Stepping up to the Plate

We are experiencing a national spectacle on health reform. I repeatedly hear about people who will go without insurance, betting on good health. Forty years ago President Johnson pushed through Medicare in the face of mounting costs and the uninsurability of the aged. Today, political insanity trumps medical sanity.

I wonder if there is some inborn human instinct that compels so many to persist in fighting to maintain the status quo in the face of unmitigated revolution? We have just read through the year-end results for retailing, and at every turn we see a recurring theme. In some cases, new technologies are crushing some formats. Some industries are under great stress because of new formats, antiquated processes, or emerging public preferences (music,film, publishing, advertising, PR, marketing, etc.).

None of these industries will succeed without fundamental changes in their business models. It isn’t as if we haven’t gone through transitions in industry before (think of secretarial pools and hat makers). The United States has successfully transitioned from an agricultural and industrial society, to a service-based society, and now to a high-tech society that will grow on strengths in communications and innovation.

Retailing has undergone the introduction and elimination of a number of channels and broad consolidation in every channel. Manufacturing has seen broad decline as foreign production has taken over many specialties. Traditional wholesaling has largely disappeared, replaced to some degree by just-in-time service organizations. The number of operations across the spectrum has declined steadily for 30 years, and that’s accelerating.

Yet some operations are flourishing. A common element in the successes is superiority—each company has some outstanding strength. All cases show the ability to project and fully exploit strengths. In consulting for many years, I’ve seen too many cases of mediocrity, lack of focus and planning, and poor and inefficient systems and processes, all of which lead to “me too” companies that are now suffering the most.

We’ve learned some lessons in this recession. Retailers have found that sales and profits can come with lower, more focused inventories; that the public is ready to accept alternative materials; and that business can continue successfully without excessive reliance on memo goods.

It may not be enough for true success. Yes, good product and programs work, but we’re in a world where barriers are falling and competition is reaching across borders. I recently bought batteries online, and they arrived a few days later from Hong Kong! Jewelry isn’t batteries, but we’ve seen how parts of the business have been affected by distant competition. Retailer services can have distinct advantages in a local market. There is always more that can be done. Maybe we could see stores with a stylist on staff who helps customers reassess their jewelry wardrobe. How about reinforcing that with an attractive exchange policy? Still, a strong Web presence that attracts customers from all over the country by offering Web-smart merchandising that doesn’t mimic or extend what’s in the store will have to br part of jewelry retailing.

Supply side issues are complex. Suppliers have faced severe declines in volume. Tougher demands from banks brought on cuts in personnel, salaries, marketing, inventory, and product development. For example, if retailers have shifted some selections to silver, manufacturers need to develop new capabilities or find cost-effective and efficient outside sources. Distribution is an issue. Fewer salespeople are on the road, and reduced orders make travel even more difficult. In the background is the threat of even higher gold prices.

But we see successes there, too. There is more application of technologies, greater recognition of the value of systematized product development and merchandising, and a new appreciation of the power of modern communication.

Instinct can be a great asset. But careful assessment of company strengths and weaknesses and a constant presence in the market will inevitably lead to defined options for business development and a clearer view of the road ahead.

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