In the face of new challenges, design and creativity are seen as key factors
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A disappointing holiday season. Predictions of limited growth in 2008. And yet the vibe at the National Retail Federation's recent convention was upbeat, with more than 17,000 attendees in New York being met with one request: "Dream Big."
Last year's show hit on retail's technical and strategic issues, but this year's left little doubt that design and creativity will be key factors in adapting a century's worth of traditional processes. "Retail is one of the oldest industries," explains Jeanette Keene, senior research associate at the Aberdeen Group. "They like to stick to the traditional business practices that have always worked for them."
She adds, "They've got more steps to deal with than other industries. If you change one small thing, it affects the whole supply chain." But the industry has grown and competition is fierce, from brick-and-mortar locations to online to multichannel. The pressure to innovate is undeniable.
Author Dan Pink (A Whole New Mind) describes the state of retail by comparing business processes to brain functionality. Traditional business operations have long focused on left-brain activities -- logical, linear, sequential, and analytical. New approaches have to tap into the right-brain ones -- creative, intuitive, imagistic, and contextual. The left brain, Pink says, "is 100 percent, absolutely necessary -- but it's no longer sufficient." Others agree that the primary differentiator will be creating a valuable customer experience.
Pink attributes the situation to three "A" factors: Abundance, Asia, and Automation. "The level of material well-being deep in the middle class is shocking," he says, illustrating his point with the simple, but necessary, toilet brush. To escape the toilet-brush monotony, he says, you have to either make a leap in toilet-brush technology to create "the iPhone of toilet brushes," eliminate the need for toilet brushes, or compete on aesthetics to hit the emotional core to deliver what Tim Gunn, chief creative officer at Liz Claiborne and an original cohost of television's Project Runway, calls an "irresistible product."
Pink's "Asia" is a nod to offshore outsourcing: repetitive or routine tasks delegated overseas, where labor is significantly cheaper. (See "Re-shoring Contact Centers," page 18.) Companies are relying less on domestic employees for number-crunching and more for creativity. In the same respect, automation has reduced reliance on human input. "Software has replaced the left side of our brains," Pink says. Instead of an accountant charging $150 to $400 or more per hour, software can help you file taxes for as low as $14.95.
While retail now focuses on delivering the best customer experience, behind-the-scenes analytical work still fuels the creative components. Retailers "get" performance management -- gauging step-by-step performance and achieving goals. But they don't know what the numbers mean or how to improve, Aberdeen's Keene says. According to her firm, 45 percent of retailers admit they can't generate valid results due to incomplete data; 43 percent don't have data clean enough for analysis; and 41 percent fail to integrate their data in a central database, making it difficult to gain a complete view of the company or deeper insight into the demands of the customer. Retailers are aware of this problem: Aberdeen reports that 47 percent of them intend to invest in business intelligence software this year.
In the end, though, the trick will be adding the new techniques without sacrificing the old lessons of experience. "I wouldn't recommend retailers shift from one side of the brain to the other," Keene says. "It's really the holistic brain. You've got to have both together."
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