Impact Today™
Thursday, January 10, 2008
Vendor Chargebacks: intension vs. reality
David Ashear wrote us in November after hearing about "Life's Leadership Lessons", the new book from Max Impact founder Rick Weaver: You have a book that talks about “The Vendor Chargeback Program”?
Actually the book contains only one chapter about vendor chargeback programs. The book looks at the people, events, andthings that have taught me important aspects about leadership throughout my life. The book would not be complete without atleast discussing the chargeback program at Kmart. I had the misfortune of being involved in this program at its inception.
The now defunct Andersen Consulting that sold the initiative to Ron Floto, then Kmart Vice President. Paul Foley and myself were the instrumental developers for the merchandising team. Paul and I knew there were problems right from the start. Andersen Consulting expected the program to increase on-time deliveries from Kmart's vendors by creating a pain threshold for noncompliance. Floto, Foley, and I thought the program would only work if it was completely fair and had a goal of raising shipment issues to the point of discussion and investigation.
Although we never the saw the program as being a revenue generator, Foley and I confided in each other that if the program was ever budgeted, it would completely destroy vendor relations.
The other side of the guillotine
In a strange turn of fate, I would find out what it was like to be on the otherside of the issue. Read about it by clicking here.
David Ashear wrote us in November after hearing about "Life's Leadership Lessons", the new book from Max Impact founder Rick Weaver: You have a book that talks about “The Vendor Chargeback Program”?Actually the book contains only one chapter about vendor chargeback programs. The book looks at the people, events, andthings that have taught me important aspects about leadership throughout my life. The book would not be complete without atleast discussing the chargeback program at Kmart. I had the misfortune of being involved in this program at its inception.
The now defunct Andersen Consulting that sold the initiative to Ron Floto, then Kmart Vice President. Paul Foley and myself were the instrumental developers for the merchandising team. Paul and I knew there were problems right from the start. Andersen Consulting expected the program to increase on-time deliveries from Kmart's vendors by creating a pain threshold for noncompliance. Floto, Foley, and I thought the program would only work if it was completely fair and had a goal of raising shipment issues to the point of discussion and investigation.
Although we never the saw the program as being a revenue generator, Foley and I confided in each other that if the program was ever budgeted, it would completely destroy vendor relations.
The other side of the guillotine
In a strange turn of fate, I would find out what it was like to be on the otherside of the issue. Read about it by clicking here.
Labels: Ethics, Kmart, Strategy
¶ 1/10/2008 0 Comments Links to this post
Tuesday, December 11, 2007
Believing in yourself
With the onslaught of competition from the Internet and globalization of the marketplace, many companies are afraid to launch new ventures, explore new marketing strategies, or take aggressive steps to lure customers from their competition.
Instead they “circle the wagons” thinking that if they can only protect their existing customer base, they can ride out the era of change. However the history shows disappointing results when wagons are circled.
Look at retailing, for example. Discounters were king during the 60s and 70s but lost their luster when big box specialty retailers started opening up in the 80s and expanding in the 90s. Wal-Mart and Target took aggressive stands. Wal-Mart began unprecedented store expansions to move into new areas where regional retailers such as Bradlees, Caldor, and Ames were vulnerable. They also developed new brands such as Wal-Mart Super Centers, Sam’s Club, and the Neighborhood Marketplace. Meanwhile Target also increased their expansion plans to reach parts of the country where they had no exposure.
While Wal-Mart was growing the Sam's Club brand, Kmart was selling off its big-box divisions and spending its money on up-scaling existing stores. Bradlees, Caldor, and Ames were also concentrating on existing units and product lines without a vision to stave off competition from the big-box retailers.
Today, history shows that the aggressive approach of Wal-Mart and Target is the right way to go. The lesson is applicable to businesses both large and small.
The Lesson
To be successful at building businesses and careers one must have the confidence in their abilities to such a degree that they are not afraid of trying something new. I am not talking about small changes - but moving forward in a radical direction. There are several required steps involved in moving forward with risk:
The difference
One of the world's greatest inventors, Ben Franklin, developed many companies including a library, a post office, a printing business, and much more. We view his greatness in light of his aggressive approach to the world. He was always looking for some way to add value in the American colonies and the new country he helped form. Franklin is no different from you or me in capabilities. But he was different in that he saw life as a series of giant leaps over the chasm of mediocrity.
With the onslaught of competition from the Internet and globalization of the marketplace, many companies are afraid to launch new ventures, explore new marketing strategies, or take aggressive steps to lure customers from their competition.Instead they “circle the wagons” thinking that if they can only protect their existing customer base, they can ride out the era of change. However the history shows disappointing results when wagons are circled.
Look at retailing, for example. Discounters were king during the 60s and 70s but lost their luster when big box specialty retailers started opening up in the 80s and expanding in the 90s. Wal-Mart and Target took aggressive stands. Wal-Mart began unprecedented store expansions to move into new areas where regional retailers such as Bradlees, Caldor, and Ames were vulnerable. They also developed new brands such as Wal-Mart Super Centers, Sam’s Club, and the Neighborhood Marketplace. Meanwhile Target also increased their expansion plans to reach parts of the country where they had no exposure.
While Wal-Mart was growing the Sam's Club brand, Kmart was selling off its big-box divisions and spending its money on up-scaling existing stores. Bradlees, Caldor, and Ames were also concentrating on existing units and product lines without a vision to stave off competition from the big-box retailers.
Today, history shows that the aggressive approach of Wal-Mart and Target is the right way to go. The lesson is applicable to businesses both large and small.
