May/June 2007

A Report on the Current State of Retail produced by
In theory, intelligent strategy and beautiful design should result in a retail success. So how did Forth & Towne miss? It answered the fashion needs of the vast and lucrative women-over-35 group with a new grown-up brand wrapped in a sophisticated design from David Rockwell. Yet Gap’s attempt to get its share of the healthy sales being enjoyed by stores like Chico’s and Eileen Fisher failed to strike gold. Instead, 18 months after they opened their doors to an eager and underserved audience, all 19 Forth & Towne stores will close, deemed unworthy of further investment by their parent company. “It’s something of a myth that if you work on strategy, you will be guaranteed the right answer, or the perfect concept,” says Bruce Dybvad, Design Forum’s president. “Retail brand strategy is multi-faceted. It includes the product of course, and all the customer touch points. If one of those aspects doesn’t deliver, the rest can’t make up for it.” stage in the lifecycle of retail where, if you’re not cautious, you can lose your soul. Things start showing up in the store that don’t make sense.

The Magic of Strategy and Design
“Here is where a really outstanding professional team that attaches strategy and design together can help guide solutions that keep the brand in its natural space. The retailer’s energy—in the context of shopper insight, brand and profitability—must be channeled to constantly align against the brand foundation to propel the chain and maintain its soul. That’s the magic of strategy and design. It’s the navigational star.” Dave & Buster’s restaurant and gaming concept is another great idea, born 25 years ago when its namesakes merged an arcade with a restaurant in a 40,000-square-foot Dallas warehouse. The private equity firm that now owns it knew Dave & Buster’s offered a great experience, but weren’t sure why. They needed to know before evolving the brand for growth. Their research revealed a surprise. Games alone were not the draw with key segments. The appeal of Dave & Buster’s is the experience that comes from the interaction of all their offerings—food, drink, good service, sports, corporate events and games for families and business people. Nothing should be cut, because the whole is greater than the sum of the parts. “A smart retailer will take that kind of insight and design an environment that will physically do what customers want it to do,” says Dybvad. Analogous to a mid-life crisis, mature retailers under pressure to create additional revenue may find themselves chasing too many poorly-fit initiatives and failing to manage the outcome of their efforts. Executive teams making day-to-day decisions may lose the spark of passion. A once-vibrant retail experience can begin to feel tired. Carefully considered strategy, says Dybvad, can provide a clarifying “moment of perspective” on what the company is trying to solve for. “Within strategy, there are a lot of factors that tell you where you should spend on the experience relative to what you get credit for,” says Dybvad. “You get an idea of how much total investment should be made in the facility, and the hierarchical order of what’s important to the customer. Those insights help deliver really critical knowledge to designers as they put together a concept. It’s not that the strategic component guarantees the creative answer. It identifies the area to work the problem.” It’s too late for Forth & Towne, but not for the world’s largest specialty coffee retailer. Maybe Starbucks will decide to lose the super-automatic espresso machines and save its soul.

According to the retail analyst post-mortem, Forth & Towne apparel decisions were made by Gen Xers who didn’t understand what Boomer women wanted. Further, the assortment made it more like a department store than a boutique. And their messaging was age specific, a turn-off to the group they were trying to attract. The design and service component were strategically right, but it wasn’t enough. There was no magic. “The experiential facet is where the store delivers on the brand promise. Strategy, the way we define it, engages business opportunity with shopper insight and appends all that knowledge to a physical solution. It doesn’t guarantee magic, but it does give you a much greater possibility of creating a magnetic concept that fills a vacant market space. And then, only if strategy and design share a process that engages their thinking in a fluid, dynamic, related way.” Executed the way it was, Forth & Towne didn’t connect with the various life stages of this demographic, which is a great challenge for every retailer because of its breadth and the variety of life styles within it. Older women also buy less impulsively and less frequently than the younger shoppers catered to by Gap and Old Navy. In the end, retail experts accused Gap of seeing only a statistic, the growth potential of the target market. In their rush for gold, they didn’t gather the insight required for a great retail experience. Of course, many of the greatest store ideas have been born simply from a smart observation and a passion for a product or service— without the use of a battery of consumer tests, authentication, and an army of consultants. Target wanted to make discount shopping as much fun as shopping in a stylish department store. Starbucks wanted to romance the neighborhood coffee house. At the end of the day, they are simple, well-executed, insightful ideas running on their own unique dynamic. The problem is, great ideas turn into great big companies coining huge amounts of revenue that must show year-over-year sales improvement through growth. That’s where strategy and design have a role to play. “Howard Shultz is right to be worried that Starbuck’s foray into through-put has removed much of the romance and theatre from the experience,” says Dybvad. “He must now be unbelievably careful that they don’t jeopardize the original idea in their lust for growth. This is a

May/June 2007

Getting Younger
Originally for this issue’s commentary, I was going to talk about the different things Generation Y is doing. But the way I see it, we’re all doing the same things. Just for different reasons. Businesses are increasingly aware that in order to survive the rapid pace of change wrought by the Internet, we need to adopt the optimism of youth: being open by allowing others access to our content online, peering within communities rather than being controlled by traditional hierarchies, sharing ideas and success stories so they can be valued by a wider audience, and acting globally by collaborating with friends outside our own geographical area. Add to that list, the insatiable need for newness and coolness and you begin to sound like a retailer. My point is, we are all beginning to think about adopting the same principles that youth aged 16-27 operate on. Witness their fearless use of social media, with an emphasis on fearless. Interestingly, the other major population group, the age 43-61 Baby Boom, is moving into the second half of life, tiring of structure and looking for something fresh and new, with an emerging trend that looks like a return to youthful idealism. Not that they’re heading to MySpace in droves. But they are certainly blogging like crazy, writing and editing for Wikipedia—and as they leave the workforce, will most likely take on mentoring roles via social media to transmit their knowledge and experience. Being open, peering, sharing and acting globally are all principles businesses need to adopt for the digital economy. If you want to know more about how mass collaboration changes everything, I suggest you read Wikinomics, by Don Tapscott and Anthony D. Williams. Although the book is a little heavy with the melodrama (as in, collaborate or be doomed), it manages to be highly thoughtprovoking and persuasive. It’ll have you thinking twice about applying old business techniques to your growth initiatives. Yet although the authors are right about the limitless knowledge available on the Internet giving us all the power to innovate, innovation won’t get any easier. As of now, only the tiniest fraction of social media users are generating content. Most people only watch. That’s human nature, and the only real change will probably be in numbers, not percentages. But the Internet has made it much easier to influence and to get people to participate. And more creative people working together on innovation will certainly increase the odds of achieving it. Granted, I understand that of all the things keeping CEOs up at night, it’s not mass collaboration. It’s more like cost reduction and risk management. At Design Forum, however, we’re already hip-deep in collaborative waters. Today, virtually every project we work on requires collaboration with another agency, in many cases the retailer’s advertising agency or private equity firm. We’ve become adept at switching leads and learning to play different roles at different times in the relationship. As the future unfolds, we’re certain to find more opportunities for creative interaction that will enrich our ability to serve clients. Changes have been at work for many years now—the microprocessor turns 50 in 2008—but they have just kicked into high gear. Consumers want more change more often. The necessity of rapid development to compete requires many minds, inside and outside of your company. The life of a retail trend used to have seven distinct steps between emergence and decline. The cycle has been compressed by 20 percent, and will continue to compress, under pressure to introduce new things quickly. The value of newness is so critical, scores of trendspotters are calling things trends that are really just influences. Rushing them through their normal stages and onto the sales floor reduces their potential and their longevity. That’s the new paradigm for the retail business. It’s reflective of life today, regardless of age. The forces that shape new strategies to accommodate change require the courage to open up. Exciting ideas, inspiration and experience are waiting everywhere, not just the board room. It’s the age of participation built on relationships and conversations. The world is getting younger. I like that. Thoughtfully,

Chairman’s Commentary

D. Lee Carpenter Chairman & CEO

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So how do we nurture our ideas so they’ll succeed in the world? Many of us struggle with how to communicate ideas effectively, how to get our ideas to make a difference. A manager makes a speech unveiling a new strategy as the staffers nod their heads enthusiastically, and the next day the frontline employees are observed cheerfully implementing the old one. Our interest is in how effective ideas are constructed—what makes some ideas stick and others disappear. There are two steps in making your ideas sticky—Step 1 is to find the core, and Step 2 is to translate the core using the six SUCCESs principles [Simplicity, Unexpectedness, Concreteness, Credibility, Emotions, Stories]. The first step in unpacking these ideas is to explore why Southwest Airlines deliberately ignores the food preferences of its customers. Vegas? Because if it doesn’t help us become the unchallenged low-fare airline, we’re not serving any damn chicken salad.’” Now the core idea –“THE low-fare airline”— isn’t the whole story, of course. Southwest is known as a great place to work, which is surprising. It’s not supposed to be fun to work for penny-pinchers. It’s hard to imagine WalMart employees giggling their way through the workday. Southwest’s employees know that it’s okay to have fun so long as it doesn’t jeopardize the company’s status as THE low-fare airline. A new employee can easily put these ideas together to realize how to act in unscripted situations. For instance, is it all right to joke about a flight attendant’s birthday over the P. A.? Sure. Is it equally okay to throw confetti in her honor? Probably not—the extra work for cleanup means higher fares. Clearly there are additional values (customer comfort, safety ratings) that refine Southwest’s core value of economy. But a well-thought-out simple idea can be amazingly powerful in shaping behavior.

Chip Heath is a professor of organizational behavior in the Graduate School of Business at Stanford University. Dan Heath is a consultant at Duke Corporate Education. A former researcher at Harvard Business School, he is a cofounder of Thinkwell, an innovative new media textbook company.
Principle 5: Emotions How do we get people to care about our ideas? We make them feel something. We are wired to feel things for people, not for abstractions. Sometimes the hard part is finding the right emotion to harness. Principle 6: Stories How do we get people to act on our ideas? We tell stories. Hearing stories acts as a kind of mental flight simulator, preparing us to respond more quickly and effectively. The SUCCESs checklist is an ideal tool for dealing with communication problems. Herb Kelleher could tell a flight attendant that her goal is to “maximize shareholder value.” Is this idea simple? Yes, but not useful. Is it unexpected? No. Concrete? No. Credible? Only in the sense that its coming from the mouth of the CEO. Emotional? Um, no. A story? No. The problem with “maximize shareholder value,” despite its accuracy, is that it doesn’t help the flight attendant decide whether to serve chicken salad. Our hope is that you’ll apply these traits to your own ideas.

Finding the core
The reasons for Southwest’s success could (and do) fill up books, but perhaps the single greatest factor in the company’s success is its dogged focus on reducing costs. For this effort to succeed, the company must coordinate thousands of employees, ranging from marketers to baggage handlers. Southwest has a core that helps to guide this coordination.

Translating the core
As we pored over hundreds of sticky ideas, we saw, over and over, the same six principles at work. Principle 1: Simplicity To strip an idea down to its core, we must be masters of exclusion. We must relentlessly prioritize. We must create ideas that are both simple and profound.

Ideas Survive and Others Die
Herb Kelleher [the longest-serving CEO of Southwest] once told someone, “I can teach you the secret to running this airline in thirty seconds. This is it: We are THE low-fare airline. Once you understand that fact, you can make any decision about this company’s future as well as I can. “Here’s an example,” he said. “Tracy from marketing comes into your office. She says her surveys indicate that the passengers might enjoy a light entrée on the Houston to Las Vegas flight. All we offer is peanuts, and she thinks a nice chicken Caesar salad would be popular. What do you say?” The person stammered for a moment, so Kelleher responded: “You say, ‘Tracy, will adding that chicken Caesar salad make us THE low-fare airline from Houston to Las

Why Some

by Chip Heath & Dan Heath

Principle 2: Unexpectedness How do we get our audience to pay attention to our ideas and how do we maintain their interest when we need time to get the ideas across? For our idea to endure we must generate interest and curiosity. Principle 3: Concreteness How do we make our ideas clear? We must explain our ideas in terms of human actions, in terms of sensory information. Naturally sticky ideas are full of concrete images because our brains are wired to remember concrete data. Principle 4: Credibility How do we make people believe our ideas? Sticky ideas have to carry their own credentials. We need ways to help people test our ideas for themselves. “Ask yourself if you are better off today than you were four years ago.”

A Report on the Current State of Retail produced by

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