business news in context, analysis with attitude

Got the following email from an MNB reader:

I am often struck by how often both your column and my own work focus on flags and signals shouting “danger – disruption in progress” while much of the retail environment, suppliers included, seem mostly intent on driving along the same old roads in the same old way.

At the top of the column you mentioned Amazon holding meetings with suppliers aimed at enlisting them in the new economy…highly reminiscent of the tough meetings a few of us remember when Walmart did the same more than thirty-plus years ago, and met the same ambivalence, while retailers were either oblivious, or threatening. The same happened when clubs emerged.

The old order changeth, yielding place to new…

Then in the same column, you mentioned the startling news  that yes, indeed, men shop and cook and by inference, actually eat. And that young men are increasingly digital and purchasing online, which led nicely into the latest set of statistics on the amount of grocery ordering that Prime members do through Amazon.

I have  spent years (way too many I am sure) pointing out how slow companies are to respond and it struck me how many brand managers are still being measured by POS data – which has been woefully incomplete since somewhere around 1990, since it doesn’t include whole swathes of retail change, from clubs to dollar stores, and now to online. It is obvious that we have a slower growth grocery environment, but if looked at completely, not all that slow – it simply isn’t taking place in traditional stores. We use panel data that is inherently incomplete, spending vast sums of money to buy data we KNOW is insufficient, possibly wrong and certainly misleading. And then complain about the budget required to get different data.

The measurements are wrong. And you get what you measure. There, in plain sight, is the primary excuse for the sort of sloppy management thinking that retards change – measuring the wrong result. And using the same old flawed data to repeat the same mistakes every fiscal year until it is too late.

You might as well wonder why traffic is declining on the Silk Road (the original one, thank you), why the trolley car business is in trouble, why gas lamps are no longer in use, why most houses no longer cook over a fireplace or keep their groceries in a root cellar. If you narrow-focus, you miss the whole picture. It is no longer enough to put stuff on shelves, to drop a coupon, to ship cases in dozens that in turn are piled up on pallets that simply create inventory for someone else.

Most companies have enormous installed reliance on traditional routes to market and traditional measurement of that long-gone era.  Many angry people write in to your column to complain that these changes are disruptive, and somehow, if we turn away, it will all stop and go back to the way it was.

No. It won’t. And the oldest best advice I can think of is this: Lead, Follow, Or Get Out Of The Way.

Start by measuring right. Toss the old POS mind-set out of the way and before you reconstruct your business model , reconstruct your management model and your rules for success.  Most companies are already depending for growth on businesses they neither like, nor understand,  nor are well-fitted to serve. But they delay their own adaptation because they still seek success by the old rule, the tyranny of an old spreadsheet mind-set. And do it NOW.

Got a number of emails about the meetings that Amazon has called with suppliers. One MNB reader wrote:

White Cloud  bathroom tissue comes to mind, it used to be a great seller in our stores, Wal-Mart convinced them to sell only to them, taken from traditional supermarkets…now they want to sell to us again…good luck with that..valuable shelf space absorbed by other brands, that promote.

Regarding the brands that might decide to work with Amazon, another MNB reader wrote:

Those items would be OUT of my stores!!!

And, from MNB reader Kevin Mahon:

Let’s not overlook the fact that if Amazon controls the fulfillment, they gain access to all of the purchase behavior of shoppers.

And let's not forget that Amazon has to find ways to justify the money it is spending on trucks, airplanes and boats, as it looks to control more of the distribution business and expand its ecosystem.
KC's View: