Has Amazon killed the retail star?

Transcription

1 Rejuvenating the Retail Executive: From Merchant to Customer Activist

2 Has Amazon killed the retail star? The global retail industry is in a state of flux. Once iconic brands are struggling with too many stores, too high a cost base and too little differentiation. Customer is King, Queen and Emperor Amazon did more than just introduce an easier way to shop; it changed the balance of power. Consumers now comparison shop, read reviews, order anywhere, return purchases, and manage subscriptions from their smartphones. Unprecedented levels of transparency have lifted the lid on companies sourcing and production practices. This forces retailers to consider the customer in what used to be back-office activity. Amazon s model of putting customers at the heart of the purchasing journey has also triggered a revolution in expectations. Whereas customers were once just a link in the value chain just one of many stakeholders they are now everything. Retailers are responding, but is it enough? Retailers must align their operations not just their products or platforms with their customers evolving preferences and behaviors. A systemic customer re-orientation is what is required for success in retail, and organization-wide transformation is the only way to get there. Between 010 and 014, e-commerce grew by an average of $30 billion annually. Over the past three years average annual growth has increased to $40 billion. That is the tipping point, right there, said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. It s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating. This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses. Michael Corkery, New York Times, April 15, 017 This has created a new breed of retail leaders: customer activists, not merchants. An executive for a new era It takes a unique leader to successfully lead a transformation. A look into their backgrounds and personality profiles helped Russell Reynolds Associates paint a picture of today s retail leaders. Using proprietary data around retail executives and a wider database of psychometrics, we set out to answer the following questions: Who are the retail leaders of today? How are retail executives different from other executives? Are retail leaders disruptive enough? How will the customer activist arise? How can retail executives prepare for the future? How will retail leaders change? How will the organization change?

3 3 Who are the retail leaders of today? Where is the customer? Despite a retail landscape that is dynamic and constantly changing, retail leaders remain homogenous and insular. Russell Reynolds analyzed over 300 retail executives globally. Of those, 84% were men, the average age was 54, and over two-thirds had been internally promoted the majority of whom spent an average of 15 years with the company before taking their current position. Even those who were external appointments typically had retail experience. While lengthy in-industry tenure brings deep understanding of traditional retail, it limits the learning gained from exposure to other, more innovative, sectors. As the relationship with the customer changes and moves from transactional to conversational, retail leaders can no longer solely rely on simply being a great merchant. They need to actively advocate for and reflect the diversity of an increasingly complex customer base. 68% of executives are internal appointments 78% 54 years of executives are citizens of the company s HQ country is the average age of C-suite retail executive 84% are men 89% had previous retail experience, with 45% having worked only in retail during their career 83% of executives with previous retail experience have only worked in one retail segment (e.g., department stores/ grocery/specialty) Note: RRA analyzed 338 retail executives globally. 65% of executives have been in their current role for less than 4 years

4 4 How are retail executives different from other executives? Leveraging the merchant in a customer world Using our proprietary psychometric database, we compared 56 retail executives at the C-suite and vice president levels against the executive population in our database. The analysis showed that retail leaders are socially bold, persuasive, and assertive with a desire to win. They stay the course, drive for results, and trust others to execute. At the same time, they have a tendency towards doing things as they have always done, which restricts their toolbox and, thus, limits their ability to fully engage with the customer. RETAIL EXECUTIVES VS OTHER EXECUTIVES Average of Differences in Psychometric Scores TRAITS THAT MAY HINDER Socially bold Takes the lead TRAITS THAT MAY HELP 8% Enjoys selling 8% 15% In comparison to other executives, retail leaders show a bold, assertive style; they enjoy sharing a vision and aligning others in a persuasive manner Unaware of organizational politics 14% Trusting of others 13% Perceives others as reliable 4% Overly optimistic 13% Prefers traditional approaches 6% Anticipates the future 1% Although forwardthinking, can resort to tried and tested ways Attentive to details 7% Leverages data 8% Withdrawn 16% Achievement-oriented 8% Self-assured 7% Competitive 6% Bias for action 6% Retail executives are driven and action-oriented; they move forward in a confident manner yet are more withdrawn than peer executives Note: Analysis involved the proprietary psychometric data for 56 retail executives at the C-suite and vice president levels compared against an average executive profile calculated from more than 8,000 data points.

