http://mix.chimpfeedr.com/4b811-retail retail 2017-12-02T11:54:00+00:00 http://www.chimpfeedr.com/ tag:blogger.com,1999:blog-6106782.post-5484549799781692675 The Smell of Data Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2017-12-02T11:54:00+00:00 Air/Aroma.

So perhaps we can use smell to alert consumers to dodgy websites? An artist and graphic designer, Leanne Wijnsma, has built what is basically an air-defreshener: a hexagonal resin block with a perfume reservoir inside, which connects over Wi-Fi to your computer. When it notices a possible data leak (like the user connecting to an unsecured Wi-Fi network, or browsing a webpage over an unsecure connection) — puff! It releases the smell of data.

James Vincent, What does a data leak smell like? This little device lets you find out (Verge, 31 Aug 2017)

That's all very well, but it only sniffs out the most obvious risks. If you want to smell the actual data leak, you'd need a device that released a data leak fragrance when (or perhaps I should say whenever) your employer or favourite online retailer is hacked. Or maybe a device that sniffed around a corporate website looking for vulnerabilities ...

I'm sure my regular readers don't need me to spell out the flaws in that idea.


Related posts

Pax Technica - On Risk and Security (November 2017)
UK Retail Data Breaches (December 2017)]]> Air/Aroma.

So perhaps we can use smell to alert consumers to dodgy websites? An artist and graphic designer, Leanne Wijnsma, has built what is basically an air-defreshener: a hexagonal resin block with a perfume reservoir inside, which connects over Wi-Fi to your computer. When it notices a possible data leak (like the user connecting to an unsecured Wi-Fi network, or browsing a webpage over an unsecure connection) — puff! It releases the smell of data.

James Vincent, What does a data leak smell like? This little device lets you find out (Verge, 31 Aug 2017)

That's all very well, but it only sniffs out the most obvious risks. If you want to smell the actual data leak, you'd need a device that released a data leak fragrance when (or perhaps I should say whenever) your employer or favourite online retailer is hacked. Or maybe a device that sniffed around a corporate website looking for vulnerabilities ...

I'm sure my regular readers don't need me to spell out the flaws in that idea.


Related posts

Pax Technica - On Risk and Security (November 2017)
UK Retail Data Breaches (December 2017)]]> tag:blogger.com,1999:blog-6106782.post-4211686998343088253 UK Retail Data Breaches Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2017-12-02T10:50:00+00:00

Morrisons (2014)


The High Court has just found Morrisons to be liable for a leak of employee data by a disaffected employee in 2014. (The perpetrator got eight years in jail.) 

http://www.theregister.co.uk/2017/12/01/morrisons_data_leak_ruling/
http://www.bbc.co.uk/news/uk-england-42193502

Sports Direct (2016)


A hacker obtained employee details in September 2016, but Sports Direct failed to communicate the breach to the affected employees.

https://www.theregister.co.uk/2017/02/08/sports_direct_fails_to_inform_staff_over_hack_and_data_breach/

CEX (2017)


Second-hand gadget and video games retailer Cex has said up to two million customers have had their data stolen in an online breach

http://www.bbc.co.uk/news/technology-41095162
https://uk.webuy.com/guidance/

Zomato (2017)


Up to 17 million users affected by data breach at restaurant search platform Zomato

https://www.infosecurity-magazine.com/news/zomato-breach-exposes-17-million/
https://www.zomato.com/blog/security-notice

Tesco Bank (2016)


Cyber thieves steal £2.5m

https://www.theguardian.com/business/2016/nov/08/tesco-bank-cyber-thieves-25m
https://www.theregister.co.uk/2016/11/10/tesco_bank_breach_analysis/
https://www.itproportal.com/features/lessons-from-the-tesco-bank-hack/


Related posts


The Smell of Data (December 2017)

]]>

Morrisons (2014)


The High Court has just found Morrisons to be liable for a leak of employee data by a disaffected employee in 2014. (The perpetrator got eight years in jail.) 

http://www.theregister.co.uk/2017/12/01/morrisons_data_leak_ruling/
http://www.bbc.co.uk/news/uk-england-42193502

Sports Direct (2016)


A hacker obtained employee details in September 2016, but Sports Direct failed to communicate the breach to the affected employees.

https://www.theregister.co.uk/2017/02/08/sports_direct_fails_to_inform_staff_over_hack_and_data_breach/

CEX (2017)


Second-hand gadget and video games retailer Cex has said up to two million customers have had their data stolen in an online breach

http://www.bbc.co.uk/news/technology-41095162
https://uk.webuy.com/guidance/

Zomato (2017)


Up to 17 million users affected by data breach at restaurant search platform Zomato

https://www.infosecurity-magazine.com/news/zomato-breach-exposes-17-million/
https://www.zomato.com/blog/security-notice

Tesco Bank (2016)


Cyber thieves steal £2.5m

https://www.theguardian.com/business/2016/nov/08/tesco-bank-cyber-thieves-25m
https://www.theregister.co.uk/2016/11/10/tesco_bank_breach_analysis/
https://www.itproportal.com/features/lessons-from-the-tesco-bank-hack/


Related posts


The Smell of Data (December 2017)

]]> tag:blogger.com,1999:blog-6106782.post-1464060225198569437 The Price of Everything Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2017-05-05T18:33:00+00:00 #PowerSwitch The relationship between the retailer and the customer can be beset by calculation on both sides. The retailer is trying to extract enough data about the customer to calculate the next best action, while the customer is trying to extract the best deal.

There is nothing new about customers comparing products and prices between neighbouring shops, and merchants selling similar goods can often be found in close proximity in order to attract more customers. (This is especially true for specialist and occasional purchases: in large cities, whole streets or districts may be associated with specific types of shop. London has Denmark Street for musical instruments, Hatton Garden for jewellery, Saville Row for made-to-measure suits, and so on.)

But nowadays the villain, apparently, is eCommerce. As a significant share of the retail business migrates from the high street to the Internet, many retailers are concerned about so-called showrooming. It may seem unfair that a customer can spend loads of time in the high street, wasting the time of the shop assistants and shop-soiling the goods, before purchasing the same goods online at a better price. To add insult to injury, some people not only practice showrooming, but then blog about how guilty it makes them feel.

The assumption here is that the Internet can generally undercut the High Street, and there are several reasons why this assumption is plausible.
  • Internet businesses compete on price rather than service, so the prices must be good.
  • An internet store can provide economies of scale - serving the whole country or region from a single warehouse, instead of needing an outlet in each town.
  • An internet store can offer a much larger range of goods without increasing the cost of inventory - the so-called Long Tail phenomenon
  • An internet store typically has lower overheads - cheaper premises and fewer staff
  • An internet business may be run as a start-up, with less "dead wood". So it is more agile and less bureaucratic. 
However, there are some counterbalancing concerns.
  • The economic and logistical costs of delivery and return can be significant, especially for low-ticket items. With clothing in particular, customers may order the same item in three different sizes, and then return the ones that don't fit.
  • Investors previously poured money into internet businesses, and the early strategic focus was on growth rather than profit. As internet business become more mature, investors will be looking to see some decent returns on their investment, and margins will be pushed up.
  • And then there is differential pricing ...
One of the key differences between traditional stores and online stores is in pricing. Although high street retailers often drop prices to clear stock - for example, supermarkets have elaborate relabelling systems to mark-down groceries before their sell-by date - they do not yet have sophisticated mechanisms for dynamic pricing. Whereas an online retailer can change the prices as often as it wishes, and therefore charge you whatever it thinks you will pay. According to Jerry Useem,
"The price of the headphones Google recommends may depend on how budget-conscious your web history shows you to be."
I heard Ariel Ezrachi talking about this phenomenon at the PowerSwitch conference in Cambridge a few weeks ago. (I have not yet read his new book.)
"There is an assumption is that the internet is a blessing when it comes to competition. Endless choice. Ability to reduce costs to close to zero. etc ... What you see online has very little to do with the ideas we have of market power, market dynamics, etc. everything is artificial. It looks like a regular market, with apples or fish. But because it’s all monitored, it’s not like that at all. What you see online is not a reflection of the market. You see “the Truman Show” — a reality designed just for you, a controlled ecosystem." (via Laura James's liveblog)

In his play Lady Windermere's Fan, Wilde offered the following contrast between the cynic and the sentimentalist.
Lord Darlington: What cynics you fellows are!
Cecil Graham: What is a cynic?
Lord Darlington: A man who knows the price of everything and the value of nothing.
Cecil Graham: And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.

According to one of the participants at the PowerSwitch conference, some eCommerce sites quote higher prices for Apple users, based on the idea that they are less price-sensitive and can afford to pay more. In other words, the cynical Internet regards Apple users as sentimentalists.

If there is an alternative to this calculative thinking, it comes down to reestablishing trust. Perhaps then retailers and consumers alike can avoid an artificial choice between cynicism and sentimentalism.



Emma Brockes, I found something I like in a store. Is it wrong to buy it online for less? (Guardian, 3 May 2017)

Ariel Ezrachi and Maurice Stucke, Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy (Harvard University Press, 2016) - more links via publisher's page

Laura James, Power Switch - Conference Report (31 March 2017)

Joshua Kopstein, Is Amazon Price-Gouging You? (Vocativ, 4 May 2017) via @charlesarthur

Jerry Useem, How Online Shopping Makes Suckers of Us All (Atlantic, May 2017)

Price-bots can collude against consumers (Economist, 6 May 2017)

The Dilemma of Showrooming, (Daniels Fund Ethics Initiative, University of New Mexico)

Related posts: Online pricing practices to be regulated? (October 2009), Predictive Showrooming (December 2012), Showrooming and Multi-Sided Markets (December 2012), Showrooming in the Knowledge Economy (December 2012).]]> #PowerSwitch The relationship between the retailer and the customer can be beset by calculation on both sides. The retailer is trying to extract enough data about the customer to calculate the next best action, while the customer is trying to extract the best deal.

There is nothing new about customers comparing products and prices between neighbouring shops, and merchants selling similar goods can often be found in close proximity in order to attract more customers. (This is especially true for specialist and occasional purchases: in large cities, whole streets or districts may be associated with specific types of shop. London has Denmark Street for musical instruments, Hatton Garden for jewellery, Saville Row for made-to-measure suits, and so on.)

But nowadays the villain, apparently, is eCommerce. As a significant share of the retail business migrates from the high street to the Internet, many retailers are concerned about so-called showrooming. It may seem unfair that a customer can spend loads of time in the high street, wasting the time of the shop assistants and shop-soiling the goods, before purchasing the same goods online at a better price. To add insult to injury, some people not only practice showrooming, but then blog about how guilty it makes them feel.

