The Strategic Mind

"It is a process of diverting one's scattered forces into one powerful channel."

--James Allen

Did you happen to shop at Target over the Christmas holidays? I went to one of their stores a few weeks ago to purchase an item and was pleasantly surprised by a redesigned interior--everything from attractive gray wood flooring; neatly stocked shelves; deliberately locating women's apparel closer to the front entrance, but especially the spotlights and circular lighting making the Big Box store glimmer with a new look.  

And that's one of the messages Target wants to send to the marketplace.   

At least some of the physical components of a turnaround by Target's CEO Brian Cornell and the leadership team were before my eyes.  

(C) Target Corporation

In 2017, up against giants Walmart ($514 billion revenue) and Amazon ($232 billion revenue), Target's board and top management bet $7 billion that more affluent shoppers still want an in-store experience provided the environment and customer service were inviting enough. So as a part of recreating itself, Target ($75 billion revenue) raised wages for a large number of its 320,000 employees as "guest" and "team member" satisfaction are one and the same.  

Developing a corporate strategy and implementing it close to the original plan is something to behold. But, unfortunately, few leaders pull that off, as looking ahead and seeing short is hard.

The leadership agenda

Reversing direction requires clear priorities. What made up the centerpieces of Mr. Cornell's leadership agenda? *

o  Spruced-up stores. Better lighting and longer sightlines. By 2020 almost 1,000 stores (out of 1,800) will have a new look.

o  Integrated e-sales. An upgrade to store locations makes it possible to pick up online orders near your home. For example, about 80% of Target's e-commerce sales involve stores.  

o  Speedier delivery. Rather than building capacity from scratch, which would have taken a lot of time, Target bought Shipt and Grand Junction to allow faster deliveries.  

o  Fresher brands. New and more profitable store brands, 20 at last count, earn higher margins and appeal to younger households.  

o  Selective tech. The goal with tech was practical and had an immediate payoff, so experimentation was pushed aside.  

Is yours a strategic mind? 

Before the first piece of flooring was laid or lighting hung, someone had to know what a refurbishing could look like and how that investment might change Target's direction.  

How else would a leader be able to communicate the main goal?  

Author Henry Mintzberg once observed that strategic thinking was "seeing."  The strategic mind sees ahead; of that, there's no doubt. The more significant question is how do they see ahead?  

Here are five ways of strategic thinking that Dr. Mintzberg uses to qualify a leader as having a strategic mind:

1. You cannot see ahead unless you can see behind. Any good vision of the future has to be rooted in the past.

2. Strategic thinkers must find the gem of an idea that changes their organization. That comes from a lot of digging, which is where treasures are found. Unfortunately, there's no big picture ready for seeing; each strategist has to construct his or her own. 

3. Strategic thinkers see differently from other people. They pick out the precious gems that others miss. They challenge conventional wisdom--the recipe, the traditional strategy--and thereby distinguish their businesses. 

4. Creative ideas must be placed into context to be seen in a world that is to unfold. Seeing beyond constructs the future--it invents a world that would not otherwise be.

5. For a thinker to deserve the label "strategic," he or she must be able to see it through (something only about 10% of leaders appear able to do, according to a global study by PwC).   

What's held in common

If there's one leadership tactic that improves a strategy's chance of success, it's this:

The more an organization shares in common, the less likely personal interests will prevail. The less an organization shares in common, the more likely personal interests will prevail.

An absence of shared understanding can cause a corporate-wide initiative to get off to a false start. Therefore it's well worth the time and effort to engage employees, customers, and vendors early on. Unfortunately, workforce studies consistently show that individuals at all levels rarely understand the purpose and strategy they are expected to fulfill.  

You can believe there were a lot of experience-based judgments to determine the direction Target has chosen. That said, no one can know everything from the beginning. The real learning is in the doing, now underway. 

Is the strategy working? 

Like most large enterprises, some things work, and others don't.  

Target reported sluggish holiday sales, with toys and electronics a disappointment. "We faced challenges throughout November and December in key seasonal merchandise categories, and our holiday sales did not meet our expectations," Chief Executive Brian Cornell said. 

However, Simeon Gutman, a retail analyst at Morgan Stanley, said: "Target's ability to manage the business well through weaker sales is the silver lining."    




*Published in FORTUNE Magazine, September 2019.  

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© Bredholt & Co.  

Delivering Exceptional Service

"From now on the essence of this hotel will be speed. If a customer asks you for a three-minute egg, give it to them in two minutes. If they ask you for a two-minute egg, give it to them in one minute. If they ask you for a one-minute egg, give them the chicken."

--Groucho Marx, "A Night in Casablanca"

Uber Technologies, Inc. said that within three years, the company intends to expand its services to include a fleet of food-delivery drones called, UberEats.  

Instead of having your Domino's Deluxe Pizza brought to the house or apartment by a friendly delivery person, that box, wafting with the smell of your favorite toppings, would sail through the air, landing at your doorstep, hot and ready to eat.

