Lean(er) Retail

Is it me, or does holiday shopping feel noticeably different from the past 3-4 years? I’m not a big shopper, but it feels like a small surge in consumer purchasing fueled by some smart, savvy online retailing will probably create some larger trends for the next few years. Retailers like Zappos, JCrew, Brooks Brothers, LL Bean, and a few others feel like their approaching the online experience fundamentally differently. I sort of hate myself for saying this, but the online portion of these businesses really feel like they’ve been pulling pages from lean start-up strategy. (I know, I just threw-up in my mouth a little too…anyway, here’s the thinking.)

Selling when people are buying
Traditionally, the only time retail puts anything on sale is after they’re sure the majority of people don’t want it anymore (after the holiday has ended). In 2009, when the financial crisis hit, companies staged pre-holiday sales as a means of self-preservation – everyone was sure sales were going to be soft and retailers were doing anything possible to clear pre-recession inventory levels. That tactic was really all about “the business”, the consumer just happened to benefit (if they felt like buying).

This year, there’s clearly a different strategy at play. This year, if people are in the mood to spend, retailers have a sale for you. And it’s usually online, it usually lasts 3 days, it usually includes free shipping, and it’s usually a percentage of your order. All those things drive more sales volume, which compensate for selling at a discount. The tools and methods are familiar, but the big idea here is that this is approaching is retailing centered on the purchaser. The retailer is having a sale BECAUSE the customer is wants to buy, versus having a sale when the season’s over (and the retailer can’t command full price.)

Release early and often
Based on how the world works today, I’m not sure there are four solid fashion seasons anymore; maybe it feels more like eight. I’m noticing early fall, late fall, early winter, and so on. Retail isn’t different from other experience based businesses- new experiences and new options drive interest and engagement. Very much like the tenant of a new start-up, retailers are taking the core audiences they have and they’re constantly pushing updates, inviting people back and spurring conversation.

Codes as currency
Start-ups use beta codes and early invites all the time, it’s an engagement tool. There’s something ephemeral about a coupon code, and there’s something elite about an early invite. Sure retailers have used online codes for a while, but if you notice they’re using them differently. Most of the time the sales last for a very short period. Retailers are staging multiple sales over shorter periods of time. Each sale pulls a different lever (shipping, specific items, volume discounts.) Through this constant campaign, traditional retail is starting to make good on the promise of being as dynamic as the web will allow it to be. I’m waiting for the next step where retailers break into using one-time use codes that have Easter egg discounts or other crazy interactions. (This will happen at some point, trust me.)

Built on buzz
A sale is a way to generate buzz; no news there. But through the use of codes, and releasing often, it seems like shoppers are visiting online stores from new directions. I haven’t been alerted to any of this online retail 2.0 through the traditional spammy email. Sites like Svpply, Pintrest, and this crazy advent of menswear blogs(?!) are creating new conversation and appreciate for clothing.

Much like a new venture, these retailers aren’t resting on their brand hoping that people will buy. They’ve gotten scrappy, they’ve found influencers, and they’re trying to build buzz in every non-traditional way possible. I’ve seriously witnessed bros trying to help bros make the right decision about which “semi-casual suede boots to buy”…and they’re sharing coupon codes!! I swear I’m living in the twilight zone. (related story here.)

So, we’ll see. I have no doubt I’m late to the fashion party, but I have a feeling some of the things these retailers are trying will probably stick with us. It also feels like maybe online retail is finding a new footing. Maybe these retailers are finally letting the shopping experience be as dynamic and fast-paced as the web wants it to be (as opposed to trying to serve a traditional channel through a digital experience). I hope so – I’m definitely not paying full price or shipping for those brown brogues I’ve been eyeing.

Netflix and the “Framing” problem

So I’ve been wondering why the Netflix company split seemed like such a poor execution of a good idea. Logically, I get that it’s two different businesses that need to be supported differently, but I still cancelled the physical DVD service today. I think I figured out why it bothered me.

First, Netflix gave me more than I ever imagined when they launched free streaming. (At this point I love Netflix)

Then, Netflix upped their rates, but I was ok with it because they were giving me more of what I wanted. (I didn’t really mind…I was using the service)

Finally, they split the company in two and offered to bill me individually for two services that served the same need. (Now, I’m insulted b/c they expect me to pay to different bills for the same service…I know it’s the same price, but emotionally it feels different.)

There just feel like so many other ways to ease in to this. As the split is announced you could…
- increase the number of DVDs in rotation with the physical service
- expand the titles in the streaming service
- announce a special partnership for the streaming component
- add a pay-per-view component for streaming new-releases (competing with iTunes)
- add deeper content integration with online streaming
- start randomly shipping free microwave popcorn with the physical DVDs
(I know they added video games to the physical DVD mailing, but they’re about 6 years late to that party…and that’s more off-mission than streaming movies IMHO)

…you know just do ANYTHING besides billing my credit card twice for no additional benefit.