The assumption here is that the Internet can generally undercut the High Street, and there are several reasons why this assumption is plausible.
  • Internet businesses compete on price rather than service, so the prices must be good.
  • An internet store can provide economies of scale - serving the whole country or region from a single warehouse, instead of needing an outlet in each town.
  • An internet store can offer a much larger range of goods without increasing the cost of inventory - the so-called Long Tail phenomenon
  • An internet store typically has lower overheads - cheaper premises and fewer staff
  • An internet business may be run as a start-up, with less "dead wood". So it is more agile and less bureaucratic. 
However, there are some counterbalancing concerns.
  • The economic and logistical costs of delivery and return can be significant, especially for low-ticket items. With clothing in particular, customers may order the same item in three different sizes, and then return the ones that don't fit.
  • Investors previously poured money into internet businesses, and the early strategic focus was on growth rather than profit. As internet business become more mature, investors will be looking to see some decent returns on their investment, and margins will be pushed up.
  • And then there is differential pricing ...
One of the key differences between traditional stores and online stores is in pricing. Although high street retailers often drop prices to clear stock - for example, supermarkets have elaborate relabelling systems to mark-down groceries before their sell-by date - they do not yet have sophisticated mechanisms for dynamic pricing. Whereas an online retailer can change the prices as often as it wishes, and therefore charge you whatever it thinks you will pay. According to Jerry Useem,
"The price of the headphones Google recommends may depend on how budget-conscious your web history shows you to be."
I heard Ariel Ezrachi talking about this phenomenon at the PowerSwitch conference in Cambridge a few weeks ago. (I have not yet read his new book.)
"There is an assumption is that the internet is a blessing when it comes to competition. Endless choice. Ability to reduce costs to close to zero. etc ... What you see online has very little to do with the ideas we have of market power, market dynamics, etc. everything is artificial. It looks like a regular market, with apples or fish. But because it’s all monitored, it’s not like that at all. What you see online is not a reflection of the market. You see “the Truman Show” — a reality designed just for you, a controlled ecosystem." (via Laura James's liveblog)

In his play Lady Windermere's Fan, Wilde offered the following contrast between the cynic and the sentimentalist.
Lord Darlington: What cynics you fellows are!
Cecil Graham: What is a cynic?
Lord Darlington: A man who knows the price of everything and the value of nothing.
Cecil Graham: And a sentimentalist, my dear Darlington, is a man who sees an absurd value in everything, and doesn’t know the market price of any single thing.

According to one of the participants at the PowerSwitch conference, some eCommerce sites quote higher prices for Apple users, based on the idea that they are less price-sensitive and can afford to pay more. In other words, the cynical Internet regards Apple users as sentimentalists.

If there is an alternative to this calculative thinking, it comes down to reestablishing trust. Perhaps then retailers and consumers alike can avoid an artificial choice between cynicism and sentimentalism.



Emma Brockes, I found something I like in a store. Is it wrong to buy it online for less? (Guardian, 3 May 2017)

Ariel Ezrachi and Maurice Stucke, Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy (Harvard University Press, 2016) - more links via publisher's page

Laura James, Power Switch - Conference Report (31 March 2017)

Joshua Kopstein, Is Amazon Price-Gouging You? (Vocativ, 4 May 2017) via @charlesarthur

Jerry Useem, How Online Shopping Makes Suckers of Us All (Atlantic, May 2017)

Price-bots can collude against consumers (Economist, 6 May 2017)

The Dilemma of Showrooming, (Daniels Fund Ethics Initiative, University of New Mexico)

Related posts: Online pricing practices to be regulated? (October 2009), Predictive Showrooming (December 2012), Showrooming and Multi-Sided Markets (December 2012), Showrooming in the Knowledge Economy (December 2012).]]> tag:blogger.com,1999:blog-6106782.post-3063130259919994642 Inspector Sands to Platform Nine and Three Quarters Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2017-03-09T22:21:00+00:00 Uber's Defeat Device and Denial of Service (March 2017). And on Tuesday, a fat-fingered system admin at AWS managed to take out a significant chunk of the largest platform on the planet, seriously degrading online retail in the Northern Virginia (US-EAST-1) Region. According to one estimate, performance at over half of the top internet retailers was hit by 20 percent or more, and some websites were completely down.

What have we learned from this? Yahoo Finance tells us not to worry.
"The good news: Amazon has addressed the issue, and is working to ensure nothing similar happens again. ... Let’s just hope ... that Amazon doesn’t experience any further issues in the near future."

Other commentators are not so optimistic. For Computer Weekly, this incident
"highlights the risk of running critical systems in the public cloud. Even the most sophisticated cloud IT infrastructure is not infallible."

So perhaps one lesson is not to trust platforms. Or at least not to practice wilful blindness when your chosen platform or cloud provider represents a single point of failure.

One of the myths of cloud, according to Aidan Finn,
"is that you get disaster recovery by default from your cloud vendor (such as Microsoft and Amazon). Everything in the cloud is a utility, and every utility has a price. If you want it, you need to pay for it and deploy it, and this includes a scenario in which a data center burns down and you need to recover. If you didn’t design in and deploy a disaster recovery solution, you’re as cooked as the servers in the smoky data center."

Interestingly, Amazon itself was relatively unaffected by Tuesday's problem. This may have been because they split their deployment across multiple geographical zones. However, as Brian Guy points out, there are significant costs involved in multi-region deployment, as well as data protection issues. He also notes that this question is not (yet) addressed by Amazon's architectural guidelines for AWS users, known as the Well-Architected Framework.

Amazon recently added another pillar to the Well-Architected Framework, namely operational excellence. This includes such practices as performing operations with code: in other words, automating operations as much as possible. Did someone say Fat Finger?



Abel Avram, The AWS Well-Architected Framework Adds Operational Excellence (InfoQ, 25 Nov 2016)

Julie Bort, The massive AWS outage hurt 54 of the top 100 internet retailers — but not Amazon (Business Insider, 1 March 2017)

Aidan Finn, How to Avoid an AWS-Style Outage in Azure (Petri, 6 March 2017)

Brian Guy, Analysis: Rethinking cloud architecture after the outage of Amazon Web Services (GeekWire, 5 March 2017)

Daniel Howley, Why you should still trust Amazon Web Services even though it took down the internet (Yahoo Finance, 6 March 2017)

Chris Mellor, Tuesday's AWS S3-izure exposes Amazon-sized internet bottleneck (The Register, 1 March 2017)

Shaun Nichols, Amazon S3-izure cause: Half the web vanished because an AWS bod fat-fingered a command (The Register, 2 March 2017)

Cliff Saran, AWS outage shows vulnerability of cloud disaster recovery (Computer Weekly, 6 March 2017)]]> Uber's Defeat Device and Denial of Service (March 2017). And on Tuesday, a fat-fingered system admin at AWS managed to take out a significant chunk of the largest platform on the planet, seriously degrading online retail in the Northern Virginia (US-EAST-1) Region. According to one estimate, performance at over half of the top internet retailers was hit by 20 percent or more, and some websites were completely down.

What have we learned from this? Yahoo Finance tells us not to worry.
"The good news: Amazon has addressed the issue, and is working to ensure nothing similar happens again. ... Let’s just hope ... that Amazon doesn’t experience any further issues in the near future."

Other commentators are not so optimistic. For Computer Weekly, this incident
"highlights the risk of running critical systems in the public cloud. Even the most sophisticated cloud IT infrastructure is not infallible."

So perhaps one lesson is not to trust platforms. Or at least not to practice wilful blindness when your chosen platform or cloud provider represents a single point of failure.

One of the myths of cloud, according to Aidan Finn,
"is that you get disaster recovery by default from your cloud vendor (such as Microsoft and Amazon). Everything in the cloud is a utility, and every utility has a price. If you want it, you need to pay for it and deploy it, and this includes a scenario in which a data center burns down and you need to recover. If you didn’t design in and deploy a disaster recovery solution, you’re as cooked as the servers in the smoky data center."

Interestingly, Amazon itself was relatively unaffected by Tuesday's problem. This may have been because they split their deployment across multiple geographical zones. However, as Brian Guy points out, there are significant costs involved in multi-region deployment, as well as data protection issues. He also notes that this question is not (yet) addressed by Amazon's architectural guidelines for AWS users, known as the Well-Architected Framework.

Amazon recently added another pillar to the Well-Architected Framework, namely operational excellence. This includes such practices as performing operations with code: in other words, automating operations as much as possible. Did someone say Fat Finger?



Abel Avram, The AWS Well-Architected Framework Adds Operational Excellence (InfoQ, 25 Nov 2016)

Julie Bort, The massive AWS outage hurt 54 of the top 100 internet retailers — but not Amazon (Business Insider, 1 March 2017)

Aidan Finn, How to Avoid an AWS-Style Outage in Azure (Petri, 6 March 2017)

Brian Guy, Analysis: Rethinking cloud architecture after the outage of Amazon Web Services (GeekWire, 5 March 2017)

Daniel Howley, Why you should still trust Amazon Web Services even though it took down the internet (Yahoo Finance, 6 March 2017)

Chris Mellor, Tuesday's AWS S3-izure exposes Amazon-sized internet bottleneck (The Register, 1 March 2017)

Shaun Nichols, Amazon S3-izure cause: Half the web vanished because an AWS bod fat-fingered a command (The Register, 2 March 2017)

Cliff Saran, AWS outage shows vulnerability of cloud disaster recovery (Computer Weekly, 6 March 2017)]]> tag:blogger.com,1999:blog-7426899.post-3200513742480292762 Search versus discovery Richard Veryard https://plus.google.com/107891026040206160712 noreply@blogger.com 2014-04-22T08:39:00+00:00
http://sethgodin.typepad.com/seths_blog/2014/04/search-vs-discovery.html

Retailers need to help customers to DISCOVER things they didn't know they wanted, not just SEARCH for things they already knew they wanted.

Just as librarians (and knowledge management websites) need to help readers to discover books and other reading material they didn't know they wanted. And not just tell them (as Google and Amazon do) the books that everyone else has already read.]]>
http://sethgodin.typepad.com/seths_blog/2014/04/search-vs-discovery.html

Retailers need to help customers to DISCOVER things they didn't know they wanted, not just SEARCH for things they already knew they wanted.

