By Erin Pressley
CHICAGO – NACS State of the Industry Summit attendees spent several hours listening to sessions on the industry’s performance in 2016, taking copious notes on category metrics and U.S. region performance. Every April, Summit attendees take this in-depth look at the recent past to help them plan for the uncertainties of the future.
On the last morning, however, Northwestern University professor Robert Wolcott, clinical professor of innovation and entrepreneurship at the Kellogg School of Management, encouraged attendees to set their sights on the future—way in the future—and start looking for signs and technologies that could significantly change their business.
Wolcott said that what often happens with technology is that there’s a lot of excitement and hype in the short term when a new idea is birthed. But a couple years later, people look back at the technology and say, “nothing has really happened.” Yet if they look back 10 years later, they can more clearly see how profound the change really was.
“Today is the slowest pace of change we will experience for the rest of our lives,” he told the crowd, when explaining the value of perspective. And not only is time necessary, but so is distance. “Change starts at the periphery,” Wolcott said. “Big threats do not come from your space—your competitors know what you are doing and you know what they are doing. Instead, big threats and opportunities come at the edges of market.” He said these changes come in small ways; they are marginalized and are, more often than not, ideas that most people are not noticing. Sure, some innovations rise up and enter the market and change the game, but many do not.
It takes time to change, so businesses require foresight to achieve a general gist of what might come. The trick is to determine how to turn that foresight into insight, then turn that insight into action to build a “portfolio of the future.”
That is the essence of innovation, Wolcott said: building a portfolio of options on the future. “We can’t predict the future, but we’ll make all our money there.”
The essence of managing that innovation is resolving uncertainty from a rational process. Wolcott advised not to manage the rate of failure—or businesses will pass on good opportunities. Instead, manage the cost of learning. “We are conditioned to avoid anything likely to fail; we don't want to put our name on it,” he said. “But the problem is that the more potentially transformative an idea, the more it looks unlikely to succeed.”
To manage the cost of learning, Wolcott shared a technique for how to turn ideas more effectively into action. When someone comes up with a new idea or concept, instead of saying no or bringing up all the reasons why the idea won't work, Wolcott advises you to say, “I’m not sure what it is but let’s start talking about it.” Then gather a team and articulate the idea for about 15 minutes. Next, write down all uncertainties about the idea that you want to resolve—what you would like to know to determine if the idea is a good opportunity or not. Now, figure out all things you can do to resolve those uncertainties with no money invested. It’s a good way to convince your folks how much they can accomplish without spending any money.
And why is the exercise so important for businesses? The changing marketplace has introduced a dynamic that will occur across all industries. “It’s so pervasive that it will happen,” Wolcott warned. And what is it?
“One of the most powerful forces reshaping markets for the coming generation will be the production and provision of products and services ever closer to the point of demand. We call this proximity,” he stated. It’s a force that the convenience retailing industry is already harnessing—and it’s only going to get better, or worse, depending on perspective.
Wolcott flashed a few brand logos on the screen for attendees to soak up: IBM, Kmart, Kodak, Sears, Pan Am and a few more. “All of these companies had near death experiences,” he shared. “For decades, they were the gold standards of their respective industries, the top of their game. But then some version of this happened: They were making lots of money for a long time but then comes a memo that says, ‘This quarter we will not make our numbers.’” There are two things businesses do when they get this memo, Wolcott said. “They cut costs, or change stuff to make more money. And it does work—the first time.”
But then it happens again and kind of works the second time, but eventually a slow spiral begins. In a cyclical market this could keep working—but now, the underlying paradigms of the marketplace are shifting so this does not work anymore. “We are still doing what we used to do,” Wolcott said, “but our customers and the marketplace are changing.” A change in perspective in required.
Wolcott advised attendees to develop and run companies that are not only focused on sustaining the present (fortification) but also companies that are growing and evolving toward the future (exploration).
These two different environments, with different processes and different metrics, not only require a new way of thinking but they also require different kinds of people—and not just one or the other. Great leaders need to provide homes for both, and great companies do not try to get everyone great at both mindsets.
The NACS State of the Industry Summit wrapped up on Thursday, April 6. Data from the Summit will be released in the NACS State of the Industry Report of 2016 Data, which will go on sale in June at www.nacsonline.com/shop. Mark your calendars for 2017 when the Summit takes place on April 10-12 in Chicago.
Erin Pressley is vice president of the NACS Media department.