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    Published on: February 24, 2016

    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    And now, the Conversation continues...

    KC: I've been spending this week at Portland State University, and so I've been thinking about so-called "higher education."  And so I want to ask you about some of the young people you encounter as you work with various technology companies.  When you talk to them, to what extent do you get the sense that their education has proven to be relevant to the work they are doing?

    Tom Furphy:
    I think that it varies by discipline. The more specialized the role, the more the benefit of college preparation is evident. For example, it’s clear when developers and other technical staff have benefitted from computer science or similar degrees. In less specialized roles, it seems to have less to do with specific coursework, but more to do with the overall impact of the education and college experience. If they graduated from a top school with a high GPA, it shows that they were deemed smart enough to get in, worked hard, were able to overcome obstacles and finished with a “score” to show they are achievers. This often translates to early career success, which I observed across my teams at Amazon.

    Also, for others from less prominent schools or those with lower GPAs, the workers that seem to do best are those that were active in extracurricular activities. Many have valuable experience from an internship. Having taken these challenges on, having dealt with the stresses and ambiguity that accompany them, is important. These are the things that I think shine through when young people are faced with new challenges in the workplace.

    KC: If you had to create a curriculum for a college business school with a focus on technology, in general what would you suggest teaching them?  (This can be things that are being taught now, or things that are not … and include things that perhaps are being taught but not well.)

    I think there are two areas that I would stress more than are being stressed now. Computer science and customer centricity. In both high school and college I would encourage more computer science courses as general requirements. Past generations have had to learn biology, chemistry, algebra and geometry even if they weren’t studying to be a doctor or scientist. They studied these subjects to better understand how things in the world around them work. Given how integral technology is to our lives, I think it is important for people to understand how technology works. Understanding the basics of coding, encryption, processing and such helps us understand the how technology can be used to support our objectives. This understanding enables us to better leverage technology to our advantage in our personal and business lives.

    Second, I would teach about customer centricity. No matter how business changes over time, it is always important to truly understand your customer and to develop innovative ways to serve them. Back at Wegmans, I was always impressed at how our leadership agonized over every detail of the customer experience. The customer was front and center of every discussion we had. They would innovate to better serve the customer. I saw the same thing at Amazon in how Jeff led the charge to “focus on the customer and work backward”. When you are truly focused on the customer, the things you need to do in your business to support that become obvious. Innovation becomes rational and technology can enable a lot of that innovation. I think that getting students to understand customer centricity would be incredibly valuable.

    KC: In terms of where you see the job opportunities erupting in the next decade, what should kids be studying?

    In addition to computer science, I would add coursework in entrepreneurship. Entrepreneurs are risk takers and creators. In almost any business role today, you are judged on your ability to add value. You are rewarded for creating products and services that are better than the competition and that customers want to pay for. In the workplace, this applies to serving internal customers as well. You should always be looking for ways to improve your role to help the company work better overall. Also, entrepreneurs are constantly faces with risks and challenges. Understanding that this is normal and learning how to thrive in the face of these is incredibly valuable.

    KC: What are the most important questions potential employers should be asking college students about to embark on careers?

    Beyond asking questions to check the boxes, I think it’s important to find out what motivates candidates. Is it the pursuit of a passion, monetary rewards, overcoming challenges, having a big title or changing the world? I think it’s important that they stand for something and are not just going through the motions, which our trophy society has enabled for their generation. Automatic participation trophies stop during college. It’s important to understand if candidates are ready to earn their outcomes.

    I would also ask questions to assess what kind of team member they will be. The new generation of workers has grown up with personal gaming, selfies, Instagram and a world that is all about them as individuals. I would probe for examples of how they succeeded as part of a team. I would ask how they contributed to making a team better and how being on a team made them better. We’ve seen high-potential young folks come through where it has been more about them succeeding as individuals and less about the greater good of the organization. Money, titles, responsibilities and equity ownership become more important than creating something great with great people. That can be very damaging to morale and will ultimately limit the potential of these folks.

