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The Core Components Of Retail Transformation

Videos 2016

April 12, 2016

Nikki Baird

Last week I attended Microsoft Envision, the company’s inaugural event targeted towards thought leaders. During the event, analysts and press were invited to a more town hall style format to sit with Chris Capossela, the CMO of Microsoft. He focused his comments on the transformation currently happening within Microsoft, which alone are impressive. I confess to having held some bitter feelings for Microsoft’s productivity apps as an end user, and during the course of just this event alone, I found myself revising my opinion upwards.

But as he spoke, I also couldn’t help thinking about transformation as it applies to the retail industry. In the early days of Omni-Channel, I heard the word thrown around a lot. It faded for awhile, and now it seems to be coming back with a vengeance. And even within that broad pendulum swing, I still find many retailers who don’t understand just how much the growth of the digital consumer is having on their business right now, and will have over the foreseeable future.

Specifically, Chris talked about two areas of focus within Microsoft’s own transformation that apply directly to retail.

Customer-Obsessed

Microsoft has historically been very product-focused, as Chris readily admitted. But the company’s success doesn’t depend on its products, it depends on its customers. Sound familiar? Chris talked about focusing onearning fans. I have the feeling those are two deliberately chosen words.

Earn has a lot of power, especially in a world where a lot of retailers have run out and bought, for example, a bunch of Facebook Likes. Earning implies that the company must work at it, must actively do things to create fans. Fans aren’t something that just happen.

And for Microsoft, fan is not a throw-away term. Chris spoke about the science behind measuring a fan, but he also emphasized that for Microsoft, a real fan is someone who has an emotional connection to the brand or to the brand’s products. Someone who is deeply engaged in using a product, who loves the product, and who is willing to advocate for the product. Microsoft needs all three of these things to be in place in order to consider someone a fan. It’s easy to get one or two – I still curse Outlook at least three times a day, but I use it prodigiously. A fan I am not. It’s much harder to get all three.

Chris also used a lot of words that are near and dear to my heart when it comes to fans. He shared that the company has learned a lot about what it takes to build a fan – that the same things that will earn you fans will also lose you fans, and vice versa. The only difference is in the execution. Or, in his words, the quality of the execution. The best way to build a fan is to delightfully surprise. But it’s awfully easy to negatively surprise, too. However, it’s also possible to recover from a negative surprise, by doing right by a customer.

The lesson for retail is really straight-forward. There are lots of retailers who talk about being customer-centric. Who claim they put the customer at the center of the business. And yet also at the same time maintain organizational silos and have no single nor collective owner of the customer experience.

How can the customer be the center of the business in a business organized around channels and products? It’s that simple. It comes down to that authenticity that Millennials increasingly demand from the companies they engage with. If you’re a teen retailer and you care about teens, then your whole organization, down to the philanthropy you engage in, should be about supporting teens in the issues most important to them. If you’re a grocer, and you care about feeding families, the whole organization should be centered around those topics.

Look how long it took CVS – a healthcare company that also runs a bunch of pharmacy stores – to decide to stop carrying tobacco products. How inauthentic is it for a pharmacy to say they care about your health on one hand, while selling you products that are known and proven to cause health problems? If they really cared about customers’ health, they would’ve dumped those products a long time ago.

And once customers truly are at the heart of the enterprise, quality of execution is key. I am continually amazed at how little credence retailers give to how much poor execution hurts their brand. It’s a snowball effect. Sure, it has little immediate impact, but if you are disappointing or, as Chris puts it, negatively surprising your customers, any fan loyalty or good will is going to be eroded to the point where the relationship will be unrecoverable. And the brand in question isn’t going to find out that it the relationship is in danger until it is too late.

If you are customer-obsessed, you should have the metrics and processes in place to stay highly attuned to customer needs and whether you are meeting them. You should be rabidly hunting down the things that destroy delight and fan-ness, and putting an end to them as rapidly as possible.

Culture

Which leads me to Chris’s next major topic, Culture. This is an interesting one, because prior to the new leadership team, Microsoft had a reputation for a pretty toxic culture, which, to his credit, Chris acknowledged. He also emphasized an important shift for Microsoft, from a place where everyone has to always be right and have the right answer, to one that focuses on curiosity and always learning.

How has Microsoft embraced cultural change? Chris laid out an interesting perspective. He said the usual things about top-down, but with a twist. The reason why culture change has to come top-down is because you have to be an “activated employee” before you can have any hope of activating anyone else.

In other words, if you as a leader are not carrying around the fire in your belly for being customer-obsessed, you can never expect anyone who works for you to develop that fire themselves. Or anyone who works for them. You can’t inspire front-line employees to customer-obsessed without working your way to those front line employees all the way from the CEO to them. Straight-line connection.

Part of the way you can achieve that kind of activation is through symbolic leadership events. Pick some things that are symbolic of the old world or old way of thinking, take them out in front of everyone and kill them off in the must public way possible, and then celebrate that they’re gone. Chris cited Microsoft’s old, much-aligned performance review system as an example of exactly that kind of symbolic item. He amended: you have to have something better ready to take its place. But you still have to take out the most symbolic things, hard.

Another thing Microsoft did that was both symbolic and activation was to convert executive retreats into something customer focused. Execs now divide up a bunch of customers, go out and visit them individually or in small groups, and then get together as a team and talk about what they’ve learned, which sets the agenda for what to work on during the rest of the retreat. Symbolically, it tells the enterprise, even our executives are spending as much time as possible being obsessed with customers. And activation-wise, it’s hard not to be customer-obsessed, and excited about opportunities or challenges, when you see first hand the challenges your customers must handle on a daily basis – and whether your company is helping or making those challenges worse.

The lesson for retail here is just as simple as it was for customer obsession. How many retail execs see first-hand the lives of the people who are most impacted by their brand? I know a lot of retail executives who visit stores obsessively. I don’t know a lot who ask to visit with real live customers – biggest fans or most at risk for leaving the brand forever – and see directly how their brand helps or hinders those customers’ lives. And frankly, I don’t know how any company can say they are customer-oriented if they still measure and report their sales by channel. That seems like an excellent measure to take out and publicly kill off, and then celebrate its end as a way to wake the company up to the importance of thinking customer first, not channel or product.

In The End…

I hope you don’t think this whole thing was link bait – “Here are two easy things to do to transform your retail company”. There aren’t just two, and the two that I talk about here aren’t easy by any stretch. But they’re critically important, and I just see too little change around customer obsession and culture, at least in the general retail market. Take a hard look at your company – can you honestly say your company has these two nailed?

I hope so. But I doubt it.

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