Tag Archives: Retail industry

If UPS’ Accountants Can Deliver Holiday Packages, Human Capital May Be More Flexible Than We Expected

Now that the dust is clearing on the blow-out holiday sales season that retailers enjoyed last month, tales are emerging about the extraordinary steps that their supply chain managers took to meet customer demand.

What tales? Consider, for instance, the global delivery firm UPS. It received so many packages in the days leading up to Christmas that it was forced to ask hundreds of its accountants, marketers, and other office workers to join their colleagues in sorting and delivering packages.

Some were actually met at the doors of their office buildings and told to go home, change clothes, and report to operations facilities. Others were instructed to deliver packages with their own automobiles.

Pretty unusual, huh? Even more noteworthy is that the office workers completed these tasks responsibly. Apparently, their lack of training and personal unfamiliarity with delivery tasks failed to impede their performance.

That raises a few interesting questions. If accountants and marketers were able to succeed at these operating tasks, is human capital more flexible than we expected? If so, is the principle of work specialization overblown? And if true, are we spending too much time, effort, and resources on specialty training, and not enough on cross-training?

After all, cross-training was the fundamental Human Resource Management philosophy for centuries before Henry Ford and others developed modern Operations Management theory during the early 1900s. Business managers previously believed that it made more sense for craftsmen to learn all of the functions of producing a product or service, instead of specializing in a single function or two.

We now live in an era when many long-accepted assumptions about workers are falling by the wayside. For instance, riders now trust part-time Uber drivers as much as they ever trusted part-time taxi drivers. And travelers now trust part-time Airbnb hosts as much as full-time hoteliers.

Indeed, the UPS experience may simply represent another case of Human Capital being more flexible than we ever expected. And that very flexibility may be the harbinger of a human labor revolution.

JC Penney: A Leadership Mistake?

At the end of the 1956 baseball season in the United States, Brooklyn Dodger icon Jackie Robinson received some disconcerting news. In the twilight of his career, he had been traded to the cross town rival New York Giants, who sought his veteran leadership for a roster that included the very young future Hall of Famer Willie Mays.

Veteran leadership? For a rival team? Fuhgettaboutit! Robinson refused to report to the Giants and Major League Baseball voided the deal. Robinson himself retired from the game shortly thereafter.

Was Robinson excessively worried about his professional legacy, or did he understand that veteran leaders who switch teams rarely find success in their new positions? Unfortunately for American retailer JC Penney, Robinson is no longer available to provide them with advice regarding their leadership strategy.

A Small Slice of Americana

JC Penney, of course, is a venerable American department store chain. Although it has never earned the pedigree of Macy’s or achieved the size of Sears Roebuck, it can lay claim to its own slice of American retail history.

James Cash Penney was originally an employee in a small retail organization called Golden Rule. After purchasing a minority share in 1902, he bought out his partners five years later and took command of the chain that would be renamed JC Penney in 1913.

Although Penney lost his fortune during the Great Depression of the 1930s, he managed to keep his retail empire alive. In fact, Penney’s Des Moines store hired a young employee named Sam Walton in 1940, the entrepreneur who would later establish the Walmart chain.

JC Penney peaked in size in the early 1970s, when it briefly expanded to more than 2,000 retail sites. It now operates more than 1,000 stores across the United States.

An Apple Transplant

So who is the current leader of this venerable retail establishment icon? None other than Ron Johnson, a former corporate executive at Apple who was hired by Penney to bring a little pizzazz to its facilities.

And that’s precisely what Johnson brought to the Texas based retailer. He placed new emphasis on full, “hands on” customer service and in-store boutiques. He even abbreviated the brand itself to a crisp, concise jcp.

But then Johnson decided to eliminate Penney’s traditional reliance on frequent sales events, replacing them with a standard pricing policy for all merchandise. His Fair and Square pricing strategy emphasized non-discounted prices and infrequent sales.

Standard pricing, of course, is a classic Apple strategy; it supports the philosophy that sales events tend to cheapen the image of the brand over time. But by taking away the tradition of the frequent sales event from Penney’s core customer, Johnson drove many of them away. Indeed, sales volume has plummeted under Johnson’s command, and the prospects of the retailer are eroding quickly.

An Austerity Plan

Faced with intense criticism about Penney’s sales decline, Johnson is now retreating from his “limited sales event” policy. Instead, he is cautiously reinstating special sales events on a partial basis.

But should Penney adhere to Johnson’s limited-sales plan? After all, organizations in many different industries have moved away from sales driven marketing strategies. Many automobile companies, for instance, are no longer relying on large rebate campaigns. And most airlines are forsaking fare sale strategies, opting to increase ticket prices and ancillary service fees instead.

One can characterize Johnson’s sudden abandonment of sales events as an austerity themed plan, with austerity being imposed on the firm’s customer base. Is it possible, however, that Johnson selected an appropriate austerity strategy but served as an inappropriate leader for implementing it? Would a more familiar and recognizable leader, instead of an outsider, have been more palatable to Penney’s regular customers?

