just happened to be holding the wallet. It was the children who were driving the sale and at five years of age a price promotion holds no significance. It reset its offer to match the real customer and grouped displays by character – little ponies here, teddy bears there. Sales soared.

To lift the tone at your next team or board meeting, try these exercises to see how healthy your strategy is:

Paint a portrait of your customer
Ask each attendee to prepare and bring a pen portrait of your customer. No need to analyse it, just tell a story – what’s his or her name, what do they do for a living, income, clothes, car, children, dog, home town etc – paint as rich a picture as possible in no more than 15 minutes.

Who cares about what?
On the back of the same piece of paper write down the top five things, in order, this fictional character values in your offering.

Compare notes
Take a few minutes to discuss the output in your meeting. Was it easy or hard to do ? Are all the portraits broadly consistent? If we were to have completed this task last year would it be any different? And then ask the killer question “so, how do we know these assumptions to be true today?”

Blow some dust of that strategy paper
Pull out the top three elements of your strategy document and see how they match up with what the customer is after.

If the output of this work is there is not an up-to-date, validated and consistent understanding of what your customer wants, to which your activities are aligned, throughout the organisation then you’ve got work to do.

The leaders of the winning businesses (retailers and suppliers) will be those that maintain their strategic view of the whole field, can shape medium term strategy to account for conditions but still hold on tightly to the overall objectives.

If leaders are not convinced about the importance of strategic focus or putting Abe at the top of a greater leaders poll, then take a cue from another president who was none too shabby in the leadership-under-pressure stakes, Eisenhower.

“When it comes to preparing for battle plans are worthless; but planning is invaluable.”

Sources:

“Why we buy” Paco Underhill (Simon and Schuster)

“Confidence” Rosabeth Moss Kanter (Random House)

“Team of Rivals” Doris Kearns Goodwin (Penguin)

“Working with Emotional Intelligence” Daniel Goleman