    KC: Finally, you have kids … as they look at you and wonder about what choices they should be making as they head towards college, what recommendations are you making?

    Good timing as we were just on college tours last week. I tell my kids that they don’t have to have all the answers now. So many parents pressure their kids into certain schools or certain majors.

    I think it’s most important that kids have a great undergraduate experience that allows them to flourish. College is the years where kids truly discover who they are and find themselves as adults. I ask my kids to think about careers that seem interesting to them. Then look at schools that offer course work to support the options. But most importantly, I encourage them to find a school that they are excited about. It’s about being part of a community, succeeding on their own and having options. I want them to try things that perhaps they could develop a passion for. I want to see them get into clubs and other activities that they are excited about. Once they find the true passion, grades and other outcomes become much easier.

    The Innovation Conversation will continue ...

    KC's View:

    Published on: February 24, 2016

    by Kevin Coupe

    If there is a deadly sin in the world of retailing - or in any business - it is uttering the phrase, "Because we've always done it that way."

    Well, the Wall Street Journal has a piece this morning about the New York Yankees - ordinarily, a team that I would only reference with the kind of derision and grudging respect for decades of achievement that can come from a dedicated and longtime New York Mets fan - that illustrates fresh and original thinking.

    The Yankees, you see, have adopted an unusual approach to spring training - players are told not to be on the field until 11:30 am, hours later than pretty much every other team. Players are told to stay in bed, to get more sleep. "Scott Kutscher, a clinical assistant professor at the Stanford Center for Sleep Sciences and Medicine, led a study, presented in 2013, that found that players’ plate discipline generally declines over the course of the season, a fact he and his colleagues attributed to fatigue," the Journal writes. "He said that the traditional early-morning spring-training regimen makes little sense, since it ostensibly exists to help players prepare for a season in which a majority of games take place at night. From a physiological standpoint, players can be expected to peak both mentally and physically later in the day rather than earlier, meaning teams should practice accordingly."

    And yet, the Yankees are the only team adopting this adjusted schedule. Other teams do things the way they've always been done ... apparently for no other reason than that's the way things always have been done.

    It is a great example of original thinking. It isn't necessarily a big thing, but it may be an important thing ... baseball has a long season, and as Crash Davis says in Bull Durham, the difference between good and great can be found in the little things, the ground ball that one runs out and turns into an infield hit. Perhaps, the Yankees think, that will be because one had a few hours extra sleep months earlier.

    It is an Eye-Opener.
    KC's View:

    Published on: February 24, 2016

    Re/code reports that Whole Foods is making an investment in the four-year-old delivery startup Instacart. "The size of the deal could not be learned, but sources say the deal is essentially done, barring an unforeseen last-minute change of heart," the story says, adding that "the two companies have also signed a five-year delivery partnership ... making Instacart the exclusive delivery partner for Whole Foods’ perishables business.

    "Other terms of the deal could not be learned, but Instacart’s commercial agreements with its grocery store partners typically include a revenue sharing component."

    The story notes that "Google Express launched same-day delivery for fresh groceries just last week, and as of now, one of Google's initial partners in San Francisco is Whole Foods. According to Re/code, Google's partnership only extends to a single Whole Foods location in San Francisco, which means the grocery chain's new relationship with Instacart could sideline Google's delivery business in the near future—at least in regards to Whole Foods."
    KC's View:
    A bit of idle speculation here, if I may. (Also uninformed speculation, but when have I ever let that stop me?)

    I am a bit surprised that Whole Foods would seem to be doubling down on Instacart, even to the point of investing in the company, at the apparent expense of any expansion of its relationship with Google. It makes me wonder if, in fact, it is possible that Google might at some point be interested in acquiring Instacart, which, despite its shortcomings, would give it a bit of a jump start in a business it clearly would like to grow.

    There probably are a bunch of reasons this might not make sense. But I have a sense that this could be where things are going.

    Published on: February 24, 2016

    Business Insider reports that Macy's is planning to turn 15 of its traditional department stores into its new Backstage discount outlet format, which "will sell Macy's brands at steeply discounted prices — up to 80% off," a model designed to emulate similar stores such as TJ Maxx and Nordstrom Rack.