Just as librarians (and knowledge management websites) need to help readers to discover books and other reading material they didn't know they wanted. And not just tell them (as Google and Amazon do) the books that everyone else has already read.]]> tag:blogger.com,1999:blog-6106782.post-3250489855449399072 On Customer Insight Richard Veryard https://plus.google.com/107891026040206160712 noreply@blogger.com 2014-02-26T14:40:00+00:00
On Customer Insight from Richard Veryard
]]>
On Customer Insight from Richard Veryard
]]> tag:blogger.com,1999:blog-6106782.post-4193927093917665362 Showrooming and Multi-sided Markets Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2012-12-04T11:23:00+00:00
To complete the story, there may be another class of customer, who is happy to buy the ex-demonstration product from the first retailer at a discounted price. Thus there are five distinct roles in this game: the product supplier, the first and second retailer, the first and second customer. (In addition, if the customers are using their mobile phones in the stores, we should add the players in the mobile ecosystem.)

The earliest manifestation of this I can remember was buying records. You could listen to an LP in the record store, and then get a pristine copy (without the shop assistant's fingerprints) by mail order from a company appropriately called "Virgin".

Many retailers believe they lose out from this phenomenon, and some have attempted to prevent it. (Ever wondered why you don't get a good cellphone signal inside a large store?) Earlier this year, both Target and Wal-Mart decided to stop stocking Amazon devices, although continuing to stock Apple devices. More recently, Wal-Mart has changed its position, and now claims to embrace showrooming.

By singling out Amazon, Target and Wal-Mart were making it clear that it is Amazon's role as a retailer that they regard as a competitive threat. Although Apple also sells its devices online, it is presumably not regarded as an equivalent threat. In which case, banning Amazon products looks like a gesture of despair rather than an effective tactic.

Thinking of this as a multi-sided market prompts us to look at the direct and indirect flows of value between the players. It is as if the first retailer is providing an unpaid "service" to the second retailer, and the first customer is providing an unpaid "service" to the second customer. At present these are not genuine services, but it is possible to conceive of an ecosystem in which the product supplier or second retailer paid some form of commission to the first retailer. For all I know, that may already happen in some sectors.

Wal-Mart hopes to control showrooming by encouraging its customers to use its own mobile app, which attempts to steer customers towards its own online store. I wonder how many customers will accept this control, and how many will take the trouble to resist it.

Some large High Street retailers seem to have given up the idea of stocking goods: if you like something on display, you can order it. This has long been true for large furniture items such as beds, but is becoming more common for smaller items, as Simon Heffer complains.

Meanwhile, showrooming can work both ways. Last week I ordered a book from my local bookshop, having previously looked it up on Amazon. It was 5pm Friday when I placed the order, and they phoned me at 11am on Saturday to tell me it had arrived. (If I'd ordered it from Amazon, paying extra for 48 hour delivery, when would it have arrived? Monday, Tuesday?) So that's showrooming in reverse.

Finally, instead of selling individual products, the showroom itself can become the experience. @KBlazeCarlson sees IKEA as a prime example, and quotes Alan Penn, professor of Architectural and Urban Computing at UCL, describing the IKEA experience as "psychologically disruptive". "Part of their strategy is to take you past everything," he says. "They get you to buy stuff you really hadn’t intended on. And that, I think, is quite a trick."

Chris Petersen adds, "Instead of product centric merchandising, IKEA’s showroom is perhaps the ultimate place merchandising, where the consumer solution is focused on the most personalized dimension – the consumer’s own lifestyle and living space." Whether IKEA can replicate this experience online in the virtual world, as suggested in Patrick Nelson's piece, is another matter.


Kathryn Blaze Carlson, Enter the maze: Ikea, Costco, other retailers know how to get you to buy more (National Post, June 2012)

Dani Deahl, Amazon granted a patent that prevents in-store shoppers from online price checking (The Verge, 15 June 2017)

Simon Heffer, My futile hunt for a lamp in John Lewis reveals why the High Street is doomed (Daily Mail 15 January 2013)

Brett Molina, Is 'showrooming' behind Target move to drop Kindle? (USA Today, May 2012)

Patrick Nelson, Brick-and-Mortar's Showrooming Scourge (E-Commerce Times, Nov 2012) via First Insight

Sarah Perez, Amazon, now a physical retailer too, is granted an anti-showrooming patent (TechCrunch, 16 June 2017)

Chris Petersen, To beat showrooming … change the showroom! (IMS results count, June 2012)

Marcus Wohlsen, Walmart.com CEO: We Embrace Showrooming (Wired, Nov 2012)

Amazon's Showrooming Effect And Quick Growth Threaten Wal-Mart (Forbes, Sept 2012)

Related posts: Showrooming in the Knowledge Economy (December 2012), Predictive Showrooming (December 2012)

Updated 16 June 2017]]>
To complete the story, there may be another class of customer, who is happy to buy the ex-demonstration product from the first retailer at a discounted price. Thus there are five distinct roles in this game: the product supplier, the first and second retailer, the first and second customer. (In addition, if the customers are using their mobile phones in the stores, we should add the players in the mobile ecosystem.)

The earliest manifestation of this I can remember was buying records. You could listen to an LP in the record store, and then get a pristine copy (without the shop assistant's fingerprints) by mail order from a company appropriately called "Virgin".

Many retailers believe they lose out from this phenomenon, and some have attempted to prevent it. (Ever wondered why you don't get a good cellphone signal inside a large store?) Earlier this year, both Target and Wal-Mart decided to stop stocking Amazon devices, although continuing to stock Apple devices. More recently, Wal-Mart has changed its position, and now claims to embrace showrooming.

By singling out Amazon, Target and Wal-Mart were making it clear that it is Amazon's role as a retailer that they regard as a competitive threat. Although Apple also sells its devices online, it is presumably not regarded as an equivalent threat. In which case, banning Amazon products looks like a gesture of despair rather than an effective tactic.

Thinking of this as a multi-sided market prompts us to look at the direct and indirect flows of value between the players. It is as if the first retailer is providing an unpaid "service" to the second retailer, and the first customer is providing an unpaid "service" to the second customer. At present these are not genuine services, but it is possible to conceive of an ecosystem in which the product supplier or second retailer paid some form of commission to the first retailer. For all I know, that may already happen in some sectors.

Wal-Mart hopes to control showrooming by encouraging its customers to use its own mobile app, which attempts to steer customers towards its own online store. I wonder how many customers will accept this control, and how many will take the trouble to resist it.

Some large High Street retailers seem to have given up the idea of stocking goods: if you like something on display, you can order it. This has long been true for large furniture items such as beds, but is becoming more common for smaller items, as Simon Heffer complains.

Meanwhile, showrooming can work both ways. Last week I ordered a book from my local bookshop, having previously looked it up on Amazon. It was 5pm Friday when I placed the order, and they phoned me at 11am on Saturday to tell me it had arrived. (If I'd ordered it from Amazon, paying extra for 48 hour delivery, when would it have arrived? Monday, Tuesday?) So that's showrooming in reverse.

Finally, instead of selling individual products, the showroom itself can become the experience. @KBlazeCarlson sees IKEA as a prime example, and quotes Alan Penn, professor of Architectural and Urban Computing at UCL, describing the IKEA experience as "psychologically disruptive". "Part of their strategy is to take you past everything," he says. "They get you to buy stuff you really hadn’t intended on. And that, I think, is quite a trick."

Chris Petersen adds, "Instead of product centric merchandising, IKEA’s showroom is perhaps the ultimate place merchandising, where the consumer solution is focused on the most personalized dimension – the consumer’s own lifestyle and living space." Whether IKEA can replicate this experience online in the virtual world, as suggested in Patrick Nelson's piece, is another matter.


Kathryn Blaze Carlson, Enter the maze: Ikea, Costco, other retailers know how to get you to buy more (National Post, June 2012)

Dani Deahl, Amazon granted a patent that prevents in-store shoppers from online price checking (The Verge, 15 June 2017)

Simon Heffer, My futile hunt for a lamp in John Lewis reveals why the High Street is doomed (Daily Mail 15 January 2013)

Brett Molina, Is 'showrooming' behind Target move to drop Kindle? (USA Today, May 2012)

Patrick Nelson, Brick-and-Mortar's Showrooming Scourge (E-Commerce Times, Nov 2012) via First Insight

Sarah Perez, Amazon, now a physical retailer too, is granted an anti-showrooming patent (TechCrunch, 16 June 2017)

Chris Petersen, To beat showrooming … change the showroom! (IMS results count, June 2012)

Marcus Wohlsen, Walmart.com CEO: We Embrace Showrooming (Wired, Nov 2012)

Amazon's Showrooming Effect And Quick Growth Threaten Wal-Mart (Forbes, Sept 2012)

Related posts: Showrooming in the Knowledge Economy (December 2012), Predictive Showrooming (December 2012)

Updated 16 June 2017]]> tag:blogger.com,1999:blog-1254315679163990153.post-5094374454099356285 The Science of Retail Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2012-04-18T15:09:00+00:00 #orgintelligence Liz McShane of @PortlandDesign tells @pollycurtis why Tesco's star has waned.

"Tesco has taken its eye off the ball for some time now, focusing more on the science of retail rather than the emotion of it. By that we mean the prioritisation of the loyalty card programme and harvesting customer data, which has lead to the fundamentals of good service being neglected, for example the first thing you are asked at the check-out is for your loyalty card, rather than a simple (but appreciated) hello. ... Reliance on discounts as a point of differentiation has in turn neglected the in-store experience."
Polly Curtis, Why are we falling out of love with Tesco? Guardian, 18 April 2012

In the past, I have praised Tesco for its mastery of the science of retail, and this is certainly one aspect of its organizational intelligence. This included the following elements.

  • The Loyalty Card innovation led to the creation of a new data class called Customer. (Retailers previously had no way of recognizing a customer as "the same again" - which is a fundamental requirement for a data class).
  • The collection and analysis of very large quantities of customer purchasing behaviour.
  • The planning and execution of very large numbers of pricing and marketing experiments, such as special offers.
  • Optimizing prices and promotions based on feedback.
In the old days, retailers ran special offers for a number of reasons.
  • To shift surplus inventory (either their own or further up the supply chain)
  • As loss leaders, to get customers into the store.
  • To attack other retailers.
All of these reasons are still valid, but we can now add a further reason.
  • To differentiate customer behaviour - e.g. testing the elasticity of demand for different products for different customer segments.

Many companies collect large quantities of data, but few companies seemed to be able to use the data as effectively and profitably as Tesco. Clearly this is not just about the IT systems but about integrating sophisticated management information and analytics into the business process. This is a big part of my Organizational Intelligence story.

