Three Things for Retail Leaders

In preparation for attending the FMI Midwinter Executive Conference, an annual gathering of top retail food industry executives, I have been thinking about the upcoming meetings and conversations. While there is always interest in the latest technologies, I believe there are three topics that retail leaders need to be focused on.

#1: The Increasing Pace of Change (ie. You are NOT moving fast enough)

Imagine going out for a walk at a normal 20 minute per mile pace. Completing the first mile you now must double your pace, doing the next mile in 10 minutes, a slow run. Then you must do the next mile in 5 minutes, a flat-out sprint. But then you have to speed up even more. The next mile in 2.5 minutes… not humanly possible. But it doesn’t stop there. The mile after that calls for a minute and a quarter pace. And then 37.5 seconds. Then less than 20 seconds. You can see this gets ugly fast. And you see that the demands rapidly outpace human ability.

That’s just the journey the retail industry is on. And yet retail leaders are not considering how they adapt their organizations, their business processes, their decision making processes, or their teams to a world where change and disruption happen at an ever-faster pace.?

This is not a theoretical exercise. We have passed the inflection point on the exponential growth curve of computer processing power and tech-fueled transformation is getting faster, and more widespread, every day.

Retail’s response to ever-faster, ever-broader tech-fueled innovation has been to try and do more (of the same), faster. But like our ever-accelerating walker, there comes a point where demands simply outpace existing capability. Legacy systems and processes, organizational structure and culture, all constrain retailers from doing things radically different. To move beyond those constraints, retail must look to more fundamental change.

As human beings we suffer from exponential growth bias: We intuitively UNDERESTIMATE the pace of exponential growth and change. We awake each day confident that today will be much like yesterday and comfortable with the thought that tomorrow will be much like today. Except that it will not.

Retail leaders must focus on the question of how they adapt their organizations for a world unlike any before, a world of exponential change.?

#2: The Coming Culture War

Because traditional retail industry executives are not confronting the reality of exponential change, the most significant threat in the time ahead will be competitors entering retail with a digital-first mindset.?

There are significant, fundamental differences in culture between traditional retail companies and digital native firms. And those differences are becoming more apparent by the day as we progress up and out the exponential growth curve of tech-fueled innovation. The ‘operating system’ of traditional organizations is becoming an increasing liability as speed, nimbleness, risk-taking, and digital-first thinking become evermore important to success.

Some traditional retailers have realized that they now operate in a new environment: Fast-changing shopper expectations, new competitors, and ever-faster innovation. What many have not yet realized is that the traditional retail organization was built for the world of yesterday, not for today and certainly not for tomorrow.

The way traditional organizations function - their culture - is becoming a fast-growing handicap. This, while digital native organizations, born from technology and nurtured on the pablum of data, are built to thrive.

The risk for traditional retail companies is not this or that new technology or capability. The most serious threat to traditional retailers are digital native companies that simply think differently. Retailers that fail to realize this are at growing risk of obsolescence.

#3: Too Much Following, Not Enough (True) Innovation

Retail, particularly food retail, has a long history of following; letting a competitor be the first to implement some new capability or business process. Once proven, other retailers then quickly follow, letting someone else suffer the arrows of innovation.

But what was once a successful business strategy is now fraught with growing risk. Today, in a world of exponentially growing technological capability, followers are at risk of falling further and further behind as the leaders open up a growing performance gap using new tools like artificial intelligence and machine learning.?

New capabilities are transforming competition and established business models, adding to even more risk for traditional retailers. Look no further than how some leading regional retailers are leveraging new AI powered hyper-personalization to automate marketing, using the entire store product catalog, to strategically grow customer value and their business. Gone is the CPG brand-driven model of yesterday, key retailers are learning the power of giving each of their individual shoppers savings on the products they want to buy - not what the big brands want to sell.

I continue to see retailer after retailer implement capabilities simply because they see competitors doing it. I see very few retailers - with the exception of an Amazon, Walmart, or Kroger - step back and brainstorm how to re-envision the shopping experience and then create the technologies needed to bring that vision to life. Too often retailers simply take solutions out of a box and plug them in - no creativity required. And yet in a world where increasingly anything is becoming possible, retailers are afraid to think outside the box.