5 5 Are retail leaders disruptive enough? Far from disruptive We have compared the psychometric profile of retail executives to the profile of those executives who have been involved in disrupting industries we call this group Productive Disruptors*. Productive Disruptors are bold in their strategic and leadership approach. They prefer innovation to tradition and push limits. While retail executives possess some of the competencies of Productive Disruptors such as their optimism and achievement orientation, overall they score lower across all disruptor traits. Retailers score especially low on competencies such as ability to think outside the box, being open to new things, and going against the grain. Retail executives also show less agility and empathy, which may hinder their ability to truly advocate on behalf of the customer. PRODUCTIVE DISRUPTORS RETAIL EXECUTIVES Competencies Relatively weaker** Within range** Innovative Thinking outside the-box Open to new things Abstract thinking style Disruptive Cut through bureaucracy Go against the grain Willing to take calculated risks Socially Adept Adapt to different audiences Aim to understand people and the reasons for their behaviors Socially confident Bold Leadership Decisive Take initiative and test limits Identify limitations Lead from the front Determined Achievement-oriented Optimistic *Comparing the psychometric profile of 8 digital transformation leaders to the database of other C-suite executives, Russell Reynolds has developed a competency model for these individuals termed Productive Disruptors profile. The study defines digital transformation leaders as senior executives charged with leading large-scale digital transformation efforts within an established, complex organization (Russell Reynolds Associates, Productive Disruptors: Five Characteristics that Differentiate Transformational Leaders, 015). ** Relative to the Productive Disruptor profile.

6 6 How will the customer activist arise? Delivering a systemic customer re-orientation of the business Retailers have made only incremental changes to their business models to meet customers needs. These changes involved responding to customer demand by adding new sales channels, such as e-commerce, offering more flexible delivery methods, enhancing and digitizing back-end operations and CRM systems. However, nimble and innovative players have already been orienting around and anticipating the desires of the customer. The customer-driven organization-wide transformation will require retail leaders to change their organizational structure, their culture, and their ways of working. Only then will they be able to act as the true activist for their customers. ALIGN ORGANIZATION Remove barriers such as hierarchical structures, silos or operational expediency from dictating what or how the customer shops Put the customer at the core of the business and develop a culture focused on optimal customer experience PIVOT CULTURE Organize around the customer journey rather than in channels in order to facilitate seamless process THE CUSTOMER ACTIVIST Let s figure this out, should be the response to any customer problem, not I am not sure if we can Embrace digital technology as it empowers and enables unique interactions, whether in-store or online Continuously engage customers to build a deep understanding of who they are and what they need Focus on the individual customer in order to tailor interactions Anchor decision making in facts through use of data and analytics INSTITUTE NEW WAYS OF WORKING

7 7 How can retail executives prepare for the future? Cultivating critical competencies among retail executives Retail organizations need leaders with a rejuvenated leadership profile to help them through this time of transformation and position them, and their businesses, for growth. The good news for retail executives is that what makes for success in a massively disrupted industry are competencies that can be cultivated not traits that are inherent to their personalities. Our Leadership Span TM framework shown here and derived from analysis of over 5.5 million leadership cases posits that a retail executive s ability to thrive through constant change hinges on the ability to act in ways that on the surface seem at odds with each other. Looking, for example, at the area of strategy setting, the effective retail leader can flex between a highly pragmatic and highly disruptive decision-making style. The embodiment of these competing competencies in a single leader represents their leadership span the higher an individual scores in both competing traits the bigger the span for that competency. This ability to span and flex across apparently contradictory leadership styles is the key for retail executives to survive and ultimately thrive. Core Leadership Skills SETTING STRATEGY EXECUTING FOR RESULTS LEADING TEAMS RELATIONSHIPS AND INFLUENCE C-suite Differentiators PRAGMATIC RELUCTANT VULNERABLE CONNECTING DISRUPTIVE RISK TAKING HEROIC GALVANIZING LEADERSHIP SPAN FOR THE RETAIL EXECUTIVE Increase executive's span through cultivating competing competencies* SETTING STRATEGY EXECUTING FOR RESULTS PRAGMATIC RELUCTANT DISRUPTIVE While retail executives can be bold in driving innovation, they often prefer traditional methods. Strengthening disruptive leadership capability will drive more innovation and faster adoption of new technologies. RISK TAKING Historically, aggressive risk taking may have uncovered unconventional revenue streams. However a better balance of analysis with measured risk taking would create more sustainable results in a volatile market. VULNERABLE LEADING TEAMS HEROIC While retail executives are renowned for their heroism, they will also need to be more vulnerable in the future. That is to admit their mistakes and shortcomings, learn from others, ask for help when needed, and look for a fresh perspective. CONNECTING RELATIONSHIPS AND INFLUENCE GALVANIZING While charismatic leadership in retail has inspired great results, it is as important to connect to build true networks and communities. Breaking down traditional silos will foster more agility across the organization. *The visual representation of current retail executive s competency span is illustrative only and does not correlate to exact SPAN scores which the model uses.