While UberEats already has a ground delivery service, the announced timeline calls for a drone service to be in place by 2021, according to the original Uber posting on its website. 

Several big tech companies, including Amazon and Uber, are keeping a George Jetson future in front of hungry investors and media. Over $3.5 billion has been invested in food and grocery delivery services in 2018. As a result, Instacart, Inc., Postmates, Inc., and DoorDash, which delivers Wendy's hamburgers and other menu items, are vying for ways to carve out positions in this emerging market.

In the meantime  

This past summer, I made a business trip from Kalamazoo, Michigan, to Minneapolis, by way of Detroit, that resembles an obstacle course. During each segment, I became increasingly dependent on others to help get me to my destination safely and on time by delivering exceptional service:

Amtrak Station in Kalamazoo 

When my train was posted late, Tod, the Amtrak station manager, offered to find a ground transportation service at Dearborn Station, about 30 minutes from Detroit Metropolitan Airport. Of course, there's nothing unusual about a late Amtrak train. But, unfortunately, that happens more than it should.  

What was different on that Thursday in June was Tod's effort to ensure we didn't miss our flight to Detroit.

Amtrak Station in Dearborn to Detroit Metro

Eddie, our polite and knowledgeable driver, navigated heavy congestion and construction between the train station and the airport. All for a reasonable fee.       

Delta in Terminal A

As it turns out, my dash to the gate was unnecessary. Delta 23 was running a little behind, and boarding had yet to begin. Then Delta announced that the scanning system for reading boarding passes was down. So all 167 passengers on this oversold flight would have to be boarded manually through a backup plan.  

Susan, the gate agent, called for boarding and began a tedious process of getting passengers onto the Boeing 737-900 plane. I asked how she felt about being alone at Gate 70 in Terminal A with a broken system. Her response: "You do what you have to do."  

Within a reasonable amount of time, everyone was boarded, and Delta 23 nonstop to Minneapolis was safely on its way.  

Hertz at Kalamazoo/Battle Creek International Airport

I returned to Kalamazoo by renting a Hertz car at Detroit Metro Airport and driving two hours west on Interstate 94 to the Portage Road exit. Unfortunately, in my haste to fill out the rental agreement (gas, mileage, time) and get home, I left my mobile phone in the front seat.  

Fortunately, when the associate manager, Michael, did the vehicle inspection, he found the phone and held it for me.   

With appreciation

I am grateful to Tod, Eddie, Susan, and Michael for their spirit and quality service. Each acted as much out of who they were as what they were trained to do.  

What happens next?

Who knows what will unfold when it comes to delivering products and services through various methods, including air. With technology and artificial intelligence advancing rapidly, the sky may be the limit.  

Finding ways for any business to stand out from the competition is essential. One path to success is providing exceptional face-to-face customer service. Then, when necessary, give them the chicken.  

Delivering what's promised daily is not easy, but that's the goal.  

Your Domino's Ultimate Pepperoni Pizza will still arrive by car, truck, or SUV--delivered by a mortal being. However, when The Wall Street Journal contacted Uber about a flying drones program, the company removed that posting from its website.  

Apparently, the air version of UberEats has been temporarily grounded.      

Strategist.com

(C) Bredholt & Co. 

Interrupted or Disrupted?

"Disruption is a process. not an event, and innovations can only be disruptive relative to something else."

--Clayton M. Christensen

There are different kinds of interruptions in our lives. Some involve personal and family matters.

Others are work-related, such as when colleagues step into cubicles to ask a question or just chat. "The average American worker has 50 interruptions a day, of which seventy percent have nothing to do with work," said W. Edward Demings, a statistician and best-selling author.    

What about the time a colleague was interrupted as they were speaking? 

Overwhelmed by a corporate ADD, managements have been known to interrupt their strategies and plans to get there after reading a book, going to a seminar, or having a new member join the team.  

Most of the time, an interruption is something we initiate and therefore control its frequency. 

Defining our terms

What about disruptions? They're primarily external to the business. 

Most are familiar with the book, The Innovator's Dilemma, published in 1997. "The main idea is that disruptive innovation transforms a complicated, expensive product into one that is easier to use or is more affordable than the one most readily available," according to its author, Dr. Christensen.

That disruption makes it possible for a broader population to access products (Warby Parker--eyeglasses) and services (Spotify--music) previously reserved for specific market segments based on cost. (Innosight)

Another definition that quickens the pace of destructive forces is called "big-bang disruption."  As the theory goes, that kind of disruptive behavior doesn't come from competitors in the same industry or companies with a similar business model. (Downes and Nunes:  Big Bang Disruption)

And switching from one product to another was a matter of weeks, not months or years. To illustrate their point, the authors highlight free navigation apps preloaded on smartphones, doing a quick number on TomTom, Garmin, and Magellan.

