John Orr, Initial Interview

Question: What are the top three fundamental issues on the minds of retailers today?

JO: From the retailers I hear from – and certainly everything is going to be caveat-ed with my workforce management focus and operational focus – but the
top 3 things that I hear over and over again from retailers are: compliance, customer service and quality, and third, visibility in the business and the need to be proactive.

So from a compliance perspective, it falls into three other sub-categories. One is obviously hour and wage rule compliance. You know, we’re beginning to hear
litigation stories of certain retailers having class-actions brought against them from alleged violation of  hour and wage laws.. The violations are not intentional, but it’s just if the retailer does not have the systems in place to plan and prevent, they remain exposed to very expensive actions. Second issue is the lack of or degrees of compliance with the budgetary targets and constraints.  This has placed pressure on the IT folks to provide compliance to corporate finance and executives through improved visibility and governance to alignment with budgets and commitments to profitability, whether they’re public and committing to Wall Street or committing to their shareholders. And the final issue is compliance with corporate policies and procedures. Most retailers today have multiple locations, and they want to make sure that they’re managing and applying policies and procedures consistently throughout the enterprise for brand equity, service quality, HR policy adherence, payroll processing and continuity, and so forth.

When it comes to customer service and quality, retailers desire and need to be able to institutionalize the service levels they have established to be appropriate for their brand.  There are five dimensions of service quality: tangibles, coverage, knowledge, empathy, and responsiveness. It is important to manage the labor required to maintain store front and back office aesthetics and cleanliness. Proper coverage is critical in delivering the expected service levels and convert sales. Additionally, customer service and quality is making sure that the employees or associates are knowledgeable about what they’re selling, and based on the level of service commitment they have, they’re delivering the right amount of service, and it’s a good level of interaction with the customer, and just having the right level of empathy and care that extends to the end consumer that walks in the store.

Specific to visibility of the business and the need to be proactive, it’s the old adage of if you cannot see it, you can’t manage it. So a lot of retailers are struggling with visibility of the business, but more importantly, as real time as they can get it. So there’s not a week lag based on waiting for payroll to run to find out what your costs were last week or two weeks ago. They want it as real time as they can get it, so they can proactively do mid-week adjustments based on trending up or down for the week and making sure that they’re hitting their key performance indicators. And then, to that, it’s just visibility on the key performance indicators, how they’re measured, having a consistency in it across different stores, regions, districts. And so really, it’s about visibility of the business, as real time as they can get it, so they can manage it properly.

Question: What do you view as some of the biggest challenges retailers face concerning mobility?

JO: One of them certainly is the cost in providing. A lot of the providers have gone out for years talking about mobility and showing a bunch of slick apps and things on global devices, but depending on what it is, some of them are interested in it, but then they start thinking, “Well, now I’ve got to procure and deploy a lot of these mobile devices to my team – do I have the budget and should it be a part of a reward system?” Cost is certainly a consideration and needs to be budgeted for. Secondly, there’s the adoption of devices and platforms. For years RIM’s blackberry highly penetrated the business market.  Recently, we have seen Apple and Android make inroads and shift the adoption of consumers to their devices and platforms. But
retailers are still looking for… because of the proprietary nature of some of the devices and platforms, a mobile device that is interoperable with the predominance of the Microsoft world for the back office. And so, even though Apple has gotten way out in front, and BlackBerry seems to be struggling of late, there’s a window open for someone to step through and provide a mobile device that gets traction, has the form factor, and that interoperates with retail back office.

And then, lastly, it’s just being real pragmatic. For years, being a provider myself, you think of mobile and you can get really slick real quick, and a lot of colorful, gadgety-type things. You know, about a year or so ago, when I talked to retailers, the least common denominator was really as simple as SMS texting. It’s not very glamorous, but very pragmatic. I think it’s really cutting through a lot of the hype, that hype-cycle, where we all  level off on a plateau of productivity with real pragmatic mobile solutions.

Question: How do you see the social network sites influencing the retailers and what can a retailer do to ensure their success and participation in that?

JO: It’s certainly the feedback in communication that allows for it, and that’s good and bad. I’ve seen it be very good, where the social environment of a certain retailer using social networking has been very positive, but occasionally you’ll get a bad apple that, as free as they are to share positive things, disgruntled employees can share negative things about the company or about the program. But I think that certainly, the feedback in communication with associates and team members is part of how social networks are influencing them.  Be ready for the “raw” feedback, and then ensure success through focusing on root cause and not the symptoms or characteristics.