And as Alan Mitchell explains, Tesco's Clubcard has benefited from a unique combination of favourable attributes, which other retailers cannot duplicate. Luck or intelligence?

But this must now be balanced against Tesco's neglect of other success factors, which several of Polly Curtis's correspondents have identified. It now becomes clear that Tesco was failing to respond to a number of other weak signals, and has fallen behind its competitors in some areas. Responding appropriately to weak signals is another key part of the Organizational Intelligence story.

Liz McShane seems to imply that Tesco's success in one area (loyalty card programme, data harvesting and differentiation) was a cause of its neglect of other success factors. What could explain this neglect? So perhaps Tesco only has a finite amount of organizational intelligence, and deploying it in one area means that it is not available in other areas. Or perhaps Tesco's success in one area made it complacent in other areas.

But instead of just attributing the shift in fortunes solely to neglect on Tesco's part, we could also explain it by changing circumstances, which even a good company might be unable to anticipate. So perhaps customers might be starting to become aware/wary of Tesco's cleverness - thanks in part to media coverage, as well as such anecdotes as pregnant women receiving targeted marketing before anyone else knew. This would either mean that this form of intelligence has diminishing returns, or that it requires continual leaps in intelligence to keep one step ahead of customer resistance.

Some commentators have seen the recent change of CEO as a proximate cause for Tesco's latest results, but I doubt that it will have made much difference, not yet at least. For many years, Sir Terry Leahy was one of the most respected CEOs in the UK; but then so (for a time) was Sir Fred Goodwin. We shouldn't confuse public reputation with real effectiveness, and we shouldn't be in any haste to assess the true contribution of any individual to a large company. In any case, the personality of the CEO may only have a marginal effect on organizational intelligence of the whole enterprise.

Nevertheless, in his Wikipedia entry, Sir Terry Leahy is credited with devising and implementing the Tesco Clubcard loyalty program "and also successfully monitoring the shopping habits, movements, and political opinions of Clubcard holders". Leahy only stood down as CEO in March 2011, so it is a bit unfair to blame his successor if it turns out that the overwhelming success of Clubcard programme has masked under-investment in other areas.

Some commentators have also noted that Leahy's successor, Philip Clarke, had been CIO of Tesco, although he did not have an IT background.

After graduating from Liverpool University with a degree in economics he joined the Tesco Management Training Programme which provided him with a perfect platform to work his way to the top. In 1998 he was appointed to the board with responsibility for the supply chain and a year later information technology was added to his brief. ... Six years into the role, Mr Clarke then became responsible for the businesses outside the UK, leading Tesco's entry into the huge markets of India and China.
http://www.bbc.co.uk/news/business-13114113

My interpretation of this series of appointments is that the Tesco board (including Leahy and Clarke) saw supply chain, IT and international as the strategic capabilities for Tesco, and this may be a good indicator of Tesco's present strengths and weaknesses.

It is however worth pointing out that Tesco's profits have only fallen by 1%. Although this may be an unwelcome surprise for Tesco shareholders and senior management (especially as the stock market generally overreacts to this kind of news), it hardly signals the end of the road for Tesco just yet.


Rachel Shabi, The card up their sleeve (Guardian, 19 July 2003)

Glynn Davies, How Tesco became Britain's top supermarket (MoneyWeek, 9 May 2007)

Alan Mitchell, Why Tesco Clubcard is a dead end (Marketing Magazine, 16 April 2010)

Philip Clarke, Retail is detail: Tesco boss Philip Clarke explains new retail strategy (BBC Today, 18 April 2012)

Subsequent link

Zoe Wood, Five problems for Tesco's new boss to deal with (Guardian, 21 July 2014)]]> #orgintelligence Liz McShane of @PortlandDesign tells @pollycurtis why Tesco's star has waned.

"Tesco has taken its eye off the ball for some time now, focusing more on the science of retail rather than the emotion of it. By that we mean the prioritisation of the loyalty card programme and harvesting customer data, which has lead to the fundamentals of good service being neglected, for example the first thing you are asked at the check-out is for your loyalty card, rather than a simple (but appreciated) hello. ... Reliance on discounts as a point of differentiation has in turn neglected the in-store experience."
Polly Curtis, Why are we falling out of love with Tesco? Guardian, 18 April 2012

In the past, I have praised Tesco for its mastery of the science of retail, and this is certainly one aspect of its organizational intelligence. This included the following elements.

  • The Loyalty Card innovation led to the creation of a new data class called Customer. (Retailers previously had no way of recognizing a customer as "the same again" - which is a fundamental requirement for a data class).
  • The collection and analysis of very large quantities of customer purchasing behaviour.
  • The planning and execution of very large numbers of pricing and marketing experiments, such as special offers.
  • Optimizing prices and promotions based on feedback.
In the old days, retailers ran special offers for a number of reasons.
  • To shift surplus inventory (either their own or further up the supply chain)
  • As loss leaders, to get customers into the store.
  • To attack other retailers.
All of these reasons are still valid, but we can now add a further reason.
  • To differentiate customer behaviour - e.g. testing the elasticity of demand for different products for different customer segments.

Many companies collect large quantities of data, but few companies seemed to be able to use the data as effectively and profitably as Tesco. Clearly this is not just about the IT systems but about integrating sophisticated management information and analytics into the business process. This is a big part of my Organizational Intelligence story.

And as Alan Mitchell explains, Tesco's Clubcard has benefited from a unique combination of favourable attributes, which other retailers cannot duplicate. Luck or intelligence?

But this must now be balanced against Tesco's neglect of other success factors, which several of Polly Curtis's correspondents have identified. It now becomes clear that Tesco was failing to respond to a number of other weak signals, and has fallen behind its competitors in some areas. Responding appropriately to weak signals is another key part of the Organizational Intelligence story.

Liz McShane seems to imply that Tesco's success in one area (loyalty card programme, data harvesting and differentiation) was a cause of its neglect of other success factors. What could explain this neglect? So perhaps Tesco only has a finite amount of organizational intelligence, and deploying it in one area means that it is not available in other areas. Or perhaps Tesco's success in one area made it complacent in other areas.

But instead of just attributing the shift in fortunes solely to neglect on Tesco's part, we could also explain it by changing circumstances, which even a good company might be unable to anticipate. So perhaps customers might be starting to become aware/wary of Tesco's cleverness - thanks in part to media coverage, as well as such anecdotes as pregnant women receiving targeted marketing before anyone else knew. This would either mean that this form of intelligence has diminishing returns, or that it requires continual leaps in intelligence to keep one step ahead of customer resistance.

Some commentators have seen the recent change of CEO as a proximate cause for Tesco's latest results, but I doubt that it will have made much difference, not yet at least. For many years, Sir Terry Leahy was one of the most respected CEOs in the UK; but then so (for a time) was Sir Fred Goodwin. We shouldn't confuse public reputation with real effectiveness, and we shouldn't be in any haste to assess the true contribution of any individual to a large company. In any case, the personality of the CEO may only have a marginal effect on organizational intelligence of the whole enterprise.

Nevertheless, in his Wikipedia entry, Sir Terry Leahy is credited with devising and implementing the Tesco Clubcard loyalty program "and also successfully monitoring the shopping habits, movements, and political opinions of Clubcard holders". Leahy only stood down as CEO in March 2011, so it is a bit unfair to blame his successor if it turns out that the overwhelming success of Clubcard programme has masked under-investment in other areas.

Some commentators have also noted that Leahy's successor, Philip Clarke, had been CIO of Tesco, although he did not have an IT background.

After graduating from Liverpool University with a degree in economics he joined the Tesco Management Training Programme which provided him with a perfect platform to work his way to the top. In 1998 he was appointed to the board with responsibility for the supply chain and a year later information technology was added to his brief. ... Six years into the role, Mr Clarke then became responsible for the businesses outside the UK, leading Tesco's entry into the huge markets of India and China.
http://www.bbc.co.uk/news/business-13114113

My interpretation of this series of appointments is that the Tesco board (including Leahy and Clarke) saw supply chain, IT and international as the strategic capabilities for Tesco, and this may be a good indicator of Tesco's present strengths and weaknesses.

It is however worth pointing out that Tesco's profits have only fallen by 1%. Although this may be an unwelcome surprise for Tesco shareholders and senior management (especially as the stock market generally overreacts to this kind of news), it hardly signals the end of the road for Tesco just yet.


Rachel Shabi, The card up their sleeve (Guardian, 19 July 2003)

Glynn Davies, How Tesco became Britain's top supermarket (MoneyWeek, 9 May 2007)

Alan Mitchell, Why Tesco Clubcard is a dead end (Marketing Magazine, 16 April 2010)

Philip Clarke, Retail is detail: Tesco boss Philip Clarke explains new retail strategy (BBC Today, 18 April 2012)

Subsequent link

Zoe Wood, Five problems for Tesco's new boss to deal with (Guardian, 21 July 2014)]]> tag:blogger.com,1999:blog-6106782.post-7536865038336238404 Generalization as Business Strategy Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2010-09-06T12:52:00+00:00 entarch @BBCRadio4 Just listening to a business story on the radio: the music retailer HMV is now going to be selling clothes from its flagship Oxford Street store. Of course this kind of thing is nothing new - retailers have always tried to diversify, and there are clothes shops in Oxford Street that are trying to sell CDs, while large retail chains that started as grocery stores now sell books, clothing, computers, mobile phones and furniture, as well as financial services.

For many enterprise architects, this kind of diversification strategy seems like a "no-brainer". If you have a robust retail process, together with the assets and infrastructure to support the process, then surely it makes sense to make as much use of the process as you can.

But successful diversification is by no means a "no-brainer" (how I despise that term and its implications), but requires careful consideration and planning. This kind of planning should be meat and drink for enterprise architects, but not if they imagine that the decision follows automatically from some abstract process model.

So what models and techniques would be relevant to support an intelligent diversification strategy? And how comfortable are enterprise architects with using these models and techniques to support business decision-making?

These are questions I've looked at before on this blog (see the generic v specific category) and will certainly look at again. Meanwhile, I'd welcome your ideas.]]> entarch @BBCRadio4 Just listening to a business story on the radio: the music retailer HMV is now going to be selling clothes from its flagship Oxford Street store. Of course this kind of thing is nothing new - retailers have always tried to diversify, and there are clothes shops in Oxford Street that are trying to sell CDs, while large retail chains that started as grocery stores now sell books, clothing, computers, mobile phones and furniture, as well as financial services.

