Many retail organisations are essentially tribal. They are all too often made up of separate and often competing groups. These tribes worship different gods. The functional areas of Buying and Merchandising, Logistics and Operations, Finance and...
Retail is experiencing, and will continue to experience for some time to come, quite radical transformation. The thin tail of the internet’s impact on retail started some twenty years ago but its major impact has been concentrated into the last seven (cruelly coinciding with significant financial and economic disruption). In the UK commentators are perhaps somewhat understated in their forecasts when they indicate that by 2024 30% of retail sales will be achieved online (17% in 2013).
Many retail organisations are essentially tribal. They are all too often made up of separate and often competing groups. These tribes worship different gods. The functional areas of Buying and Merchandising, Logistics and Operations, Finance and Treasury, Retail Operations and IT each have their own behaviours, languages and jargons, performance targets and objectives. The “C” suite is often made up of “tribal chiefs” each competing for attention, budget, manpower and reward for their tribes which have an undeniable hierarchy; in retail buying sits at the top, and logistics is condemned to the lowest end of the food chain.
It’s possibly a harsh view, but in academic literature the retail supply chain is broadly acknowledged as being the most dysfunctional. Dysfuntionality destroys value and in retail this is quickly felt by both shareholder and customer.
Tribal behaviours bring out the worst in a retail organisation. As well as having a parochial view of what constitutes success it stifles imagination and responsiveness. For example a retail buyer is often performance managed on gross margin. This can lead to a tacit conspiracy with the supplier who is looking for common ground; long production runs, large order quantities, elements which are going to delivery efficiency for the factory and the gross margin target that will secure the buyer’s bonus. This isolationist approach takes no account of effective inventory control, asset capacity management, mark down risk, responsiveness or availability. It is behaviour that does not serve the shareholder or the customer. There are similar examples in each of the unaligned functional areas within this sort of organisation.
It’s a really bad time to be tribal. Tesco will no doubt be a future business school case study of the toxic consequences of tribalism.
ribal companies tend to be the victims of transformation whereas those with a non-tribal approach are drivers. Non-tribal retailers are typified by having a strong sense of ‘orientation’, a sense of collective alignment to common goals being pursued under common measures.
The most successful retailers that I have been involved with seem to have some distinctive characteristics:
- They understand the transformational evolution they are experiencing; the move away from a wholly property asset based model and the balance sheet and shareholder investment consequences associated with that.
- They appreciate how the new retail model and supporting supply chain and fulfilment infrastructures demand new capabilities from their people and are prepared to invest in development at all levels of the organisation.
- They are acting to ensure that their people and organisational behaviours are structured on an aligned approach to service the customer with everyone in the business knowing the consequences of their decision-making on the value gain or loss in the supply chain.
- They are prepared to break down some of the biggest tribal barriers - the relationship with strategic suppliers – to work to move these from a punishing transactional arrangement to a sustainable and mutually supportive contract. These companies realise that their supply chain success and offer to the customer isn’t something that can be continually ripped out from a supplier’s margin.
When I started in retail some thirty years ago it was a structurally stable environment and it was dominated by large format retailers whose measure of success was to become larger and to exploit economies of scale. It relied to some degree on the passive compliance of the shopper to conform to the operational model being created through large developments, often out of town, often at the expense of the High Street.
Retail was a conservative game in those days and that conservative mind-set engendered the tribal culture that can still prevail. In many of the organised retailers in this country (who accounted, and still account for a hugely influential percentage of the market) change was dangerous and the behavioural response to economic upheaval was to stand fast and attempt to ride out the storm.
These days the customer is driving change. Companies succeed or fail depending on how well they transform to new demands in the areas of areas of price, quality, sourcing, ethics, service and agility.
If ever there were a time to throw off old behaviours, now would be good.
There are plenty of examples of non-tribal companies out there; Amazon who have been a front runner in revolutionising retail (although a shareholder might be forgiven for losing patience in their wait for some meaningful profit to be generated…), Next who have managed to stay close to the customer in terms of product proposition and have been consistently on-trend with both supply chain and e-commerce offer, and Sainsbury’s who have been strong in the supermarket war with a targeted response to the customer’s need for price and quality (their tie up with the Danish retailer Netto is an interesting and exciting strategy, not without risk). And pure-player ASOS who has shown how to turn clothing retail and customer fulfilment into a very modern science by the acquisition of tech companies to drive innovation..
These companies have been at the leading edge of modern retailing and have done this through abandoning old tribal cultures and in doing so have enabled the enjoyment of the opportunities and imperatives of transformation.
Perhaps my favourite example is John Lewis. Their contract with the customer has been consistent and their offer appealing. In retail terms they have been consistently ‘on fire’ with retail growth in robust figures in recent years or more along with healthy profits. At the same time they have been transforming their business from a traditional bricks and mortar operation to perhaps the most successful omni-channel model in the UK. At Christmas 40% of all of their sales took place online and that percentage will increase over the next five years.
From a cautious toe in the water in 2006 when they achieved £1 million in online sales, they had, by 2012 achieved £1 billion. By 2020 they forecast £2.4 billion. This company, conservative in appearance and quite revolutionary at heart, has achieved this through shared thinking, open minds, the removal of organisational boundaries and, perhaps fundamentally, through the culture and behaviours associated with the partnership model.
Transformation is happening at pace within retail both here in the UK and overseas; those companies who are succeeding have made organisational design and behaviour a keystone as important in their strategy as product.
They certainly avoid tribes.