The decision just seems so out of character…the company who harnessed device convergence to deliver the future in streaming/anywhere entertainment can’t figure out how to issue one bill for the services it provides? Like that’s going to send it’s internal business into bedlam? I mean even the phone company can manage to bill me for my phone and my DSL.

Hacking Business Models

I’ve been doing a lot of interviewing lately. Beyond meeting some really nice people, this means I have to explain what the idea of Business Design is a lot. To be honest, it’s not always an easy thing to describe. The idea of using design sensibilities to solve business problems…well it’s easier done than explained. Much of the act of Business Design is dictated by the problem you’re solving. This probably has more to do with design than business –business likes standardized processes, design likes appropriate approaches. When you design, you go about things is almost intentionally different every time. To top it all this off, the idea of Business Design is still very much emerging, so it’s changing all the time. It’s also a hip phrase people throw around a little too loosely. All this makes explaining what I do sort of a hot mess.

Yesterday I was interviewing with a colleague of mine, Joe. Without realizing it, I think he blurted out a pretty perfect description of the idea of business design. He simply said, “we hack business models.”

I really love that statement because of all the implications of the idea of “hacking”. For me hacking implies that you’re working with an existing system and pushing and pulling on its boundaries to see what will happen. Tools can be crude and fast, but there is an eye to understanding and evolve the larger system. Hacking implies that what you’re doing isn’t a science, but there’s probably a lot of underlying laws ad principles involved. There’s no certification to be a hacker, but not everyone can do it. And to be a good hacker, you have to be pretty curious, confident, and inspired.

As I frame Business Design loosely as a hacking exercise, it also starts to draws some boundaries for what is and what isn’t business design to me. Businesses tweak their model all the time, and not every change is a design. If you increase the price for your goods, that’s not really design. If you change your entire pricing structure to communicate a new type of value, that’s probably business design. Netflix raising rates isn’t business design. Netflix launching a streaming-only pricing option is definitely the result of a lot of hacking and some pretty smart business design.

All this hacking leads me back to the idea of a system. Businesses after all are systems that create/provide value. That’s very academic sounding, but thinking of a business as a system that must remain in balance is sort of the first step to being able to frame and solve problems differently. (And there’s a ton of companies who think of a business as a kit of parts.) These systems have many interrelated parts (and people). As you add or remove some element of the business, a different component will be affected. As you design the customer experience, you have to design the business model that supports it. As you design the business model, you have to think about what sort of experience you can provide.

It’s all about the system; it’s all about balance.

Curiosity, Confidence, and Inspiration

I was catching up with one of my colleagues the other day and the topic of leadership came up. She had been doing a lot of deep thinking in the area, and she was wondering how leadership might differ from generation to generation. She wasn’t being academic, she was trying to figure out what it means to attract, retain, and foster leaders given the rapid rate of change in world. She’s not alone, lots of people seem to be asking that same question.

At first, I was glazing over a little bit. The idea of ‘leaders of tomorrow’ is one of those phrases that’s been so co-opted by the business schools and business press of the world, it almost doesn’t mean anything anymore. But as the conversation continued, I started to realize just how massive of a challenge she was talking about.

The idea of leadership is a weird animal. It’s mostly internal personality characteristics that manifest themselves in significant ways. Good leaders see the world from a unique perspective, they get things done, they make people feel valuable. It’s easier to reflect that someone is a good leader, rather than project that they will be a good leader.

After a lot of thinking and conversations, I believe that what makes a ‘leader’ has to do with their levels of curiosity, confidence and inspiration. Of course there are lots of other characteristics at play, but those elements seem to be the three traits I see over and over that define people and how they become these strong leaders. There are many talents good leaders learn over time, these three feel a little more innate.

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Grinding out Happpiness

I’ve been wondering what it is about social games that bug me – you know those massively addicting games like Farmville, Maffia Wars, and WeRule. There’s something really fascinating about how these interactions have captured the attention of social circles way beyond the web. It seems like everybody knows somebody whose mom is playing Farmville on Facebook. There’s something simultaneously brilliant and insidious going on in these games, and I think there’s a way to tweak the game design to unlock the good and bury the bad.

Most of the social games we’re seeing today are largely about ‘grind and reward’; you have to farm to get a currency (grind) and then you can trade currency for that little special something to show off to your friends (reward). The props are different, but the mechanics are largely the same. The games are really approachable because anyone with enough patience and tenacity can grind out goods, and the experience is satisfying because in some small way, you’re earned for that reward. In a society of complex tasks and relationships its satisfying the same way cleaning your house might be, or working in your yard. From a distance its mockable, but the experience is real. There are millions of people grinding on virtual farms and frontiers even as you read this. The rewards are satisfying too; people pay real money to buy virtual currency to skip grinding out their rewards.

