How excited do you think mass merchandisers and other retailers would be to achieve a 23% lift in revenues? Surprisingly, the apparent answer is, “Not very.”
A.T. Kearney’s recently released report “Idle to Agile” polled 270 CEOs, CFOs and COOs of retail and consumer packaged goods companies in 10 countries with sales in excess of $2 billion in revenue — amounting to aggregate annual revenues of more than $1.5 trillion — in order to explore how they were addressing a radically changing consumer and competitive market.
For responding companies there is a potential $345 billion dollar upside from moving from “Idle” — operating as they always have — to “Agile” — being in position to be nimble and responsive enough to deliver what today’s consumers increasingly expect. The study echoes Sam Walton’s insight that “there is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Ironically, with so much money — and perhaps even their corporate survival — on the table, while companies acknowledge the need to change in order to capture that upside, they also report that internal cultural practices are holding them back.
For example, new consumers prefer personalization, and executives said their companies are transitioning from traditional mass-produced products and services to more personalized offerings. But, only 9% of respondents indicated they took a “personalized” approach to products today, and only 17% saw themselves moving to personalization by 2026. Additionally, despite acknowledging that their customers are demanding personalization, 25% of respondents, or one in four companies, believe their offerings will still be either “mass produced” or “mass produced/mass customized” eight years from now.
The executives acknowledged that there are difficulties associated with clearly defining and then achieving competitive advantage. Many felt simply gathering data and developing an omnichannel strategy are sufficient to meet the demands of the future. They gravitated toward time-honored approaches to organizational management over strategies requiring direct actions to improve customer service and the shopping experience, taking new approaches toward talent acquisition and training, and evaluating and adopting new technologies.
Companies primarily rely on financially driven loyalty programs, such as discounts, points and gift cards, to gather the data needed to personally serve consumers — essentially, paying their “best” consumers. Asked, “What are some specific ways in which your organization plans to incentivize consumers for sharing their personal information?” 70% identified these financial incentives to motivate consumers to share their data.
The most challenge hurdle to agility lives deep in the institutional corporate heart. Corporate culture was the most frequently cited obstacle to more nimbly serving customers. Yet, when recruiting new talent, most companies plan to prioritize “cultural fit” over “disruptive thinking.”
Asked, “What are the main barriers holding back your organization from becoming Agile?” 37% of respondents ranked “Culture” as the No. 1 answer. The No. 2 answer, “Lack of resources,” trailed “Culture” by 18 percentage points.
And it gets worse.
Asked, “By 2026, how will your organization approach recruitment of top talent?” over half (51%) said, “We will target candidates who appear to be the best ‘cultural fit.’ ” An additional 38% of all respondents said, “We will recruit some candidates who bring nondisruptive diversity of thought, but whose backgrounds and values align with the collective behaviors of the organization.” Only 11% of executives said, “We will deliberately recruit diversity of thought, including disruptive thinkers.”
This apparent insistence on preserving the status quo would shock one of mass merchandising’s most iconic figures, Richard Sears, the cofounder of Sears Roebuck. “The surest way to gain unswerving loyalty of employees is to show them from the start that they will be allowed to make the most of themselves,” Sears once said. “Many a hundred-dollar man remains a fifteen-dollar subordinate because he is not given any latitude and is not allowed to develop.”
What does it take to move from Idle to Agile? Based on our research, we believe the first step is to prioritize actions and engagements, while avoiding paralysis caused by an overreliance on more and more data. Consumer-facing actions trump internal priorities.
Next, companies hoping to escape Idle need to shift resources from broadcasting at consumers to listening to consumers. This means taking some of the funding currently being devoted to mass market media and channeling it toward new tools such as interactive websites that respond in real time and social media analytics.
Third, every effort should be made to push power and accountability closer to associates working closest to the consumer. This requires empowering associates, ensuring they are properly trained to address consumers’ needs, creating seamless communication from the store floor to the corporate offices and, above all, enabling managers and other executives to develop a greater appetite for risk and overcome the impulse to micromanage from afar. While, at first, this may seem like a radical step, it is actually a foundational principle that spurred the growth of mass retailing.
Successful mass merchandisers have always been willing to embrace risk, at least calculated risk. To quote Richard Sears again, “No man can learn to be a ‘crack shot’ unless he wastes some ammunition. The employer should stand the expense of the experiments made by a new man who shows ability; it will pay in the long run.”
Fourth, in a world where change is continuously accelerating, trying to catch up with new trends is a recipe for always being off-trend. Rather, it is increasingly important to identify early signals to shape trend. Analyzing polished longitudinal data is a hard way to find a needle in the haystack that hasn’t been found by others. There is more upside in actively trying to shape trends to anticipate and create new kinds of consumer demand.
Finally, we will invoke the spirit of the man many argue was the founder of modern mass merchandising, Sebastian Spering Kresge, whose words were as sparse as his beliefs were strong.
Speaking at the dedication of a new building on the Harvard campus Kresge slowly rose to the podium, looked out over the crowd and delivered what is likely the shortest speech in the history of the Ivy League. “I never made a dime — talking,” he exclaimed, quickly retreating to his seat.
Moving from Idle to Agile requires action, but the reward makes it all worthwhile, especially since the alternative is so unacceptable.
Greg Portell (Greg.Portell@atkearney.com) is global lead partner in the consumer and retail practice of A.T. Kearney. Abby Klanecky (Abby.Klanecky@atkearney.com) is chief marketing officer of A.T. Kearney.