Incrementalism: Retail’s Sacred Cow And Worst Enemy
If you’re not casting aside incremental goals and striving for a breakthrough, you are ultimately going to write your own ticket out of the industry.
by Charlie Cole
Posted on 08-22-2017
Think of all the greatest achievements in human history—debatable, for sure—but what comes to mind?
For me it’s the Egyptian Pyramids, the polio vaccine, putting a man on the moon, the four-minute mile, the ending of Apartheid, and much more.
Now imagine before embarking on any one of those great pursuits, one of the team leads said: “I mean, it’s achievable, but then we’ll have to comp it next year, so I don’t know.”
We’ve all been there. Any retailer who has been asked to increase same-store sales by 5% knows achieving 10% is almost as scary as hitting 0%. For better or worse, this is the way of the retail world, and, in a lot of cases, this obsession with incrementalism is reinforced and encouraged to a different level when the company is public.
By “obsession with incrementalism,” I mean the uber-relentless, daily focus on year-over-year metrics. I appreciate that orientation toward metrics is important, but at a certain point it becomes what drives us—and innovation suffers.
This obsession can be seen all around the retail industry—and it’s being capitalized on by one company that is singlehandedly killing off retailers around the U.S.: Amazon. Now, this is not one of those woe-is-me articles about how Amazon is the end-all/be-all of retailers. Rather, this is an article to help you understand what Amazon understood long ago: If you’re not casting aside incremental goals and striving for a breakthrough, you are ultimately going to write your own ticket out of the industry.
Amazon was probably a bit of a punch line in some retail executive circles for at least 10 years. Hell, for its first five years as a publicly traded company it didn’t even have net operating cash flow. Now it owns 33% of the U.S. e-commerce market. That’s the power of encouraging and rewarding audacity in thinking and ideals. Every moment of every day, Amazon has been playing chess while the rest of the retail industry has been playing checkers.
One example? Shipping.
Problem : We have to get packages to our consumers if we want to conquer e-commerce.
• Retailer, 2007: That sounds hard. Let’s outsource it. Ohio is sort of in the middle of the country, right? Put the warehouse there.
• Retailer, 2017: Wait a minute. We have all these stores. Maybe we can ship from them?
• Amazon, 2007: Let’s build as many warehouses as possible within the standard shipping zones to capitalize on inventory management, minimize shipping delivery times and costs over the next 10 years, and ultimately exceed customer expectations by offering two-day delivery.
• Amazon, 2017: Our logistics are great for shipping packages, but now we need to shorten our customer expectation from two days to two hours to continue to put pressure on the market. We also need to use these earned relationships to sell our most profitable set of goods: technology.
Audacious, no? Imagine partitioning your company into one that plays the traditional game on Wall Street and focuses on incremental profit, and one that focuses solely on breakthroughs. That’s what Google, er, Alphabet did in August 2015. Its “Moonshot” division plays by different rules, with the sole purpose of bucking the incremental trend.
The irony is that breakthrough was founded on something so intuitive: customer expectations. In the case of Amazon, it was about breaking down the business to what matters most—making customers happy. In setting out on a 10-year battle with traditional Wall Street thinking, Amazon bucked the incrementalism trend, which the retail industry has been in servitude to since the days of Woolworths.
So how do you apply this to your business? It’s September, which means most of us are in the middle of budget season. Check all those boxes you have to in order to pacify whomever requires pacification in the form of top-line growth, margin growth, etc.—and then perform a completely separate exercise. Ask yourself: What are 10 things we are going to try in the first half of the year, that we are going to put budget behind, and that we’ve never done before?
“Never” is italicized intentionally. This cannot be an incremental shift; it has to be a completely generative and new idea. For example:
- Good: Open a VR-based popup store in airports.
- Bad: Change the windows in the front of the stores we already own.
It’s a scary exercise but one that could benefit your company immeasurably. It requires not a shift in current mindset, but instead the embrace of an additional mindset. Budgeting is budgeting—it has to be done, and it has to check the boxes of incrementalism. And I’m certainly not suggesting you forgo profitability. However, by setting aside a pool of money to test, learn, and guess—and not hold to the same standards of tradition—retailers can flourish to the extent of the companies that have been killing them for the past 15 years.
Topics: Retail, Experience Cloud, Trends & Research, Insights Inspiration, Digital Transformation, CMO by Adobe