    The story notes that "the locations will serve as a test of whether the store's new discount outlets will take business away from the higher-priced traditional stores ... Macy's Backstage stores are an attempt to get younger customers as sales at the company's core business declines. But it's possible that once shoppers become accustomed to discounts, they will refuse to pay full price for brand-name clothing."
    KC's View:
    I hadn't been in a Macy's for some time, but went into one the other day because I hadn't packed enough underwear for my current travels. I have to tell you that the atmosphere was mausoleum-like ... there were very few customers there, and I found the displays I was perusing to be a mess, like nobody cared enough to make things easy to find. Now, this was just a moment in time ... an hour earlier or an hour later, the place could've been mobbed. But that's not how it felt. The store felt obsolete and lonely ... which may explain why Macy's sales were down four percent last year.
    It'll be interesting to see how the Backstage concept works, and if it is able to replicate the kind of success that the Nordstrom Rack has achieved. (A note: I was curious, so I checked. There happened to be both a Nordstrom and a Nordstrom Rack within blocks of the Macy's I visited, and both were a lot busier. I'm just sayin'...) This will be intriguing in part because it is the same kind of move that Whole Foods is making with its new 365 retail brand. There may be lessons that cut across all these brands about what customers want and don't want.

    Published on: February 24, 2016

    The New Yorker has a typically eclectic look at the nature of leadership that starts with poet Thomas Hardy, makes side stops at Donald Trump and Steve Jobs, and then offers an assessment of the nature and qualities of leadership, concluding that it "may be, by its nature, an anxious and inconstant idea."

    "Our faith in the value of leadership is durable," the story says, adding that "it survives, again and again, our disappointment with actual leaders." People may be disillusioned with actual so-called leaders, not with the concept of being led. "In a sense, they’re caught in a feedback loop. The glorification of leadership makes existing leaders seem disappointing by comparison, leading to an ever more desperate search for 'real' leaders to replace them."

    The story goes on:

    "To some extent, leaders are storytellers; really, though, they are characters in stories. They play leading roles, but in dramas they can’t predict and don’t always understand. Because the serialized drama of history is bigger than any one character’s arc, leaders can’t guarantee our ultimate narrative satisfaction. Because events, on the whole, are more protean than people, leaders grow less satisfying with time, as the stories they’re ready to tell diverge from the stories we want to hear. And, because our desire for a coherent vision of the world is bottomless, our hunger for leadership is insatiable, too. Leaders make the world more sensible, but never sensible enough."

    It is a fascinating read on leadership and management, and yearning and disappointment ... and you can read the whole story here.
    KC's View:

    Published on: February 24, 2016

    The Conference Board is out with its monthly assessment of consumer confidence, which it says has fallen to its lowest level in seven months "as Americans grew more pessimistic about business conditions and their personal finances, though the overall outlook suggests slow but steady economic expansion across the US," the Wall Street Journal writes. "The group’s index of consumer confidence declined to 92.2 this month from a revised 97.8 in January. Measures of consumers’ outlook on current and future conditions both dropped."

    The Journal notes that "consumer sentiment has been broadly solid for more than a year. A number above 90 is generally considered a good reading." But the fact that the stock market has been volatile in recent weeks seems to have created concerns about the economy, and many Americans seem expect Wall Street's "wild ride" to continue.
    KC's View:
    There's no question that the economy is a lot more volatile than we'd all like it to be. There's also no question that we are in a political moment in which votes can be generated by provocative rather than calming voices, and so I'd expect that consumer confidence is likely to be unsettled for at least the next nine months or so. (I also think that when these nine months are over we're all going to feel like we need a shower ... but that's another issue.)

    Published on: February 24, 2016

    Bloomberg reports that a lawsuit against Walmart accuses the company "of defrauding customers by selling Parmesan cheese touted as pure that contained wood pulp as filler."