8 8 How will retail leaders change? RETAIL EXECUTIVES TODAY FROM MERCHANT RETAIL EXECUTIVES OF TOMORROW TO CUSTOMER ACTIVIST Equipped with powerful traits for addressing disruption such as social boldness, willingness to take risks while leading from the front Overly reliant on the traditional ways of doing things, often resulting in complacency when it comes to adapting to change Tend not to be out of the box thinkers Middle-aged men, with deep retail expertise Innovative and ready to challenge the status quo or redefine the customer proposition, while being pragmatic in delivering plans Encourage dialogue and seek learning opportunities Skilled in connecting instead of just relying on bold, assertive leadership. This enables diverse teams to collaborate and yield full potential Build partnerships with suppliers and/or entirely new businesses who can engage customers in different ways Will we see more diversity?

9 9 How will the organization change? Enabling retail transformation Retail executives should explore ways they might broaden their competency span and develop their leadership. In addition to examining their own approaches, leaders can develop the capacity of their organizations to thrive in three distinct ways: TEAM ORGANIZATION CULTURE Augment the team Identify and promote creative talent from within, while bringing in non-industry, disruptive perspectives from outside and ensuring their contributions are embraced by the organization Restructure the organization Dispense with old hierarchies and rigid boundaries and build cross-functional, customer-oriented structures Evolve the culture Weave the customer into the organization's fabric, encourage innovation, and celebrate the customer-company relationship Homogenous Hierarchical Traditional FROM Narrow industry experience Gut instinct Siloed Touch point oriented structure Product-focused Execution oriented Efficiency driven Diverse Cross-functional Innovative TO Disruptive Data driven Mapped along customer journey Agile and nimble Customer-centric Encourage experimentation and risk taking Performance/entertainment

10 10 Sample and methodology In April 017, Russell Reynolds Associates conducted a detailed review of the profiles and career paths of global retail leaders. We identified the 64 largest retailers by revenue globally*. We chose retailers aligned to 6 retail segments and within each segment we represented three global regions. In total, our analysis included 338 individuals who were part of the leadership teams at the identified companies. REGIONAL REPRESENTATION OF RETAILERS Speciality Retail 6 6 FUNCTIONAL ROLES OF INDIVIDUALS ANALYZED (percentage indicates size of the group in the analysis) COO 6% Apparel Retail Online Department Store Digitial/E-commerce 7% Retail Operations 8% Supply Chain 8% Marketing 9% Trading/Merchandising 11% Luxury 1 6 CIO/CTO 14% CFO Grocery and General Merchandise CEO 18% 19% Asia and Africa Europe Americas In addition, we analyzed proprietary psychometric data for 56 retail executives at the C-suite and vice president levels and compared that against an average executive profile calculated from more than 8,000 data points *Global Powers of Retailing 017, Deloitte.

11 11 AUTHORS ANTHONY ARMSTRONG is a member of the global Consumer Sector advising clients within the retail and consumer goods environment on succession planning, leadership assessment and recruitment of outstanding leaders. He is the country manager for Australia. CLAUS FISCHER co-leads the firm s Global Retail and Luxury Practice and is a member of the Consumer Sector. He focuses on senior executive searches and leadership assessment for clients across Europe. He is based in Hamburg. RIC ROI leads the firm s Leadership & Succession Practice for Asia Pacific. He provides advisory services to a wide range of corporate clients and executives across the region. He is based in Singapore. KRISTYNA JANSOVA is the knowledge lead for the Retail Practice and a member of the Diversity and Inclusion Practice. She is based in London. MALLORY SAMSON is the Global Knowledge Leader for the Consumer sector. She is based in Chicago. Russell Reynolds Associates is a global search and leadership advisory firm. Our 400+ consultants in 47 offices work with public, private and nonprofit organizations across all industries and regions. We help our clients build teams of transformational leaders who can meet today s challenges and anticipate the digital, economic and political trends that are reshaping the global business environment. From helping boards with their structure, culture and effectiveness to identifying, assessing and defining the best leadership for organizations, our teams bring their decades of experience to help clients solve their most complex leadership issues. Find out more at Follow us on GLOBAL OFFICES Americas Atlanta Boston Buenos Aires Calgary Chicago Dallas Houston Los Angeles Mexico City Miami Minneapolis/ St. Paul Montréal New York Palo Alto San Francisco São Paulo Stamford Toronto Washington, D.C. EMEA Amsterdam Barcelona Brussels Copenhagen Dubai Frankfurt Hamburg Helsinki Istanbul London Madrid Milan Munich Oslo Paris Stockholm Warsaw Zürich Asia /Pacific Beijing Hong Kong Melbourne Mumbai New Delhi Seoul Shanghai Singapore Sydney Tokyo Copyright 017, Russell Reynolds Associates. All rights reserved.

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