For many enterprise architects, this kind of diversification strategy seems like a "no-brainer". If you have a robust retail process, together with the assets and infrastructure to support the process, then surely it makes sense to make as much use of the process as you can.

But successful diversification is by no means a "no-brainer" (how I despise that term and its implications), but requires careful consideration and planning. This kind of planning should be meat and drink for enterprise architects, but not if they imagine that the decision follows automatically from some abstract process model.

So what models and techniques would be relevant to support an intelligent diversification strategy? And how comfortable are enterprise architects with using these models and techniques to support business decision-making?

These are questions I've looked at before on this blog (see the generic v specific category) and will certainly look at again. Meanwhile, I'd welcome your ideas.]]> tag:blogger.com,1999:blog-6106782.post-924410372997164934 Two Second Advantage Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2010-05-28T11:04:00+00:00

advantage means something to business

The first reason is that it actually means something to the business, unlike the widely misunderstood technical term “real-time”. One company that is currently boasting “real-time” performance is SAP, which claims that its in-memory databases will result in analytics that are “really in real-time”. Larry Dignam quotes Hasso Plattner as follows. “In analytics, there’s theoretically no limitation on what you can analyze and at what level of detail. (In-memory databases) mean reports on a daily basis, hourly basis.” [ZDnet] @davidsprott calls this In-memory madness. Even if an hourly or daily report counted as “real-time” (which it doesn't), this kind of technical wizardry doesn't make any sense to the business.

On a Linked-In discussion thread recently, I've seen vendors excusing their misuse of the term "real-time" (to describe software that isn't strictly, or sometimes even remotely, real-time) by claiming that the meaning of technical terms evolve over time. Oh yeah, very convenient. But we shouldn't allow vendors to fudge perfectly good technical terms for their own marketing purposes, any more than we should tolerate car manufacturers self-interestedly redefining the word "friction".

(In The 2 second advantage...the 2 culture disadvantage? Vinnie Mirchandani praises TIBCO executives for being able to talk business, and contrasts them with the IT analysts in the expo hall, with a special dig at Gartner.)

Unfortunately, TIBCO is not content with the "two second advantage" slogan, and we find TIBCO CEO Vivek Ranadivé over-egging the pudding by introducing some additional notions including Enterprise 3.0. Transcript of HCL keynote by TIBCO CEO Vivek Ranadive (April 2010). For @neilwd "Enterprise 3.0 ... is the sound of a company trying too hard" (TIBCO, Enterprise 3.0 and the two-second advantage, May 2010. See also Tibco’s Hits and Misses (Ovum, May 2010).

advantage is relative

The second reason I like the phrase "Two Second Advantage" is that it focuses our attention on the business advantage - not of raw speed but of getting there first. If you are a speculator who judges that some asset is overvalued or undervalued, the way to make money from this judgement is to buy or sell and then wait for other speculators to arrive at the same judgement. Being just ahead of the pack is actually more profitable than being a long way ahead, because you don't have to wait so long.

And although simple decisions can be taken quickly, complex decisions need time for understanding. (See my presentation on Mastering Time.)With complex decision-making, it's about spending just enough time to process just enough information to make a good enough judgement.

Ranadivé also talks about two trends - the increasing volume of data and the diminishing half-life. (In physics, the concept of "half-life" suggests a long tail of residual value - just as a radioactive sample will always remain somewhat radioactive, so the value of data never reaches zero.)

But as @neilwd points out, these trends don't necessarily refer to the same kinds of data, especially if we measure data volumes in terms of physical storage, since these volumes are dominated by email attachments and rich media. Maybe we need to find a way of measuring data volumes in terms of information content ("a difference that makes a difference"): as the cost of data transmission and storage continues to get smaller, it is not the number of megabytes but the number of separate items (giving managers the experience of being overloaded with information) that really matters.

Even if we limit ourselves to traditional data, the relationship between data volumes and response speed is not as simple as all that. Let's look at a specific example.

If a retail store gives a hand-held scanning device to the customer and/or places electronic tags on all the goods, it can collect a much higher volume of data about the customer's behaviour - not merely the items that the customer takes to the check-out but also the items that the customer returns to the shelf. As technology becomes cheaper, this enables a huge increase in the volume and granularity of the available data, collected while the customer is still shopping, and therefore the retailer actually has more time to use the data before the customer leaves the store.

For example, you might infer from the customer's browsing behaviour that she is looking for her favourite brand of pasta sauce. The shelf is empty, but there's a new box just being unloaded from a truck at the back of the store. Find a way of getting a jar to the customer before she reaches the checkout, and there's your two second advantage.]]>

advantage means something to business

The first reason is that it actually means something to the business, unlike the widely misunderstood technical term “real-time”. One company that is currently boasting “real-time” performance is SAP, which claims that its in-memory databases will result in analytics that are “really in real-time”. Larry Dignam quotes Hasso Plattner as follows. “In analytics, there’s theoretically no limitation on what you can analyze and at what level of detail. (In-memory databases) mean reports on a daily basis, hourly basis.” [ZDnet] @davidsprott calls this In-memory madness. Even if an hourly or daily report counted as “real-time” (which it doesn't), this kind of technical wizardry doesn't make any sense to the business.

On a Linked-In discussion thread recently, I've seen vendors excusing their misuse of the term "real-time" (to describe software that isn't strictly, or sometimes even remotely, real-time) by claiming that the meaning of technical terms evolve over time. Oh yeah, very convenient. But we shouldn't allow vendors to fudge perfectly good technical terms for their own marketing purposes, any more than we should tolerate car manufacturers self-interestedly redefining the word "friction".

(In The 2 second advantage...the 2 culture disadvantage? Vinnie Mirchandani praises TIBCO executives for being able to talk business, and contrasts them with the IT analysts in the expo hall, with a special dig at Gartner.)

Unfortunately, TIBCO is not content with the "two second advantage" slogan, and we find TIBCO CEO Vivek Ranadivé over-egging the pudding by introducing some additional notions including Enterprise 3.0. Transcript of HCL keynote by TIBCO CEO Vivek Ranadive (April 2010). For @neilwd "Enterprise 3.0 ... is the sound of a company trying too hard" (TIBCO, Enterprise 3.0 and the two-second advantage, May 2010. See also Tibco’s Hits and Misses (Ovum, May 2010).

advantage is relative

The second reason I like the phrase "Two Second Advantage" is that it focuses our attention on the business advantage - not of raw speed but of getting there first. If you are a speculator who judges that some asset is overvalued or undervalued, the way to make money from this judgement is to buy or sell and then wait for other speculators to arrive at the same judgement. Being just ahead of the pack is actually more profitable than being a long way ahead, because you don't have to wait so long.

And although simple decisions can be taken quickly, complex decisions need time for understanding. (See my presentation on Mastering Time.)With complex decision-making, it's about spending just enough time to process just enough information to make a good enough judgement.

Ranadivé also talks about two trends - the increasing volume of data and the diminishing half-life. (In physics, the concept of "half-life" suggests a long tail of residual value - just as a radioactive sample will always remain somewhat radioactive, so the value of data never reaches zero.)

But as @neilwd points out, these trends don't necessarily refer to the same kinds of data, especially if we measure data volumes in terms of physical storage, since these volumes are dominated by email attachments and rich media. Maybe we need to find a way of measuring data volumes in terms of information content ("a difference that makes a difference"): as the cost of data transmission and storage continues to get smaller, it is not the number of megabytes but the number of separate items (giving managers the experience of being overloaded with information) that really matters.

Even if we limit ourselves to traditional data, the relationship between data volumes and response speed is not as simple as all that. Let's look at a specific example.

If a retail store gives a hand-held scanning device to the customer and/or places electronic tags on all the goods, it can collect a much higher volume of data about the customer's behaviour - not merely the items that the customer takes to the check-out but also the items that the customer returns to the shelf. As technology becomes cheaper, this enables a huge increase in the volume and granularity of the available data, collected while the customer is still shopping, and therefore the retailer actually has more time to use the data before the customer leaves the store.

For example, you might infer from the customer's browsing behaviour that she is looking for her favourite brand of pasta sauce. The shelf is empty, but there's a new box just being unloaded from a truck at the back of the store. Find a way of getting a jar to the customer before she reaches the checkout, and there's your two second advantage.]]> tag:blogger.com,1999:blog-6106782.post-7074477114174603585 From Espresso to Instant Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2009-02-17T22:50:00+00:00 Staying Real in an Instant. Starbucks will be selling shots of instant coffee, for under a dollar a cup. The UK price is said to be around 60p.

Some people may have thought that "espresso" was the Italian word word for speed. (It isn't - it means "pressed".) So what could be faster than express coffee? Instant coffee!

Of course the word "instant" isn't about getting the coffee more quickly either, it is about doing away with all that fancy machinery, in whose use Starbucks makes such a charade of training its baristas. (A year ago, Schultz ordered all US stores to close for a three-hour training session "as part of an effort to improve coffee quality and revive the chain's flagging fortunes" [Guardian, 26 Feb 2008].)

Shultz now claims to be responding to the increasing mobility of consumers. "Imagine a cup of Starbucks VIA Ready Brew on a mountaintop" he says, as if willing us to imagine millions of Starbucks customers on some remote and implausible trek.

But clearly his real interest is selling mass market coffee. He hopes that the Starbucks instant coffee will be not only better-tasting but also "paradigm-changing" (whatever that means), and hopes "to turn on a whole new set of coffee drinkers to the Starbucks brand". But the obvious risk is that the old set will be turned off. He acknowledges that this move is a gamble (he calls it "a considered bet"), and expects "to learn a lot ... over the coming weeks". You bet.

In what sense does this count as a new business model? Starbucks already sells ground coffee and coffee beans in supermarkets across the USA. Many rival coffee purveyors have already shifted to the Gillette model, in which the coffee machines are sold cheap or practically given away, and you make your money selling overpriced pods of coffee.

The challenge faced by Starbucks is not choosing one business model, but attempting to combine two or three different (and possibly incompatible) business models at the same time. Such composition faces questions of cross-subsidy, brand dilution or erosion. Are there any reliable rules or patterns governing the interoperability (compatibility and composition) of business models?

See also
Update
]]> Staying Real in an Instant. Starbucks will be selling shots of instant coffee, for under a dollar a cup. The UK price is said to be around 60p.

Some people may have thought that "espresso" was the Italian word word for speed. (It isn't - it means "pressed".) So what could be faster than express coffee? Instant coffee!