I think social networking is a good way to create awareness for a particular brand and its appeal, and help to attract and retain employees. And it’s very competitive, not only for the consumer, but for the employees also. So you have to look at the internal and external customers, and certainly, the lines between segments in retail continues to blur across what traditionally was discount, department, specialty, and food—it’s getting pretty blurred. But I think allowing the social network to help increase awareness and attract, retain, and develop associates has become a part of a stellar organization. From a strategic human capital management standpoint, you have your core HR and payroll, but wrapped around it are these strategic HCM elements, like acquire, manage, develop, and assess.  Workforce management focuses on managing, but provides strategic value in better refining what to acquire, when, and how much. And then, certainly, development—in HCM, social networks help with development from a learning, management, and career-succession planning side. And then the assessment, allowing social networks to tie into applications and screening helps with employee reviews, and then once they’re all onboard, helps with goal setting and in compensation planning.

And then lastly, social networks—I don’t know if retailers, when and if they’ll be ready for this, but eventually into more of a PEO arrangement, where perhaps there’s a professional employee organization, and it helps provide retail sales associates at a particular mall, and it’s not very brand-specific, but location oriented to where some of these retailers can begin to staff up and down for season through some PEO network that’s part of a whole social network—certified women’s apparel specialists, for an example.

Question: What does it mean to be a customer centric retailer? Should retailers strive to be “customer centric” and, if so, what are some things they should be
doing?

JO: To be customer centric, retailers need to—and most of them do at the executive level, and then they need to finish it through – but it’s really to know the profiles of their target customers, their buying behaviors and preferences, and then through analysis, really start to analyze and understand what works with this targeted profile and what does not. A lot of folks think that more customer centricity infringes on privacy, but most people know that if you do it well, you’re really eliminating a lot of the noise, to where specific things and messages and channels are available to that target, based on their needs, and they’ll find it a lot more valuable, because it’s very targeted, instead of getting some general blast in a promotion.

The other part I think is to… a lot of retailers don’t necessarily want to do this, but I think they need to… it’s to establish what their service level commitment is. You know, if you go into a discount retailer, you’re not going to expect a whole lot of personalized service. Your main service position: is the merchandise there? Is it cheaper than I can get it elsewhere? And can they check me out quickly? And so that’s the level of service you’d expect there, but if you go to a high fashion retailer, you would expect a certain level of service walking in the door. And I think some retailers don’t really standardize or monitor what that service level commitment is, and they certainly need to, so that they can begin to plan for it, cover for it, manage it, and measure it properly. This is where it gets into the customer centricity, and some of the things that they should be doing.

There are some really good studies out there and books such as “Delivering Quality Service: Balancing Customer Perceptions and Expectations,” by Zeithaml, Parasuraman, and Berry, that really talks about customer service gaps and how to survey, measure, and determine what the gaps are. And it’s around customer values, the total value the customer receives from a retail operation, and their satisfaction depends on their experience relative to their expectations they had coming in and what expectations the retailer has set. And so it needs to be provided very consistently in an outstanding manner to really make the overall shopping experience as easy as possible and beneficial to them. And this is about assurance – assuring that the right people with the right knowledge and skills and courtesy are available, based on the traffic. Empathy, by improving the communication between the employee and the company, then the employee believes they do not get lost in the numbers. As a result, they can establish a better work/life balance. And when that’s done, an employee feels appreciated and cared for by the retailer, and they’re more willing to extend that provision of caring and individual attention to the consumer.

And there are three others. One is leveraging your resources effectively enough to where your customers see that you are committed to your ability to perform the promised service in a dependable and accurate manner. And being responsive is another one. The right management and staffing on the right days and times of the day improves conversion and overall dollars per transaction. So being responsive means making sure that you’re ensuring the proper coverage is available to drive the willingness to help customers and provide the prompt service, making it an easy and enjoyable experience.

And then lastly, what I mentioned earlier was tangibles. It’s extremely important to ensure that the appearance of the physical facility – the equipment, personnel – are superior or at least exceeding what they expect when they come in the door. Like my wife, when she shops, she goes into a retailer and has to use the public restroom they have there, and it’s filthy, that’s a tangible dimension of service quality that doesn’t meet her expectations and would, quite frankly, influence whether she would shop there again.

Question: What effects will the cloud have on retailers and what should they be doing today to ensure success in the cloud?

I believe retailers need to choose what makes the most sense for their organization. Some with strong IT organizations believe that it’s normally more cost effective to deploy off-premise or host it themselves. Increasingly, though, retailers are deciding to base whether it’s strategic or not to host themselves or not, and many find that most are not strategic and they’re better off outsourcing. So the old adage of “do they have a large IT department, and therefore they should host it themselves and not use the cloud” is starting to go away, because they have been missing the main point. One point is that retailers have a need for speed, and typically, their consumers are demanding more selection, faster, lower cost, anywhere I need it. And so, they go to their IT to help support them and IT is all bottlenecked maintaining legacy solutions and systems and not being very strategic or responsive to the operations/business.

More and more, the smaller retailers with the smaller IT organizations are more than happy to outsource, but we’re starting to see more large companies recognize that it’s not whether they’re willing and able to, it’s more about can they get rid of the bottleneck that’s stymieing operations. It’s a fact that most large IT departments can’t keep up with operational demands and speed, so to free up the IT and focus them more on strategic items that are less tactical makes a lot of sense. The cloud offers retailers the ability to invest in the solution itself, but not carry the burden of the legacy architectures and designs. And today, there’s still a lot of first-generation web solutions out there that are pretty clunky and ugly and they don’t need to be bogged down in that.