In certain circles, people have a problem with these sorts of games. You see when you have a grinding mechanic in a game and your repeat the same action over and over, it starts to feel like a little bit of an addictive mechanism. Players are sure to go back to their farms everyday to play and earn goods (and the games are designed to promote that). Just like mindlessly dropping tokens in a slot machine, players head back to their farms just after the cyber veggies have ripened to retrieve them and sell them. Zynga is the darling of the startup world because they’ve figured out how to do something no one else has; they’ve got an algorithm that makes people predictable.

Lately, I’ve been wondering if there’s a way to redesign some of these game mechanics. I’ve been wondering if there’s a way to navigate the tension of making the game exciting enough for people to play often, but make it rewarding and diverse enough and get rid of the grinding. I think if the game designers flipped the scarcity model in the game they could unlock something completely new, I’ll explain.

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Probability, Possibility, Monopoly, & McDonald’s

This morning I caught this tweet in my Twitter stream:

@LenKendall – I’ve got Park Place for McDonald’s monopoly. If you have boardwalk I want to be your friend

This made me think about how times have changed. When McDonald’s Monopoly was originally designed, the world wasn’t connected. So the possibility of you finding the elusive Boardwalk piece to complete your set and win millions was extremely slim. Today, in the connected world, I wonder if you would have a better chance? (Think Lazlo Hollyfeld.)

Ionically, from McDonald’s perspective the probability of you winning today was the same as it was 10 years ago. McD’s releases 3 Boardwalk pieces into the world and those pieces divided by the total number of play pieces released is your probability. The underlying assumption is that the only pieces you can play are the pieces you earn through buying fries/drinks/burgers. It doesn’t work that way anymore, (and hasn’t for some time). In 2007 people were selling pieces on eBay. The contest just launch and nothing’s changed..

The best inspiration/example to explain the difference between yesterday and today is the DARPA balloon challenge this past December. DARPA wanted to know how fast a networked group of people could solve a large-scale, time critical task. To learn, they offered $40k in a challenge that involved releasing 10 8-foot balloons in secret locations across the US. It took a team from MIT less than nine hours because they created a pyramid scheme around the challenge. Before the challenge they issued the following message:

“We’re giving $2,000 per balloon to the first person to send us the correct coordinates, but that’s not all — we’re also giving $1,000 to the person who invited them. Then we’re giving $500 whoever invited the inviter, and $250 to whoever invited them, and so on…”

So imagine if a networked entity (like 4Chan) decided to unleash the same wrath on McDonald’s that they did on Time’s Time’s Person of the Year. There are already Facebook and MySpace groups with the same intention. There was a Andriod app in the UK for the last contest.

Let’s say only 5% of McDonald’s customers are capable of pulling of this sort of collusion, should McDonald’s design the game differently? (It would cost the same either way.) Should the game be built for the connected world? Individually, those consumers aren’t that significant, but collectively they could screw the game to the wall.

I’m sure McDonald’s has all sorts of rules to prevent this sort of collaborating, but maybe they shouldn’t? The whole contest is about marketing and buzz. maybe they should invite people collude. The cost to McDOnald’s would be the same, but the engagement from their consumers would be radically different. They would reframe their brand in an entirely different context, you would have stories celebrating how people were collaborating to win. The game would be about collaborating to win, not gobbling more McDonald’s. It feels like the publicity alone would reach new audiences and meet our culture where it already is.

The Art of Passive Aggression

Yesterday I was waiting for an elevator with my colleagues Michael & Clark. As we stepped inside the elevator, it took a little too long for the door to close and we had an awkward moment. In that moment, someone quipped we should just take the stairs and right on cue the elevator doors shut. We chuckled and I sort of deadpanned that it would be amazing to have a Passive Aggressive Elevator installed in the building.

On the way home, I thought more about that moment. It’s funny to me how people can have complex relationships with objects, but most of their interactions are designed to be pretty simple – objects don’t have opinions, they can’t argue. People on the other hand are completely different, people have feelings and opinions and biases and baggage and interactions get quite complicated. Sometimes we get so wrapped up in that complexity we (ironically) don’t think about how we treat each other.

I started to wonder what it would feel like to create an art piece after some of the nastier ways we treat each other. You would probably stage it in a kitchen, since that’s sort of a communal hub. Instead of having simple interactions with all the appliances, you would have to verbally abuse them to make them work.

You could imagine a Berated Blender that only had one speed. To make it blend faster, you would have to scream at the machine because it was going to slow. Or maybe a Stove of Shame that, in order to keep it warm, you needed to continually counsel it in a disgusted tone that it wasn’t living up to it’s potential. And of course you’d have to have a Passive Aggressive Toaster, in which you’d place the bread and press the lever only to have it not work until you loudly proclaimed that you would “have rather used the oven anyway”.

The big idea behind all this is that we’d probably feel stupid chastising at a toaster, but we don’t think twice about doing it to people. If you could create a moment that was so ridiculous, could you provoke people to treat each other better? Could you use humor and akwardness to interrupt people’s routines to help people be a little more thoughtful.

I guess creating an art piece that is passive aggressively trying to make people less passive aggressive could be sort of interesting. I figure all I need is a blender and an MIT student and we can make this happen.