Of course the word "instant" isn't about getting the coffee more quickly either, it is about doing away with all that fancy machinery, in whose use Starbucks makes such a charade of training its baristas. (A year ago, Schultz ordered all US stores to close for a three-hour training session "as part of an effort to improve coffee quality and revive the chain's flagging fortunes" [Guardian, 26 Feb 2008].)

Shultz now claims to be responding to the increasing mobility of consumers. "Imagine a cup of Starbucks VIA Ready Brew on a mountaintop" he says, as if willing us to imagine millions of Starbucks customers on some remote and implausible trek.

But clearly his real interest is selling mass market coffee. He hopes that the Starbucks instant coffee will be not only better-tasting but also "paradigm-changing" (whatever that means), and hopes "to turn on a whole new set of coffee drinkers to the Starbucks brand". But the obvious risk is that the old set will be turned off. He acknowledges that this move is a gamble (he calls it "a considered bet"), and expects "to learn a lot ... over the coming weeks". You bet.

In what sense does this count as a new business model? Starbucks already sells ground coffee and coffee beans in supermarkets across the USA. Many rival coffee purveyors have already shifted to the Gillette model, in which the coffee machines are sold cheap or practically given away, and you make your money selling overpriced pods of coffee.

The challenge faced by Starbucks is not choosing one business model, but attempting to combine two or three different (and possibly incompatible) business models at the same time. Such composition faces questions of cross-subsidy, brand dilution or erosion. Are there any reliable rules or patterns governing the interoperability (compatibility and composition) of business models?

See also
Update
]]> tag:blogger.com,1999:blog-7426899.post-5653401432467715803 Asda versus Bloomsbury Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2007-07-17T08:56:00+00:00 extract from POSIWID blog
Following my earlier post on Lost Profits, a row has blown up between Asda (part of Wal-Mart) and Bloomsbury (publisher of some obscure children's book).

Potter publisher halts Asda order, BBC News July 17th 2007

The facts are (not surprisingly) disputed. But there is a suggestion that Asda has failed to pay in full for previous Harry Potter books. I don't know what has happened in this case, but supermarkets often apply retrospective discounts to their suppliers - paying less than the agreed price.

Supermarkets typically defend their price-cutting stance, and their aggression towards suppliers, by claiming that they represent the interests of consumers. In this case, Asda is claiming that the Harry Potter book is too expensive for children. Obviously Asda wants to make sure the children have some pocket money left for sweets as well.

... for the rest of this post, read Wal-de-Mart and the Profit Eaters

analysis
The Harry Potter phenomenon raises some interesting questions about the business model of media companies, which relies on large profits from a few blockbusters to cover the large risk of publishing unknown products. Emerging retail models, which seek to cream off the excess profits, represent a serious challenge to this traditional media model.

Similar analysis is prompted by Prince's recent decision to allow his latest album to be distributed in a newspaper, rather than through traditional channels. (Discussed in my post Lost Profits and by Fake Steve Jobs.)]]> extract from POSIWID blog
Following my earlier post on Lost Profits, a row has blown up between Asda (part of Wal-Mart) and Bloomsbury (publisher of some obscure children's book).

Potter publisher halts Asda order, BBC News July 17th 2007

The facts are (not surprisingly) disputed. But there is a suggestion that Asda has failed to pay in full for previous Harry Potter books. I don't know what has happened in this case, but supermarkets often apply retrospective discounts to their suppliers - paying less than the agreed price.

Supermarkets typically defend their price-cutting stance, and their aggression towards suppliers, by claiming that they represent the interests of consumers. In this case, Asda is claiming that the Harry Potter book is too expensive for children. Obviously Asda wants to make sure the children have some pocket money left for sweets as well.

... for the rest of this post, read Wal-de-Mart and the Profit Eaters

analysis
The Harry Potter phenomenon raises some interesting questions about the business model of media companies, which relies on large profits from a few blockbusters to cover the large risk of publishing unknown products. Emerging retail models, which seek to cream off the excess profits, represent a serious challenge to this traditional media model.

Similar analysis is prompted by Prince's recent decision to allow his latest album to be distributed in a newspaper, rather than through traditional channels. (Discussed in my post Lost Profits and by Fake Steve Jobs.)]]> tag:blogger.com,1999:blog-7426899.post-113659325834056114 Walmart and Snapper Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2006-01-06T23:55:00+00:00 Tesco and 3G, Tesco and Walmart).

There is a fascinating story in the January 2006 issue of Fast Company (Issue 106, January 2006) about a company that decided to stop selling a high-quality product (lawnmowers that last a lifetime) through a pile-em-high-n-sell-em-cheap store. There is also a summary on Chandler Howell's blog.

Note that the story doesn't just have an economic angle (short-term loss against longer-term economic survival) but also an ethical angle (quality versus throw-away culture) and a social angle (loyalty and trust across network of independent dealers). Note also the system side-effects - sales through the independent dealers rose to compensate for the lost Walmart sales - which were influenced at least as much by social factors as by economic factors.

However, the reason this story is remarkable is that it represents an exception. Few manufacturers are able or willing to say No to Walmart (or Tesco or any of their competitors). The boot is usually on the other foot.]]> Tesco and 3G, Tesco and Walmart).

There is a fascinating story in the January 2006 issue of Fast Company (Issue 106, January 2006) about a company that decided to stop selling a high-quality product (lawnmowers that last a lifetime) through a pile-em-high-n-sell-em-cheap store. There is also a summary on Chandler Howell's blog.

Note that the story doesn't just have an economic angle (short-term loss against longer-term economic survival) but also an ethical angle (quality versus throw-away culture) and a social angle (loyalty and trust across network of independent dealers). Note also the system side-effects - sales through the independent dealers rose to compensate for the lost Walmart sales - which were influenced at least as much by social factors as by economic factors.

However, the reason this story is remarkable is that it represents an exception. Few manufacturers are able or willing to say No to Walmart (or Tesco or any of their competitors). The boot is usually on the other foot.]]> tag:blogger.com,1999:blog-7426899.post-113085472088261550 Tesco and 3G Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2005-11-01T13:37:00+00:00 Martin Geddes again, I don't think any apology is needed, because he does have a habit of raising some interesting questions about business, creating good opportunities for systems thinking.

In his latest blog posting Divergence at Tesco, he notes that Tesco is reducing the range of mobile phones on offer in his local store, and has no 3G phones at all. He interprets this as a sign of a weak market for mobile phones in general and 3G in particular. (Obviously there are some other possible interpretations. And we certainly cannot predict the collapse of an industry from a single observation in a single store.)

Martin rates Tesco's strategic nous above that of the mobile phone industry ("Tesco, as one of the world’s most astute and profitable retailers, generally gets these things right.") But in the grocery market, if the major supermarkets decide not to stock your product, you're dead. This makes Tesco's anticipation of low market demand self-fulfilling, at least to some extent. And Tesco is accustomed to dealing with manufacturers that will do anything for shelf-space, including humiliating discounts. (In this context, viability entails being nice to Tesco at all costs.) Clearly the phone manufacturers are not that desperate. Yet.

Martin has had doubts about the viability of the phone market for a long time before he made this observation in Tesco. So this observation simply corroborates his previous hypothesis, and we don't need to challenge his reasoning in this particular case. But this small observation raises a more general question: what can retail shelf-space tell us about the viability of an industry? And if we wanted to use this as a rough metric, what other information would we need to cross-check it against?]]> Martin Geddes again, I don't think any apology is needed, because he does have a habit of raising some interesting questions about business, creating good opportunities for systems thinking.

In his latest blog posting Divergence at Tesco, he notes that Tesco is reducing the range of mobile phones on offer in his local store, and has no 3G phones at all. He interprets this as a sign of a weak market for mobile phones in general and 3G in particular. (Obviously there are some other possible interpretations. And we certainly cannot predict the collapse of an industry from a single observation in a single store.)

Martin rates Tesco's strategic nous above that of the mobile phone industry ("Tesco, as one of the world’s most astute and profitable retailers, generally gets these things right.") But in the grocery market, if the major supermarkets decide not to stock your product, you're dead. This makes Tesco's anticipation of low market demand self-fulfilling, at least to some extent. And Tesco is accustomed to dealing with manufacturers that will do anything for shelf-space, including humiliating discounts. (In this context, viability entails being nice to Tesco at all costs.) Clearly the phone manufacturers are not that desperate. Yet.

Martin has had doubts about the viability of the phone market for a long time before he made this observation in Tesco. So this observation simply corroborates his previous hypothesis, and we don't need to challenge his reasoning in this particular case. But this small observation raises a more general question: what can retail shelf-space tell us about the viability of an industry? And if we wanted to use this as a rough metric, what other information would we need to cross-check it against?]]> tag:blogger.com,1999:blog-7426899.post-112910848577416028 Heated Opinion Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2005-10-12T08:53:00+00:00
For example, Martin Geddes contrasts telecom with retail.
Telecom isn’t the only industry with distribution bottlenecks, significant market power, and cross-subsidy between the stages of production. Just look at how baked beans are positioned in supermarket shelves. Manufacturers in the UK pay the supermarkets to buy prime positions. Yet telecom incites such great passion in intelligent people. Baked beans don’t. What’s going on?
Martin explains this difference in political terms. Telecoms (along with media and internet) are implicated in democracy and participation, whereas baked beans aren't.

There is another possible explanation in historical terms. Telecoms used to be huge state monopolies, retail used to be hundreds of thousands of tiny independent stores. This is why the public and the regulators pay closer attention to telecom than to retail. (A long delay between cause and effect is easily explained in systems terms.)

And we don't have to choose between these explanations, since they don't actually contradict one another - so they may both contribute to the observed difference. (Multiple explanation is common in social systems.)

So what aspects of business does a society choose to regulate? This is an extremely interesting and complex question, with economic, ethical, social and political threads.]]>
For example, Martin Geddes contrasts telecom with retail.
Telecom isn’t the only industry with distribution bottlenecks, significant market power, and cross-subsidy between the stages of production. Just look at how baked beans are positioned in supermarket shelves. Manufacturers in the UK pay the supermarkets to buy prime positions. Yet telecom incites such great passion in intelligent people. Baked beans don’t. What’s going on?
Martin explains this difference in political terms. Telecoms (along with media and internet) are implicated in democracy and participation, whereas baked beans aren't.

There is another possible explanation in historical terms. Telecoms used to be huge state monopolies, retail used to be hundreds of thousands of tiny independent stores. This is why the public and the regulators pay closer attention to telecom than to retail. (A long delay between cause and effect is easily explained in systems terms.)

And we don't have to choose between these explanations, since they don't actually contradict one another - so they may both contribute to the observed difference. (Multiple explanation is common in social systems.)

So what aspects of business does a society choose to regulate? This is an extremely interesting and complex question, with economic, ethical, social and political threads.]]> tag:blogger.com,1999:blog-7426899.post-112729265060737251 Tesco and Walmart Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2005-09-21T08:48:00+00:00
[source: Guardian, July 21 2005]

But surely if there is one person in the whole world who has a bit of a cheek asking these questions, it is Lee Scott, who is the boss of Walmart. Walmart is still the world's biggest retailer, is the dominant retailer in the US, and owns Asda in the UK.
[source: Sunday Times, August 28th 2005, BBC News August 28th 2005]
[commentary WalmartWatch, UltraMookie]

However, before we write off Scott as a total hypocrite, here are some reason why he feels things are unfair.

1. Tesco has a much higher market share in the UK than Walmart has in the US. And yet Walmart seems to attract a much higher level of hostile criticism and campaigning. (Just try an Internet search if you don't believe me.)

2. Walmart/Asda was prevented from buying Safeway because this would have resulted in a 29% market share. Tesco now has a 30% market share. (Not surprisingly these figures are disputed.) Why do the UK regulators permit the latter when they wouldn't permit the former? (There are of course several ways of answering this question.)

What is the purpose of this kind of regulation? One way of thinking about it is as an attempt to exert some form of ethical and social influence over economic market forces. And it is the complex interaction between ethical, social and economic forces that makes this kind of situation so interesting.]]>
[source: Guardian, July 21 2005]

But surely if there is one person in the whole world who has a bit of a cheek asking these questions, it is Lee Scott, who is the boss of Walmart. Walmart is still the world's biggest retailer, is the dominant retailer in the US, and owns Asda in the UK.
[source: Sunday Times, August 28th 2005, BBC News August 28th 2005]
[commentary WalmartWatch, UltraMookie]

However, before we write off Scott as a total hypocrite, here are some reason why he feels things are unfair.

1. Tesco has a much higher market share in the UK than Walmart has in the US. And yet Walmart seems to attract a much higher level of hostile criticism and campaigning. (Just try an Internet search if you don't believe me.)

2. Walmart/Asda was prevented from buying Safeway because this would have resulted in a 29% market share. Tesco now has a 30% market share. (Not surprisingly these figures are disputed.) Why do the UK regulators permit the latter when they wouldn't permit the former? (There are of course several ways of answering this question.)

What is the purpose of this kind of regulation? One way of thinking about it is as an attempt to exert some form of ethical and social influence over economic market forces. And it is the complex interaction between ethical, social and economic forces that makes this kind of situation so interesting.]]> tag:blogger.com,1999:blog-1254315679163990153.post-8883379982598160793 Sudan 1 Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2005-02-22T00:11:00+00:00
The list of products being withdrawn from foodstores is still growing. In other words, the extent of the contamination is still emerging.

Here's the twist. On the radio, the word goes out that large supermarkets will be more efficient than small corner shops in removing the suspect foods from the shelves. Therefore we should trust large supermarkets more.

Er, excuse me? Let me guess, where did this advice come from anyway? Doubless when politicians and journalists want inside information about the food chain, there are PR departments in the large supermarket chains who are more than happy to help.

There has always been a tendency for people to trust in size and power. I know people who openly wonder about the honesty of the organic butcher in the village, whether his meat is always what he says it is. But it wouldn't occur to them to question the accuracy of the labels in a major supermarket. It is as if they believe that only handwritten labels lie, while computer-printed labels always tell the truth.

There is certainly a desire to trace and track food sources and additives through the manufacturing process. This is not just relevant for contamination, but also to control foods according to personal requirements of health or faith or values. (Nut allergies, vegan, kosher/halal, and so on.)

So there is a Faustian pact emerging between the food manufacturer, the major supermarket and the consumer. You can eat food that is totally inauthentic and unhealthy, but we can guarantee that all the ingredients are organic/kosher/nutfree. And if they aren't, we'll withdraw the products from the shelves immediately. And if we somehow fail to do this, we'll give you double your money back.

So an occasional food contamination scare helps to remind all of us who's really in charge of the nation's food. Life Support System, huh?

(In a previous post, John asked: When is an in-store bakery like a life-support machine? In my reply, I said that we may easily be persuaded to think of the supermarket as a life-support system as well. This is a dangerous belief - because if we stop supporting the small shopkeeper, the belief may become true.)

Jon Borresen makes two important points.
  • Firstly the level of integration in our processed food network. A single source of chilli powder, sold to a single company to make a single product ends up contaminating over 350 supermarket products in every supermarket in Britain.
  • Secondly, do you know what you are eating when you buy a ready meal? ... [Supermarket meals are] packed with things you would never add yourself if you were cooking dinner at home. Every supermarket meal is also stuffed with sugar salt and saturated fat.

Update February 23rd

Taste the Difference - a good article in today's Guardian by Joanna Blythman, author of Shopped - the Shocking Power of British Supermarkets.
"The current Sudan 1 episode ... cannot help but shake consumer's trust in supermarkets."

Well that's the rational response - but look at the clever tactics on the radio yesterday, which might well have the opposite effect.

"Supermarkets have fostered the notion that we have no time to cook. ... This is because supermarkets make far bigger profits from selling us value-added processed foods than they do from straightforward raw ingredients."

Agreed. This looks like John's life support system again. (Presumably the term "value-added" is sarcastic.)

"Unable or unwilling to give us the true variety that comes from using a large number of suppliers and manufacturers with geographically distinctive, often seasonal foods, produced with specialist expertise, supermarkets present us instead with a phoney choice of merchandised factory food in all its chameleon-like forms."
]]>
The list of products being withdrawn from foodstores is still growing. In other words, the extent of the contamination is still emerging.

Here's the twist. On the radio, the word goes out that large supermarkets will be more efficient than small corner shops in removing the suspect foods from the shelves. Therefore we should trust large supermarkets more.

Er, excuse me? Let me guess, where did this advice come from anyway? Doubless when politicians and journalists want inside information about the food chain, there are PR departments in the large supermarket chains who are more than happy to help.

There has always been a tendency for people to trust in size and power. I know people who openly wonder about the honesty of the organic butcher in the village, whether his meat is always what he says it is. But it wouldn't occur to them to question the accuracy of the labels in a major supermarket. It is as if they believe that only handwritten labels lie, while computer-printed labels always tell the truth.

There is certainly a desire to trace and track food sources and additives through the manufacturing process. This is not just relevant for contamination, but also to control foods according to personal requirements of health or faith or values. (Nut allergies, vegan, kosher/halal, and so on.)

So there is a Faustian pact emerging between the food manufacturer, the major supermarket and the consumer. You can eat food that is totally inauthentic and unhealthy, but we can guarantee that all the ingredients are organic/kosher/nutfree. And if they aren't, we'll withdraw the products from the shelves immediately. And if we somehow fail to do this, we'll give you double your money back.

So an occasional food contamination scare helps to remind all of us who's really in charge of the nation's food. Life Support System, huh?

(In a previous post, John asked: When is an in-store bakery like a life-support machine? In my reply, I said that we may easily be persuaded to think of the supermarket as a life-support system as well. This is a dangerous belief - because if we stop supporting the small shopkeeper, the belief may become true.)

Jon Borresen makes two important points.
  • Firstly the level of integration in our processed food network. A single source of chilli powder, sold to a single company to make a single product ends up contaminating over 350 supermarket products in every supermarket in Britain.
  • Secondly, do you know what you are eating when you buy a ready meal? ... [Supermarket meals are] packed with things you would never add yourself if you were cooking dinner at home. Every supermarket meal is also stuffed with sugar salt and saturated fat.

Update February 23rd

Taste the Difference - a good article in today's Guardian by Joanna Blythman, author of Shopped - the Shocking Power of British Supermarkets.
"The current Sudan 1 episode ... cannot help but shake consumer's trust in supermarkets."

Well that's the rational response - but look at the clever tactics on the radio yesterday, which might well have the opposite effect.

"Supermarkets have fostered the notion that we have no time to cook. ... This is because supermarkets make far bigger profits from selling us value-added processed foods than they do from straightforward raw ingredients."

Agreed. This looks like John's life support system again. (Presumably the term "value-added" is sarcastic.)

"Unable or unwilling to give us the true variety that comes from using a large number of suppliers and manufacturers with geographically distinctive, often seasonal foods, produced with specialist expertise, supermarkets present us instead with a phoney choice of merchandised factory food in all its chameleon-like forms."
]]> tag:blogger.com,1999:blog-1254315679163990153.post-6612810163946962404 Instore Bakery Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2004-12-15T02:00:00+00:00 When is an in-store bakery like a life-support machine?

This is a great example. Many large supermarkets have inauthentic bakeries at the back, with the following features.
  • They are always situated at the back of the store, where they produce the smell of baking bread. The air circulation is deliberately designed to send this smell to the front of the store. Shoppers are thus attracted to the back of the store, buying more stuff on the way. (You don't get quite the same smell in a real bakery, which prompts me to think that the supermarket smell may be chemically modified or enhanced.)
  • The machinery is simple to use and highly automated, with preprocessed ingredients, to avoid reliance on skilled bakers.
  • Bread is commoditized. Shoppers expect a complete range of breads, plain or fancy, white or brown, finest, organic, free trade, nut-free, wheat-free, kosher, diabetic, you name it.
When John first spoke to the baker in his local supermarket, the baker didn't know one or two things.
  1. What were John's exact requirements.
  2. What was the exact content of the oven.
As a result, the baker gave a true but unhelpful answer, and John was given false hopes of organic white bread. The store achieved its tactical objectives (John went to the back of the store twice) but what of its strategic objectives?

In the UK and elsewhere, the large supermarkets are taking an ever-larger share of the food market, and are invading many other retail domains. Doubtless bread is a life-support system - symbolically important as well as real - and the supermarkets would love us to visit them not just every week but every day, to satisfy our demand for "daily bread". Unconsciously programmed by the bakery smells we increasingly associate with a supermarket visit, we may start to think of the supermarket as a life-support system as well. This is a dangerous belief - because if we stop supporting the small shopkeeper, the belief may become true. To the extent that John has embedded the supermarket system into his life-support system, it has become his chosen technology for embreading his life.

John, you have three authentic responses to this situation.
  • Eat wholemeal bread. (It's better for you, anyway.)
  • Go to a real bakery.
  • Bake your own bread.
In Scimitar, we could draw a stakeholder map showing the power (low), proximity (high) and interest (questionable) of the baker, both in relation to the customer (tactics) and in relation to the company (strategy). Bread is a small purchase for most of us, but the same technique helps us to think about questions of trust in very large procurement situations.]]> When is an in-store bakery like a life-support machine?

This is a great example. Many large supermarkets have inauthentic bakeries at the back, with the following features.
  • They are always situated at the back of the store, where they produce the smell of baking bread. The air circulation is deliberately designed to send this smell to the front of the store. Shoppers are thus attracted to the back of the store, buying more stuff on the way. (You don't get quite the same smell in a real bakery, which prompts me to think that the supermarket smell may be chemically modified or enhanced.)
  • The machinery is simple to use and highly automated, with preprocessed ingredients, to avoid reliance on skilled bakers.
  • Bread is commoditized. Shoppers expect a complete range of breads, plain or fancy, white or brown, finest, organic, free trade, nut-free, wheat-free, kosher, diabetic, you name it.
When John first spoke to the baker in his local supermarket, the baker didn't know one or two things.
  1. What were John's exact requirements.
  2. What was the exact content of the oven.
As a result, the baker gave a true but unhelpful answer, and John was given false hopes of organic white bread. The store achieved its tactical objectives (John went to the back of the store twice) but what of its strategic objectives?

In the UK and elsewhere, the large supermarkets are taking an ever-larger share of the food market, and are invading many other retail domains. Doubtless bread is a life-support system - symbolically important as well as real - and the supermarkets would love us to visit them not just every week but every day, to satisfy our demand for "daily bread". Unconsciously programmed by the bakery smells we increasingly associate with a supermarket visit, we may start to think of the supermarket as a life-support system as well. This is a dangerous belief - because if we stop supporting the small shopkeeper, the belief may become true. To the extent that John has embedded the supermarket system into his life-support system, it has become his chosen technology for embreading his life.

John, you have three authentic responses to this situation.
  • Eat wholemeal bread. (It's better for you, anyway.)
  • Go to a real bakery.
  • Bake your own bread.
In Scimitar, we could draw a stakeholder map showing the power (low), proximity (high) and interest (questionable) of the baker, both in relation to the customer (tactics) and in relation to the company (strategy). Bread is a small purchase for most of us, but the same technique helps us to think about questions of trust in very large procurement situations.]]> tag:blogger.com,1999:blog-1254315679163990153.post-7798992057435183492 Trust the technology Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2004-12-14T09:50:00+00:00 originally posted by John





When is an in-store bakery like a life-support machine?



This riddle popped into my mind as I called for bread after listening on the car radio to a discussion on the government’s proposed legislation on the ‘living wills’ of people on life-support.


Scimitar’s perspective model prompted it. This is the tool we use to try to develop a risk-manageable balance between a firm’s strategy, and the combination of technology and people it uses in trying to achieve it. There is an inherent risk that the technology constrains the people to such an extent that they become detached from the strategy and ultimately detached from their work. Risk management is impossible without this state being addressed. So is trust.


Seen from this perspective, the technology of life-support systems keeps people alive who are detached from life’s generally agreed strategy. My hope is that the legislation is aimed at doing something about it in terms of restoring some trust. The in-store bakery in my local Sainsbury’s does the same for the guys making bread. But nobody seems to be doing anything about it at all.


‘Any organic?’ I asked the guy in the baker’s hat. He looked at the meter on his oven and said ‘five minutes.’ I came back after a stroll round the store. ‘Large white organic, please,’ I said. ‘Only doing wholemeal today,’ he replied.]]> originally posted by John





When is an in-store bakery like a life-support machine?



This riddle popped into my mind as I called for bread after listening on the car radio to a discussion on the government’s proposed legislation on the ‘living wills’ of people on life-support.


Scimitar’s perspective model prompted it. This is the tool we use to try to develop a risk-manageable balance between a firm’s strategy, and the combination of technology and people it uses in trying to achieve it. There is an inherent risk that the technology constrains the people to such an extent that they become detached from the strategy and ultimately detached from their work. Risk management is impossible without this state being addressed. So is trust.


Seen from this perspective, the technology of life-support systems keeps people alive who are detached from life’s generally agreed strategy. My hope is that the legislation is aimed at doing something about it in terms of restoring some trust. The in-store bakery in my local Sainsbury’s does the same for the guys making bread. But nobody seems to be doing anything about it at all.


‘Any organic?’ I asked the guy in the baker’s hat. He looked at the meter on his oven and said ‘five minutes.’ I came back after a stroll round the store. ‘Large white organic, please,’ I said. ‘Only doing wholemeal today,’ he replied.]]> tag:blogger.com,1999:blog-1254315679163990153.post-2368465193455807385 Cross Fertilization Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2004-10-30T00:32:00+00:00 component-based business (Tesco plugs a bank into its retail business, RBS plugs a retail channel into its banking business.)



What I want to discuss here is the impact on innovation.



One of the creative strengths of the venture is that each company has a distinct view of customer demand - clear but different. This is very roughly how it works. Tesco takes a retail perspective, and seeks to develop financial services that fitted this perspective. Taking a banking perspective, the Royal Bank does not immediately recognize the validity or viability of what Tesco wants to do. However, the Bank finds a way to implement it for Tesco's customers. Subsequently, the Bank recognizes the value of this, and makes the service available to its own customers as well. The joint venture is therefore a source of innovation for each partner; the clash between the retail perspective and the banking perspective is creatively productive.



Perhaps it's important to put this into context. Both companies are already well-managed and innovative, with strong leadership, and there is undoubtedly a great deal of mutual respect and growing trust, based on similar values. The joint venture merely amplifies and extends existing competence in innovation. This is essentially a symmetric venture, where the partners deal as equals.



Of course, innovation can also come from asymmetric ventures, where one partner is much larger than the other. Perhaps one side has economic strength or market position while the other side has technical strength or innovation competence. If such arrangements are well-managed, they can bring benefits to both sides. But genuine cross-fertilization may not occur, especially when the traffic in ideas is assumed to be one-way.]]> component-based business (Tesco plugs a bank into its retail business, RBS plugs a retail channel into its banking business.)



What I want to discuss here is the impact on innovation.



One of the creative strengths of the venture is that each company has a distinct view of customer demand - clear but different. This is very roughly how it works. Tesco takes a retail perspective, and seeks to develop financial services that fitted this perspective. Taking a banking perspective, the Royal Bank does not immediately recognize the validity or viability of what Tesco wants to do. However, the Bank finds a way to implement it for Tesco's customers. Subsequently, the Bank recognizes the value of this, and makes the service available to its own customers as well. The joint venture is therefore a source of innovation for each partner; the clash between the retail perspective and the banking perspective is creatively productive.



Perhaps it's important to put this into context. Both companies are already well-managed and innovative, with strong leadership, and there is undoubtedly a great deal of mutual respect and growing trust, based on similar values. The joint venture merely amplifies and extends existing competence in innovation. This is essentially a symmetric venture, where the partners deal as equals.



Of course, innovation can also come from asymmetric ventures, where one partner is much larger than the other. Perhaps one side has economic strength or market position while the other side has technical strength or innovation competence. If such arrangements are well-managed, they can bring benefits to both sides. But genuine cross-fertilization may not occur, especially when the traffic in ideas is assumed to be one-way.]]> tag:blogger.com,1999:blog-7426899.post-109155153149027768 Marks and Spencer Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2004-08-03T16:42:00+00:00
The recent take-over approach by retailer Philip Green represents a powerful challenge to the management team and its recent attempts to balance the conflicting demands of identity and viability.

Green's proposition can be distilled down to this message: Allow me to impose my retail and management style, and watch me deliver higher and more sustainable profits.

The directors of Marks and Spencer have rejected this proposition, claiming that they can restore the fortunes of the company without the wholesale destruction of M&S values that Green was feared to be planning. Green has withdrawn, unwilling or unable to fund a higher offer. No doubt the large shareholders and affected banks have had private words with both sides, but the small shareholder has been left (as usual) without a voice.

The stakes are raised. M&S management now has to deliver results for the shareholders that are significantly better than accepting the Green offer, and this means they are going to have to take bold risks. Meanwhile Green's other companies are going to be competing hard. And it's all going to be played out in public, with frequent comments in the business press. Over the next year or so, we have a great opportunity to watch how the identity and viability of a large company develops or unravels.

> more on Marks and Spencer

]]>
The recent take-over approach by retailer Philip Green represents a powerful challenge to the management team and its recent attempts to balance the conflicting demands of identity and viability.

Green's proposition can be distilled down to this message: Allow me to impose my retail and management style, and watch me deliver higher and more sustainable profits.

The directors of Marks and Spencer have rejected this proposition, claiming that they can restore the fortunes of the company without the wholesale destruction of M&S values that Green was feared to be planning. Green has withdrawn, unwilling or unable to fund a higher offer. No doubt the large shareholders and affected banks have had private words with both sides, but the small shareholder has been left (as usual) without a voice.

The stakes are raised. M&S management now has to deliver results for the shareholders that are significantly better than accepting the Green offer, and this means they are going to have to take bold risks. Meanwhile Green's other companies are going to be competing hard. And it's all going to be played out in public, with frequent comments in the business press. Over the next year or so, we have a great opportunity to watch how the identity and viability of a large company develops or unravels.

> more on Marks and Spencer

]]> tag:blogger.com,1999:blog-1254315679163990153.post-8899757571347517151 Unilateral Changes Richard Veryard http://www.blogger.com/profile/04499123397533975655 noreply@blogger.com 2003-11-26T12:41:00+00:00
But the bread is good, and the baker is my neighbour, so I went back at 7:40 (the rain now even harder). I complained about the change. Aha, I was told, but you should have observed a small notice about the later opening, on the wall INSIDE the shop. Sorry, that's just not good enough.

This is a trust issue. I am put to some inconvenience, because a service provider has made a change without consulting me, or even properly notifying me. My willingness to trust that the baker will be open when I expect him to be open has just gone down a notch. Of course I understand that changes are often necessary, but there are surely better ways of implementing a change without impairing trust.]]>
But the bread is good, and the baker is my neighbour, so I went back at 7:40 (the rain now even harder). I complained about the change. Aha, I was told, but you should have observed a small notice about the later opening, on the wall INSIDE the shop. Sorry, that's just not good enough.

This is a trust issue. I am put to some inconvenience, because a service provider has made a change without consulting me, or even properly notifying me. My willingness to trust that the baker will be open when I expect him to be open has just gone down a notch. Of course I understand that changes are often necessary, but there are surely better ways of implementing a change without impairing trust.]]>