    According to the story, "The world’s largest retailer stocked its New York stores’ shelves with containers labeled “100% Grated Parmesan Cheese,” but tests showed Wal-Mart’s Great Value-brand cheese contained as much as 10 percent of cellulose, a wood-based anti-clumping agent, according to a complaint Tuesday in Manhattan federal court."

    The suit has been filed by a customer whose lawyers are seeking class action status "which would allow shoppers across the country to band together against Wal-Mart" on this issue.
    KC's View:
    Customers are ticked off about being lied to by the companies they thought they could trust. Expect more lawsuits, and plenty more righteous anger.

    However, I would expect Walmart to fight this by arguing that it should not have class action status, that each person who has been buying and eating parmesan laced with wood pulp needs to file his or her own lawsuit.

    Published on: February 24, 2016

    • The Los Angeles Times reports that discounter Aldi "is opening eight stores on March 24 in Southern California, the first of 45 stores in the region this year." The stores are all located near its distribution center in Moreno Valley, in Palm Springs, San Bernardino, Yucaipa, Lake Elsinore, La Quinta, Fontana, Beaumont and Moreno Valley. Nineteen stores are then scheduled "to open between April and July. Locations include Covina, Inglewood, Simi Valley, South Gate and Bakersfield."
    KC's View:

    Published on: February 24, 2016

    • Wakefern Food Corp. announced that Cheryl Williams, the company's vice president of Digital Commerce and Innovation, has been named Chief Information Officer, responsible for coordinating cyber security efforts and technology on both the corporate and retail fronts.
    KC's View:

    Published on: February 24, 2016

    I found that this email from an MNB reader put into words a lot of what I've been thinking but had not expressed adequately:

    I think I must comment anonymously, since I wasn’t smart enough to have a career that doesn’t depend on companies who would choke on hearing my name attached to some of what I believe.

    The two stories (preventing state labeling and substituting a voluntary set of federal label guidelines for GMOs on one hand and the reality of “blueberries” and other flavors on the other) are clearly related.

    Of course the industry wants “voluntary” labels; the vast majority of self-policed industry practices are a license to ignore whatever you don’t like or don’t want to pay for unless your company is culturally committed to honesty. This has been true for pollution controls, drug formulation and pricing, mine safety, automobile design, ingredient honesty, advertising claims, and almost every other form of endeavor where the few bad actors make the rest of any industry look bad. Nonetheless business reflexively doesn’t want intrusion, inspection, or anything else to interfere, and their trade groups all go along.

    As a great Supreme Court justice once wrote, “your freedom to swing your fist stops at the end of my nose”. If the food industry actually WANTED honest and transparent they could have it by delivering it. If they don’t, they won’t deliver, and no voluntary legislation is anything other than a fig-leaf to mask that they do not want to be forced to tell the truth EVEN WHEN THE TRUTH IS nothing to be ashamed about. They do not want to risk losing decision rights. I get it. But my nose is out there at the end of their fist and laws set standards for a reason.

    As for “disasters of Biblical proportions” from state by state labelling, that is nonsense. It costs a few extra dollars to distribute and label cans and bottles differently in states with different returnable regulations. The industry howled about it. And then just dealt with it. This is not all that different. And of course the Vermont law, like many such, is not designed to be a separate standard – it is designed to trigger other states into joining until a federal standard is achieved, either in law or de-facto. The model for this was California’s laws on car pollution many years ago – when a significant fraction of the market demands compliance, it becomes practical to comply everywhere.
    But I work in the food and retail industry and have for half a century. I love it. I believe in it. But I do not trust everything it does or everyone in it.

    I actually oppose GMO crops because of the freedom to apply  excessive pesticides it creates – a pretty good science case has been made that this is what is killing natural pollinators like bees. I do not really oppose engineered fish or whatever is next. But I am entitled to make up my mind on a case by case basis. And as another leader once said, “Trust. But Verify”.

    I actually think that if we have a national problem, it is that people are more concerned with their own fists than other people's noses. That applies to industry's approach to GMOs, but it also applies to a lot of other things as well. But that may be a larger thought for another time and place.
    KC's View: