retail news in context, analysis with attitude



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.

This week, we talk about the people who are necessary for innovative companies to succeed.

And now, the Conversation continues…


KC: We had a story last week about how H-E-B, while clearly making some important technology investments, also says that it is doubling down on people investments. The Dallas Morning-News quoted H-E-B president Craig Boyan as arguing that “companies' use of technology should be focused on creating jobs and making their customers' and employees' lives better — rather than simply squeezing out more money for shareholders.”  And, he expressed trepidation about how venture capitalists and other investors are giving huge sums of money to tech companies that are putting retailers out of business and thousands of people out of work — even though they have no viable business plan, and may never make money. So, you’ve been on both sides of this equation - retail and technology (though your companies actually make money), and I’m wondering what you think of his observations.

Tom Furphy:
I agree with many of Craig’s observations. I’ve said incessantly in this column that I think retailers need to be focused on making their customers’ lives better. Everything they do should be tied to a customer benefit, and one that makes a real improvement in their lives. In many cases new technologies can support that.

I also agree that it’s important to make employees’ lives better. Employees are responsible for delivering value to customers. Whether that’s a front-line employee working directly with customers, a warehouse worker getting goods into the store or headquarters staff supporting the operations, it’s important to have motivated, engaged and energized employees. In many cases, technologies can support that.

Work is a big part of people’s lives and therefore time spent at work should be rewarding. It behooves employers to provide employees tools to be more effective and to make the work as gratifying as they can. As mundane and repetitive tasks become automated, as technology manages and analyzes information, and as robotics support more physical processes, employees can be freed up to take on more value-added tasks. Also, technology can be used in training employees and assisting them in the performance of their roles. All of this can make them more effective and make their work more gratifying.

Deploying technology with the primary purpose of creating jobs doesn’t seem like it would add any value to customers. I would have disagreed with Craig’s comments that technology should be focused on creating jobs if I had relied on the face value of the media coverage of his comments. However, I watched the panel discussion where he made his comments, and it is important to put it in context. He says that jobs are still important and that using technology should enable you to lower costs and create new types of jobs. More types of jobs that engage customers and lead and inspire others will lead to better results. Tech can allow you to win with better people. I completely agree.

I also agree that the piles of investment capital moving into businesses that eliminate jobs is risky. Especially if those models are destined to eventually fail after the jobs are removed. That could potentially create a lot of near-term pain as folks deal with losing their jobs. Perhaps it could ultimately reverse if the jobs came back, but in many cases the damage would be done. It could also be really bad for the economy if overcapitalized new businesses take out old businesses, never become profitable and then fail when capital dries up. This could be a real crisis if we’re not careful.

In our world, we think it’s great that technology can create efficiencies and, even more exciting, can fundamentally improve some elements of shopping. Ideally, a change driven by tech can also drive efficiencies that lead to lower prices and/or redeployment of labor into more value-added roles. In our portfolio, Replenium is an example of a technology that’s great for shoppers helping them manage mundane shopping tasks while driving efficiency at store level with inventory flow and labor scheduling. Those efficiencies can be used to fund delivery or other value-added functions such as nutritionists, chefs or other specialists at the store.

KC: When you are evaluating companies that you might invest in, or entrepreneurs with whom you’d like to partner, is there a “tell” that you look for that defines for you - in terms of people - what will make a promising investment and what will not? I’m thinking about how there are a few retail leaders out there who have told me that when they hire people, they like to take them out to a meal and see how they treat waiters and waitresses … this can be a strong indicator of whether they see their roles in terms of servant leadership, or, at the other extreme, have some level of toxic arrogance that is unacceptable. (Granted, there is a lot of room in between those two attitudes.)

TF:
When we evaluate investments and determine which companies we will take on, we look first at the business value proposition and market need being solved. Then we look at the size of the market opportunity, the capabilities of the company and then determine how uniquely the company can deliver the value proposition and stand up to competition. It’s important that the company is solving a real customer need, does so with a novel approach that is a significant improvement over incumbents and has a core technology or capability that is defensible versus competition. Once all of that is satisfied, we then look to the team, starting with the CEO, to determine if they can pull it off.

Building an effective technology company from the ground up is difficult and requires a strong team across all the disciplines of strategy, product, technology, sales and marketing, admin and leadership. We look for leaders that have a deep understanding of their customer. This is often a retailer or manufacturer that they’re selling to, but also the end consumer of the manufacturer or customer of the retailer. They must understand the customer deeply and have a passion for solving the customer need. But they shouldn’t have so much passion that they are unwilling to listen and change. They must have the tenacity to endure the myriad challenges they are sure to face, such as slow-moving customers, product challenges, security and privacy issues, financial stresses and on.

It’s critical that leaders are able to attract and motivate a team around them. We screen for that by talking to the team and to customers. We ask what motivated them to join the company and follow its leader. How do they like working for him or her? How do they work together? What kind of culture is fostered? We screen for leaders and teams that foster transparency, dedication, conviction, respect and compassion. Our process for engaging with companies takes place over months, so we get a good sense of how the leader and team work together. It’s a lot of work, but an important investment in time.

KC: As you look down the road of how innovative companies will think about their people in terms of what they expect and how they will reward them, do you see certain inevitabilities that people would find surprising? What should employees and associates be looking for in a company? And, conversely, what should companies expect from their hires?

TF:
The caliber, dedication and effectiveness of employees has always been the main driver of success of a business. That won’t change. The nature of the required work will change as machines, machine learning and AI take over or support much of the mundane tasks of work. We will have less need for employees whose main purpose is to move, process, calculate or observe. This will become increasingly automated.

These functions will all trade to roles that require more thought, leadership, interpretation and judgement. People will be charged with improving the technology, motivating others, working with customers and providing real value. The resulting value conveyed to customers will be emotional and more rewarding.

Employees should be looking for companies that have a clear customer value proposition and whose culture values its people to support that. I think it raises the expectations employees have of companies and at the same time raises the bar on the required caliber of hires. Businesses with the best humans – those behind the technology and those in front of the customers – will win.

The Conversation will continue…

KC's View: