I’ve used this before. But I want to use it again; it’s increasingly relevant and I can give credit to the person who came up with it.
There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says “Morning, boys. How’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes “What the hell is water?”
David Foster Wallace, in 2005 Commencement Address to Kenyon College
What is our water, and how has it changed?
Our water is the narrative of the things we believe. It makes us comfortable even when, like the young fish, we aren’t aware of it and take the water for granted. It informs and shapes what we think and how we run our businesses.
It’s like The Force- or the Matrix. If you are aware of it and understand it, you can use it. With some training.
Mostly though, we just swim through our water. Some of you noticed some changes in the water years ago. Most didn’t. Of those who noticed, most thought “business as usual” was a fine response. That can work. Until it doesn’t.
What has our narrative been? How has it changed? One characteristic of a narrative is that we may not be aware of it and its influences on our thinking. It’s just part of the water, and that’s why figuring out it’s there can be powerful.
What’s changed in our industry’s water? We’ve gone:
From retailers and brands cooperate, they don’t compete, to brands are retailers and retailers are brands. Something more than a decade ago, at the surf industry conference at Cabo, I stood up and asked a panel of specialty retailers what they’d do when brands had 6,000 of their own stores. Maybe I used a different number. There was a long pause and one retailer answered, “We can compete with anybody.” Then they moved on. Quickly. I’ve always been grateful nobody tried to have me removed from the room.
From we can manage and guide our consumers’ preferences and expectation to listen to the consumer and try to do and give them what they want. Demographics, economics, consumer experience and communications have all pushed in this direction.
From I don’t have to be online at all to I have to be selling online. Yeah, kicking and screaming. Due to the reluctance many had, it was often a largely defensive measure poorly executed. It became a cost center rather than the opportunity it actually was to interact with, attract, learn about and build relationships with customers. Oh, and sell some stuff.
From management silos to integrated business systems. Finance is no longer separate from marketing. More generally, no function is separate from any other. They never really were, but you could kind of operate that way when a fast response to changes wasn’t as competitively important. It’s also true that the systems and data required to integrate functions wasn’t available. Now it is. Interestingly, it seems that many to most businesses still aren’t recognizing and taking advantage of it. At least one report says that’s especially true in retail. Capgemini has recently published a report called “The age of insight: How Consumer Products and Retail organizations can accelerate value capture from data.” You can get it free at this link.
From a focus on sales to a focus on gross margin dollars and operating income. Related to this one is a realization that all your product doesn’t have to be new and redesigned every year. Inevitably, these lead to a focus on your balance sheet, something I’ve championed for, well, a lot of years now.
From a reliance on core shops and fear of expanded distribution to letting the customer find you wherever they want. I still think (want to believe?) there’s an important role for core shops. But there are a lot less of them and I guess the consumer has spoken. In general core specialty retailers were more resistant to change. The exceptions are the ones still in business.
This list could be longer or shorter or different. Like you, I swim in this water. My perceptions of water temperature, tides and clarity may not be the same as yours. I’m not immune from, “What the hell is water.”
And then we had a pandemic. Or still have. Not quite clear. Seems to depend on whether you are vaccinated or not. The gradual changes in the water became a tidal wave, impossible to ignore.
The “changes in the water,” whether or not your list looks like mine, may look tactical, but in total adds up to significant strategic changes. Actually, that doesn’t quite cut it. Groundbreaking, unprecedented and profound are closer to what I mean.
Given the increasing role and value of data, do you hire the same number and kinds of people? Do they have the same jobs they had before? I think the answer is no and no. Go watch this really interesting 90 second video from Quorso.
If you have the same reaction I had, you’ll be horrified by this video. It makes it look like store managers and employees would do nothing but follow very specific instructions. Kind of like people who pack boxes and deliver packages. If you look at the company’s web site and description of their software, however, you’ll see that’s not their expectation.
The water I swim in includes the idea that human judgment isn’t likely to be replaced by artificial intelligence anytime soon. But will it supplement that judgment? It already is. This implies some different kinds of hires, and perhaps fewer.
It also implies a different decision making focus. As AI continues to surprise with what it can do and what it sees that we miss, certain decisions about supply chain management, product ordering, assortment, and where to place it will be more and more automated. Not to mention other decisions I haven’t even conceived of yet- because I swim in the water.
This says something dramatic about how you plan; predicting how business and economic conditions are going to evolve is becoming less important (and maybe less possible) than planning how to be flexible and resilient when something, and I guess I mean something else, comes at you out of left field. “And now for something completely different.” I miss Monty Python.
If you haven’t begun well before the pandemic what is a pretty massive makeover of your organization and how it functions you are, to understate it a bit, behind the eight ball. You know the configuration for successful competition was changing pretty fast even before the pandemic. Now change has accelerated.
I don’t know:
- When supply chains are going to normalize. No, wait- only if you don’t know you are swimming in the water do you say normalize. The question is what the permanent changes will be, though I hesitate to use the word permanent.
- The impact of a country divided between the vaccinated and the unvaccinated.
- Whether the growth in outdoors will stick. Argh- I’ve done it again. See me swimming through the water? The question is why did the new participants buy what they bought and how can you keep them as customers.
- Where people are going to live and work.
- What jobs people are going to want and how much it will cost to hire them.
- Whether inflation is short term or not. There are really smart people on both sides of the argument.
My list is horribly incomplete, I am sure. It’s the things I don’t know I don’t know that I worry about. That’s why you have to be certain your traditional organizational structure and how you think it implies your company functions doesn’t constrain your thinking.
It’s not an exaggeration to say that successful companies will have an indeterminate/fluctuating organization mediated by data. In a sense, or maybe actually, everybody will be connected to everybody else. Increasingly sophisticated artificial intelligence will parse and direct the data. Your traditional org chart should have a box labeled “AI.” Give your AI a name. I’d call mine “Babbage.”
Who gets what data? How do you differentiate between noise and valuable information? What decisions can AI make- and not make? Is a meeting required? What I’m saying is that your organization’s primary function may be to facilitate the interaction and sharing of responsibilities between humans and computers to encourage flexibility and fast decision making.
When the pandemic hit, you were forced to take some leaps of faith. You acted quickly without good information. Sometimes you were right and sometimes wrong. It was uncomfortable to have to change so quickly.
You need to embrace that pandemic encouraged willingness to evolve at a moment’s notice. Perhaps the kind of organization I’ve postulated above can allow that to happen without it being quite so scary.