Navigating disruptions

In an economy as large as the U.S., with an estimated 2016 Gross Domestic Product (GDP) of $18.5 trillion, there's room for several disruptive theories. Regardless of which idea you subscribe to, if any, what are ways incumbents can survive or even thrive by becoming a disruptor?

Some thoughts:

1. Beware mortal threats. External markets and customers continually send out signals as to shifting interests. However, those caution flags, which can become red flags, are only helpful if someone pays attention, interprets the gestures correctly, and passes on the intelligence. 

Is anyone listening?

The caveat is that consumers didn't know they wanted a minivan, a PC, or an iPhone until the products were placed in front of them.    

Being part of an inner circle is a disadvantage when minimizing disruptions. Those positions are generally too far removed from the changing tastes of ordinary people.  

If there's any good news, the pace of significant disruptions, from appearance to impact, is slower than conventional wisdom suggests. Big-bang disruption notwithstanding.  (Leinwood and Mainardi). 

Nonetheless, the arrival of a disruptive force (Netflix waiving late fees against Blockbuster) aimed in your direction (digital cameras providing instant gratification) potentially becomes a mortal threat (Facebook leveraging its platform to compete with SMS Messaging).  

2. Stay close to current users. No business should take its customers for granted. Customers today can be former customers tomorrow. That's why building relationships carries greater weight than mastering a particular kind of social media.    

The taxi industry had only to explore its customers' wants and needs to limit the damage inflicted by Uber and Lyft. Apparently, no one in the surface transportation business bothered to look in the direction of convenience.    

Consider Amazon's philosophy: "Pay attention to competitors but obsess over customers."

3. Get close to potential users. Current customers are one source of growth but have their limits. Screened carefully, potential users are another way to grow profitably.  

What do you know about potential customers? Their thinking? Their practices? Their current suppliers? What are they dissatisfied with where they currently buy? When was the last time anyone on the management team held a series of in-depth conversations with prospects and circulated those findings?      

4. Keep improving. Corporations may contribute to disruption by holding on to the status quo. Being good at manufacturing or services can be detrimental to the health of an enterprise, as success is taken for granted. 

The current business model may need to change to take on new types of competition.  

How to improve the execution of the current strategy? That's a dedicated meeting waiting to happen.    

5. Don't panic. What good does it do to hit the panic button when you see disruption coming?  

In September, there were numerous meteorologists in Florida helping us through Hurricane Irma. Working long hours, they offered spaghetti maps and cones, provided safety tips, and kept encouraging everyone to stay calm.  

Brian Shields, WFTV (ABC), Orlando, repeatedly said, "We're going to be okay." Brian was a source of emotional strength without diminishing Hurricane Irma's potential threat.  

When it comes to being disrupted, be realistic, but don't panic.

What else to learn?

If you're incapable of disrupting, look for holes in existing markets where competition is scarce. "Non-disruptive creation," promoted by W. Chan Kim and Renee Mauborgne, maybe a third option as it's not always necessary to beat the current competition. 

Sometimes the way forward is to find new markets like The Honest Company. For example, after the birth of her first child, actress Jessica Alba couldn't find high-quality, eco-friendly baby products, so she started a company with a $1 billion valuation to produce them. 

Create your future and not let others do it for you.  

Hear this

Anshu Sharma, a venture capitalist, offers this bit of wisdom:

"In terms of who wins in a given market, the fundamental question has always been, who understands the user better?"

Strategist.com

(C) Bredholt & Co.

  

Leadership Agenda: Best Buy Co.

It seemed like the best of all worlds for Best Buy stores. There was good news in a slow economy.  Circuit City, its chief competitor, was going out of business. The conditions were right for Best Buy to continue expanding, now with its major competitor gone from the scene.

However, if something seems too good to be true, it probably is.

While the competitive retail landscape was changing so was the consumer and their options for purchasing electronic equipment. Households have increasing confidence to purchase big ticket items from their computer screens, Pads, and smartphones.

What happened?

The Internet remains a potentially destructive force for nearly all companies, even those with a strong physical presence. Note the closing of 200 Border's Book Stores. Amazon.com Inc. is getting stronger by offering an increasing number of products while collecting limited sales tax. 

Its shipping options are also more attractive.

What was a plus yesterday (large stores nearby) now appears to be a liability (overhead).

It was announced recently that Best Buy will "shrink" its "big-box" strategy.

What will the new design look like? Here is CEO Brian Dunn's revised leadership agenda:

• Position Best Buy to aggressively compete against Amazon.com
• Rapidly escalate opening smaller stores focusing on smartphones (having 600 to 800 Best Buy Mobile stores in five years)
• Close some existing stores thereby reducing square footage costs
• Negotiate smaller leases with landlords
• Lobby for change in U.S. tax laws forcing online retailers to collect sales taxes.

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(C) Bredholt & Co.