Home Grown Leadership

Anecdotal evidence seems to suggest that people tend to accept austerity solutions more readily when they are proposed by home grown leaders, and not by transplanted leaders with personal histories and loyalties to other organizations. The evidence extends beyond the business sector and throughout other sectors of human endeavor.

Consider the realm of politics, for instance. On the one hand, the Italian people recently rejected the European prescription of austerity that was imposed by interim leader Mario Monti. His political rivals attacked Monti’s credibility by suggesting that his brief leadership position was too “centric” (i.e. too focused) on German political needs.

On the other hand, the popular, home grown Icelandic government has presided over an economic rebound since the 2008 / 09 financial collapse. And in the business world, Apple itself presents a quintessential example of a firm that once tottered towards bankruptcy until its home grown founder returned to replace an outsider CEO.

So is it possible that Ron Johnson developed the right plan for Penney, but is the wrong leader to implement it? And if he isn’t the right leader, then who should replace him? Until Penney’s Board clarifies the nature of its leadership mistake, it may find itself unable to correct it.

Sears, Kodak, and the Product Life Cycle

Father Time and Baby New Year.

They’re the very personification of the holiday season. The father character first emerged in Greek mythology as Chronus, the godlike manifestation of time itself. The baby character, though, is a relatively modern creation, surfacing in consumer magazines a century ago and then becoming a fixture of American culture.

Pictured together, they personify the adage “out with the old, in with the new.” Although the news media seems to embrace this adage every time it fawns over the introduction of a new technology product, it diverted its attention during the final week of 2011 to note the stark decline of a pair of American corporate icons.

The Softer Side of Sears

An advertising jingle regarding the “softer side” of Sears once referred to the department store’s apparel offerings, but it can easily be applied to its 2011 revenue figures as well. Last week, CEO Lou D’Ambrosio announced that same-store sales during the crucial holiday season plunged 5.2% at a time when industry sales grew 4%, and that over 100 Sears and Kmart stores would thus be shuttered soon.

It’s easy to forget that Sears once reigned for decades as America’s largest retailer, with a mail order catalog business that was launched in 1888 and that later became an indispensable resource for America’s emerging consumer economy. But in 1993, Sears walked away from the mail order industry and simply shut down its catalog business.

Just two years later, Jeff Bezos founded Amazon.com and reinvigorated the industry; and what of Sears? Although the firm is still the fourth largest broad line retailer in the United States, the store closings will undoubtedly accelerate its decline.

The Kodak Moment

The final week of 2011 was also a brutal one for the Eastman Kodak Company. Although the firm’s classic advertising campaign associated the phrase “the Kodak Moment” with happy times, the phrase now connotes an image of a failing firm, desperately trying to transition away from an obsolete core product.

As with Sears and the mail order retail industry, Kodak virtually invented the film industry in the United States. Since its founding by legendary industrialist George Eastman in 1880, Kodak became an icon of American society; by 1976, its ubiquitous Brownie, Instamatic and Kodachrome brands helped it achieve respective market shares of 85% and 90% in the camera and film markets.

The emergence of digital cameras, however, doomed the entire industry to obsolescence, and Kodak to decline as well. Last week, after the firm announced that Laura Tyson was joining two other high profile professionals by resigning from its Board of Directors, the media reported that the Academy of Motion Picture Arts and Sciences might shift its Academy Awards ceremony from Los Angeles’ Kodak Theater to a larger venue.

Understanding The Product Life Cycle

Many investment analysts characterize Sears and Kodak as similar organizations that are facing similar circumstances. However, most marketing professionals would disagree with this characterization.

That’s because marketers define the product life cycle as an arc that progresses through four distinct stages. Film, for instance, was only a niche product for professional portrait artists during its introduction stage during the late 1800s, until it entered its growth stage and rode the wave of American economic prosperity.

Once products like Brownie, Instamatic and Kodachrome achieved market dominance, film entered the product maturity stage. And finally, as low-cost competitors like Fuji entered the market and consumers began to adopt newer products, film fell into its current stage of decline.

Indeed, the aging of the film business is reminiscent of the life of the proverbial Baby New Year, as he ages into Father Time. But can we characterize the arc of Sears in the same manner?

Simply Poor Decision Making

Although Sears, as a firm, progressed through the stages of introduction, growth, maturity, and decline during the same era as Kodak, the American retail industry hasn’t done so as well. After all, the advent of online shopping holidays like Cyber Monday has reinvigorated the mail order industry, and the emergence of innovative retailers from American Girl to Cabela’s has redefined the live shopping experience.

So how can we explain the decline of Sears? It may simply be attributable to a case of poor decision making. After all, Sears failed to follow the “big box” warehouse trend that was pioneered by firms like Costco and Walmart, preferring to remain in more traditional shopping mall locations. And yet Sears also failed to spruce up its traditional decor, while department store rivals like Macy’s and J.C. Penney opted to do.

In other words, investment analysts may be overlooking an important distinction when they characterize Sears and Kodak in a similar fashion. After all, as long as Sears continues to operate hundreds of stores in viable locations, a corporate turnaround does indeed remain possible. It is difficult to envision any turnaround, though, of a firm that sells film.