The Future Calls for Letting Go
By George Anderson
As Dan Quayle the famous philosopher, orator and spelling bee contender once said, “The future will be better tomorrow.”
While others may not match the eloquence of the former Vice President of the United States in speaking about the possibilities of the years ahead, many share his vision that the future holds great promise.
Thomas Malone, professor of information systems at MIT’s Sloan School of Management and author of The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style and Your Life, is among those.
According to a report on the Xtreme Retail 23 (XR23) Web site, Prof. Malone believes improvements in technology,
specifically in communications, can have a profound impact on how business is done in the future if companies are willing to let go of present day thinking on organizational structure.
“People have enough information to make sensible decisions for themselves, and not just take orders in a hierarchy,” he said.
“Think about eBay as if it were a retailer, not an auction company. From this point of view, eBay has hundreds of thousands of ’employees’ — the sellers on eBay. But these sellers aren’t really employees; they are effectively independent store owners. As such, they decide for themselves what to sell, when to sell it, how to advertise it, and how to price it. In other words, eBay has ‘outsourced’ most of the traditional functions of retailing to a bunch of independent sellers who eBay doesn’t even pay. Instead, they pay eBay! This model may not work for all kinds of retailing, and sometimes you may have to almost start over to get there, but eBay shows how really different approaches can sometimes work amazingly well.”
“The next logical step” in the evolution of retailing, said Prof. Malone is “decentralized, empowered, networked and outsourced organizations” run by people who “are more creative, more motivated, and just like going to work better” than those typically employed in the business today.
For those who think the eBay reference goes too far, Prof. Malone offered another present day example of on organization change. “A less radical example comes from Whole Foods supermarkets. When managers hire people to work in Whole Foods Markets stores, they are really only making a recommendation. Before a job candidate becomes a permanent employee, the candidate has to work for a 30-day trial period. Then everyone in the department gets to vote on whether to keep them. This isn’t just a popularity contest either. Team members know that their monthly bonuses are based on their department’s labor efficiency, so the people they vote to hire will directly affect their own pay.”
Moderator’s Comment: How will technology affect how retail and related businesses are run in the future? –
George Anderson – Moderator
To hitchhike on Ian Percy’s always erudite comments (as I frequently do), his identification of the issue as “how you think” is right on the money.
All of us believe we know how to think, but many of us don’t. When you mention “teaching someone how to think,” some view it as silly as teaching someone how to breathe, or chew, or walk. And yet, teachers exist for all of these natural processes and more.
My father, a psychology professor at a midwestern college, frequently discussed at home the idea of learning how to think. He emphasized exercising the brain like a muscle, and developing an intellectual “muscle memory” that helps one quickly and efficiently understand thoughts and problems and react to them intellectually rather than emotionally. This is learned, and does not come naturally. Our military academies and officer candidate schools do a wonderful job of teaching students how to think, which is why so many of our most successful business leaders in the last half of the twentieth century were military trained.
Unfortunately, we frequently treat feelings as thoughts. Feelings give us a wonderful psychological balance, but to depend on them as if they were rational, logical conclusions is a recipe for disaster. Technology tends to reinforce this compulsion, as we come to believe that our machines can do our thinking for us, leaving us free to indulge less intellectual pursuits.
The advance of retail technology is wonderful. But, we must understand it for what it is: It’s not a way to allow us to do less thinking. Rather, it’s a way to free us up to do more thinking.
“Don’t pave the goat path” is a way of saying that adding modern capabilities to a system built for a different set of circumstances doesn’t get you the most benefit. So yes, new tech should prompt rethinking. But I think the professor is naive to think that all employees can be that self-directed, and eBay is a flea market operator, not a new kind of business.
The ultimate result of improved communication will be continued consolidation of support functions as centralized management of disparate retail operations becomes possible through the investment in exception based management tools. Retail consulting organizations that actually manage the operations through sophisticated forecasting algorithms will offer assortment planning, gross margin management, and promotion planning to all “subscribers.” “Software as a Service” will allow these new consultants to hire the best merchandisers in various categories and demographic backgrounds, so that the individual store operator will have the same resources as the “big chain” stores. The difference will be that the individual operator will have his heart and soul in the business and be more motivated to make it work. This will lead to the return of the independent retailer as the ultimate manifestation of “free enterprise.”
Companies that try to keep a centralized, controlled structure really cannot take advantage of the efficiencies of technology. The sentence always seems to start, “What will happen if we let our customers/employees control xyx??”
I am also fascinated by what technology is doing to the concept of the brand. In my opinion, marketers are too wedded to an idea of “brand” that developed 50 years ago — when the marketer had control over all communications through traditional channels like print and TV.
The old saw “a brand is a mark of trust” is still true, but less so than ever. If I end up in Uzbekistan, and I have the choice between staying at a Marriot, or the local Uzbeki motel, I’ll choose the Marriot. I know what I’m getting.
But, aside from an extreme example like the one above, “brand” or “trust-mark” is a much more decentralized concept. A brand is now the guy on eBay with a good rating. Or, my own ability as a Google searcher to find the product with the reviews that meets my standards.
Once again it all comes down to “people”…technologies can make the retail experience (and just about everything else) faster and more detailed – but it’s how the use and benefits are communicated that makes all the difference between success and failure. The key to effective technology is effective empowerment!
“…if companies are willing to let go of present day thinking on organizational structure.” The professor says that would open the retail world up to all kinds of possibilities, and he’s right. I’d go further and take the last three words off that quote and then we’d have the real challenge facing leaders today.
We need to rethink how we think about pretty well everything. Our brains are capable of 10,000 trillion operations per second. If there are eight people on an executive team, that’s a lot of capacity. Unfortunately, in my experience with many executive teams, very little “thinking” goes on. Lots of debate, lots of defending the turf, lots of control battles…but very little thinking. We talk too much to think and you can’t talk and think at the same time. We literally don’t have time to think. We’ve got to learn to think differently if we expect a different outcome. Why do you think the same issues show up on the agenda over and over again, some for years?
For the most part, as an example, companies run around looking for ‘best practices’ because they don’t seem able to think innovatively for themselves. Where did the company with the best practices get them from?
This is too big a topic for this space so let me offer this: The quality of thinking will be what determines sustainable competitive advantage. Not size, not marketing…how you think.
Good companies benefit exponentially from improved technology, but the old rules hold and automated poor companies use technology to suboptimize faster. Want to understand the limits of information? Contrast the amount of scan data available and the use of that data.