As technology improves, it certainly becomes less expensive to provision and maintain and service, and those savings, for a company like Dayforce, are
passed on to our retail clients, which creates an opportunity for them to have a cash-flow-positive investment Year One, instead of the legacy approach, where
it could be two or three years later. And then finally, the need for information and the visibility I spoke of earlier, and certainly a forced consumption anywhere, anytime, over mobile devices, not necessarily a phone but from anywhere, could be a browser. So information shared across cloud computing is more readily available and presentable on various devices today. The cloud helps to untether the consumer of that information from place and time.

Question: IT has dramatically changed over the years, but retailers are often still using older technology. How can retailers get the data they need to grow and manage their business with this older technology?

I always tell people that the latest and greatest is interesting, but in my career, some of the most elegant solutions – or the best solutions – are an elegant mixture of old and new technology together. And that right mixture is just different for every retailer. But I think that the retailers that are holding on to old technology, it’s usually out of fear to change, or they’re caught into a conundrum of wanting to move to new technology, but feeling trapped, based on the amount of money they’ve invested or spent on what they have today. So I think what they should do, they need to start thinking about IT investments from a sunk cost standpoint. Forget about what you’ve spent today, and politically that might be more of an issue for some of the politically structured retailers, but forget about the sunk costs, and really focus on projecting out the current rate and speed of what the legacy offers, compared with the new approaches.

Data is data, and all systems have a ton of it, in my opinion, but the key is really about information provisioning, so sure, a lot of legacy and old technology has tons of data, but it’s not about the data, it’s about the information provided from it, and making sure that the old systems aren’t designed in a way that either don’t allow for the capacity to provide the right information to the business and decision makers and if they spent a lot of money but the executives and the operations still doesn’t get the right information out of it, then what are you trying to preserve by not moving? So, the legacy solutions, they require a lot of pieces and parts and interfaces and sometimes delay in information just because of the design, and they become a data jailhouse, if you will. So I think what they should do is really focus on information and not data, focus not on sunk cost, but where they’re going and the ongoing costs, and get rid of the IT and focus legacy costs per day and switch to the value to the business from a profitability impact. You know you can’t keep up with technology or you’d constantly be changing, but find those right points to jump from one technology curve to another and don’t lose sight of that IT is there to enable the business, not drive it.

Question: What should retailers do to become more efficient and balanced while increasing their dependence on technology? How can they manage the cost of IT when everyone wants to increase investment in IT? Where will they need to support their dependence on IT?

JO: Technology should not drive business decisions and investments or the operation. Technology should enable the operation, and it’s a huge difference, because you can’t fix poor business practices with technology, per se. You really need to fix the process, and then apply technology that enables improvement in the process or the provisioning of information. The investment in IT is not the same as the cost of IT. It takes investment to save on costs, so more and more retailers are taking a strategic view on investment in IT and remaining focused on core competencies, meaning if it’s a strategic investment in IT, the cost of it can actually go down. You have to always focus on the IT investment enabling the operations of the business and the strategic change in objectives they have.

I was working with Limited brand years ago and one of their VPs of center store operations told me, “John, we just want to focus on selling bras and panties. We don’t really want to have to spend resources and time on indexing databases and unzipping files, and upgrades; we just want to focus on our core competency like any retailer, of provisioning and selling that product or service and not be so IT-focused. It’s more about enabling the business.” So, from that, I don’t buy the notion of being dependent on IT or allowing yourself to be dependent on IT. If IT is an enabler, the strategic decisions and approach are in the finance and operations and not a dependency.

Question: Where should retailers increase usage of technology when IT budgets are shrinking?

JO: You can use more technology with a shrinking IT budget, for example SAAS and cloud helps to increase usage of technology, but it doesn’t necessarily increase the IT expenditure. You can provide more strategic tools, the technology tools, to your business, but do it in a much lower and shrinking cost, based on the cloud, and the total economic impact of the cloud computing solutions is an operating expense and not a capital expense, for the most part. So IT expenditures are typically a cap expense but with the SAAS and cloud it moves it into operating expense and lowers the total economic impact to the business, so it’s a natural evolution to move more and more IT spend into SAAS and cloud.

If you take IT hindrance out of the decision making process, I think it allows Ops and Finance to run with the business at the speed they need, without any hindrances. It’s a thing that’s going to evolve and change over time, as is happening right now. More and more CIOs are moving things to the cloud, but those CIOs are more CFO/CIO-types, where they’re really focused on the operations and business and how to provide and enable the business, and get rid of some of the old legacy views of IT departments and operations having to wait for IT to deliver the next release of something that some customers have been waiting on for years.