The Lesson
To be successful at building businesses and careers one must have the confidence in their abilities to such a degree that they are not afraid of trying something new. I am not talking about small changes - but moving forward in a radical direction. There are several required steps involved in moving forward with risk:
- Capture a Vision. Do your homework to examine your strengths and weaknesses along with the opportunities and threats presented in the marketplace. With proper team decision-making your entire organization will understand the new vision and successfully execute it.
- Test Your Concept. When Wal-Mart decided to go in the grocery business they experimented with several concepts before finding the one that resonated the most with customers. Contrast this to Kmart when they decided to convert hundreds of Kmart units into the untested concept called Sears Essentials. Customers did not embrace the new concept and now the stores are being converted to a new format at tremendous expense. Use focus groups, test markets, or any one of a dozen other methods to make sure your new concept is correct.
- Deploy Aggressively and Intelligently. David Lloyd George said it best, “do not be afraid to take a big step - you cannot cross a chasm in two small jumps. With a clear vision and a tested concept move aggressively to make the program work before your competitors steal your thunder. Follow a plan and you will expand.
- Evaluate for Improvement. Once enough data is collected you can tweak what you have done to improve the results. Never look at what you have done as being a finished work. In the business world there is no crime in looking at your business as a work in progress.
The difference
One of the world's greatest inventors, Ben Franklin, developed many companies including a library, a post office, a printing business, and much more. We view his greatness in light of his aggressive approach to the world. He was always looking for some way to add value in the American colonies and the new country he helped form. Franklin is no different from you or me in capabilities. But he was different in that he saw life as a series of giant leaps over the chasm of mediocrity.
Labels: Kmart, Strategy, Target, Wal-Mart
¶ 12/11/2007 0 Comments Links to this post
Tuesday, September 4, 2007
Kmart and Sears: Defying Bottom-line Gravity
Every once in awhile someone comes along to rewrites the accepted rules of their business.
Henry Ford rewrote the rules of auto making when he decided to have partially assembled cars move through stationary workers, reversing the accepted way of manufacturing large products.
Consider that Lampert has seriously reduced the number of temporary price reductions, just like Wal-Mart – but with higher entry price points.
Every once in awhile someone comes along to rewrites the accepted rules of their business. Henry Ford rewrote the rules of auto making when he decided to have partially assembled cars move through stationary workers, reversing the accepted way of manufacturing large products.
In 1879, Franklin Woolworth opposed retail rules with his concept of pricing an entire store at a single discounted price – 5 cents. When the store failed to attract customers, closing a few weeks after opening, retail critics said it was proof the concept of a low-priced retail operation would never work.
Woolworth would defy their opinions when he opened a second store later that year, adding a second price, 10 cents. The new store was a hit and led to 1,000s of stores under the Woolworth banner and dozens of copycats.
Today, Eddie Lampert is boggling analysts by completely ignoring the leading retail indicator, comp-store sales (a comparison of sales this year to last year in stores open at least a year), and growing his company anyway! Lampert led Kmart Corporation out of bankruptcy, craftily building a cash reserve large enough to purchase rival Sears. Both companies were losing market share at the time of the merger, leading analysts to comment that Lampert would sell the real estate assets of the new company and then liquidate it. As comp-store sales continued to decline, analysts were positive realty sell-off was the only salvation for the company.
Now four-years later the company continues to produce a steady stream of comp-store decreases, although the double-digit drops have calmed to single digits. Although analysts continue to scratch their heads, Lampert’s once again building a bankroll as profits are up significantly. Lampert’s position is that producing fewer sales at a higher margin is a recipe for success.
Lampert’s secret to success
Lampert secret to success defies another business belief of traditional management. Lampert is running a discount organization with no discount experience. Traditional logic states plainly that someone is unable to run a company without a working knowledge of that industry.
Malcolm Forbes once said, “Education’s purpose is to replace an empty mind with an open mind.” Lampert knew finances, how to generate profits, and how to produce cash reserves. Yet Lampert’s mind was empty to retailing. As he learned from the best minds at Kmart and Sears, Lampert was able to maintain an open mind as a fertile field for developing a strategy to rejuvenate the company.
Malcolm Forbes once said, “Education’s purpose is to replace an empty mind with an open mind.” Lampert knew finances, how to generate profits, and how to produce cash reserves. Yet Lampert’s mind was empty to retailing. As he learned from the best minds at Kmart and Sears, Lampert was able to maintain an open mind as a fertile field for developing a strategy to rejuvenate the company.
His plan, replace low-gross sales with high-gross sales. His formula generates fewer transactions, but still enough transactions to offset expenses. It is almost the exact opposite of the Wal-Mart philosophy. Or is it? Could it be that Lampert is simply refining the Wal-Mart concept?
Consider that Lampert has seriously reduced the number of temporary price reductions, just like Wal-Mart – but with higher entry price points.
Relating Eddie’s success to you
Lampert’s success is only unusual because others do not key into their need for learning. Here are some important points to consider:
- Recognize your shortcomings. Sure you know your products, but do you need help understanding the sales or negotiation process? Perhaps you know how to do your job, but do you have the skills to teach others how to tap into their own talent? Surround yourself with experts.
- Don’t be afraid of admitting you need to know more. Nobody is so smart they cannot learn more or benefit from the fresh viewpoint of another. Set pride aside and find help in the form of a mentor or professional coach.
- Think differently. Sometimes success is simply a matter of turning a deaf ear to the experts and go with you gut. If you try it, you have to believe in yourself or you will give up too soon. Woolworth’s first store failed. He believed he was right and proved himself on the second try. Success takes confidence and time.
Summary
Only time will tell if Lampert is correct – and if he is in the same league as Ford and Woolworth. Regardless, we can all learn from his success and use his lessons for our own benefit.
© 2007 Max Impact, Rochester Hills, MI, USA
¶ 9/04/2007 0 Comments
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© 2007 Max Impact, Rochester Hills, MI, USA
