Innovation

innovation and the blind spot

Learn From Amazon’s Innovations and Walmart’s Blind Spot

innovation and the blind spotAmazon (NASDAQ: AMZN) should be concerned. Walmart’s (NYSE: WMT) resources are enormous. That gives Walmart time to work on their blind spot. Does Walmart leadership understand what makes Amazon so strong? Probably not. If they do, can they adopt it?

Walmart is changing quickly.  We’ve all seen all their ecommerce acquisitions and a lot of new initiatives they’ve launched and tested in the last few months. These included Bossa Nova robot in stores, Mobile, Express Returns, Scan & Go, Check Out With Me, and JetBlack premium membership.

Walmart is still the largest retailer by volume. Walmart has stores within 20 miles of 90% of Americans. Yet, they correctly perceive Amazon, and others as a threat.

This image from their shareholder meeting that was shared by Lauren Thomas from CNBC summarizes their concern:

walmart top 10 US Retailers 1970 now

 

Walmart doesn’t want to end up like Sears. However it might.

For all Walmart’s “digital transformation”, their ecommerce growth slowed down this quarter. Amazon continues to outperform expectations.

Let’s look at two similar initiatives from Amazon and Walmart to understand the differences.

Testing Walmart’s Scan & Go vs. Amazon’s Amazon Go

Cashier-less checkout was a big theme at ShopTalk. Nordstrom, Macy’s and other retailers are focusing resources to reduce this friction point.

Walmart executives presented their Scan & Go initiative at ShopTalk this year. Amazon launched Amazon Go in Seattle and is expanding. In e-commerce, retailers can either help customers increase their motivation or decrease the friction they encounter during a purchase. In retail, checkout has always been a significant source of friction. No one likes to wait.

Walmart’s Scan & Go Test

In January 2018, Walmart announced the expansion of their Scan & Go cashier-less checkout experiment to 100 stores.

Their promotional video looked promising:

This is how it actually worked.

The demo was “smoother” than the actual experience. During the test shoppers could use their phones with a mobile app or a separate device Walmart provided. As you walked through the store you scan the items added to your physical shopping cart. Then shoppers advanced checkout at a special lane near their current self service checkout.

The Scan & Go initiative was cancelled.  Walmart executives said they did learn from it.

What did Walmart learn? It seems like they were asking: If you reduce the friction in checkout will you sell more? No surprise! They likely weren’t impressed with the results of their test.

Walmart essentially moved an already not super popular self checkout scanner onto a mobile device. Self-checkout is an extra job for the customer no matter what part of the store they do it in.  They tested the same concept but moved it to a different location in the store.

Walmart tested a variation of what they were already doing. Tweaking, improving and optimizing variations leads to a local maxima, a dead end.

Let’s examine how Amazon approaches tests to see what we can learn about innovation and testing.

Amazon Go didn’t waste time and resources testing variations. They tested a variable first.

Amazon knows that customers don’t like to wait. It’s something that will never change.

“ I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … [I]n our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.” ― Jeff Bezos

Amazon innovates with a central purpose – making things better for the customer.

Amazon, and anyone who visited a store with cashier-less checkout knows, that people aren’t excited about taking over the cashier’s job.  You can see that in every grocery store, Walmart, Lowes and Home Depot that have longs cashiered lines and a handful of people struggling at the self checkout. For stores with higher margins sales people can take over the cashier’s job for the convenience of customers.

Amazon, understood that “checkout” is a lousy experience. Checkout is the variable to test.

Amazon didn’t ask how to improve checkout. They asked: would people buy more if they didn’t have to use checkout at all?

Amazon decided to innovate around replacing the checkout experience. Ironically, it was so successful that there were lines of people to try the experience for themselves.

Amazon proved that customers love their no checkout innovation. Only now will Amazon will test many variations to improve on the concept.

Walmart has a serious blind spot

Walmart focused on optimizing store operations with technology.

Amazon focused on innovating on behalf of their customers.

Walmart doesn’t understand that they don’t have an ecommerce channel problem, Walmart’s problem isn’t Amazon. It isn’t even technology.  Walmart’s problem is a blind spot, a lack of interest in who its customers are. Walmart is struggling to transform from being experts in products, inventory management, supply chain, and logistics to becoming experts about their customers.

To succeed in retail today you need to start with the customer, not the product.

Amazon is beating Walmart, and others, because it knows its customers and takes as an article of faith that if they do right by customers they will succeed.

How about you? Every successful business has a blind spot!

Here’s what often happens:

A business has a unique approach, or a special emphasis that separates them from competitors so they commit to it. It makes them successful.

They eventually reach a plateau.

Most businesses double-down on what brought them success.

They do what they know how to do and improve on the margins. They press down harder on the accelerator..

They get stuck in that gear.

At first their innovation gave them momentum.

And then things began to level off.

They believe in first gear. First gear is where they feel comfortable.

Metaphorically, Walmart is accelerating in first gear.

Businesses don’t have automatic transmissions!  All you have to do is look at the top retailers slide at the beginning of this post.

Few companies ever find second gear.

Let us know if we can help you eliminate your blind spot. Let us work with you to innovate your way to success by reducing customers’ friction and increasing customers’ motivations.

Read More
Blackberry with iphone screen

Digital Transformation Groundhog Day

Blackberry with iphone screenDigital transformation is the buzzword. Legacy systems, perverse goals, and lack of vision are the reality.

In most instances, digital transformation looks like changing the case of the blackberry, modernizing the screen and instead of the pixelated app icons they are now crisp and shiny.

Yet the operating system is still is slow, does not allow integration from one app to the next and you can’t really add any new apps.

In order to succeed in business today, you would want to compete with a modern operating system and up to date hardware and software processes. We all know businesses that seem to be running with those.

Fortunately, we are not living in Groundhog Day (February 2th, 2006?) where every day we wake up with a pretty little blackberry in our hands every morning instead of our current smartphones. A new option is coming:

However, the reality is that most businesses today are still running their businesses like they were running on Blackberries before IOS was released. They are slow, parts of the business don’t operate well with one another. They aren’t focus on innovating new applications. Their day to day operations and processes are programmed around last generation thinking. It is not quite the experience we were hoping for and trust me, their customers aren’t loving it either. How do they expect to stay ahead of our customers when customers are getting faster than us?

It’s no longer the big fish eating the little fish, it’s the fast fish eating the slow fish.

Read More

The Jeff Bezos Silent Treatment to Innovation

For every billion dollar idea there will be plenty that don’t add much to the bottom line and several that just eat up resources getting launched. More importantly, there will be many that reach the disagree and commit stage. The point is that most companies are consistently striving for innovation.

What if your team could regularly produce these type of ideas and you could implement and launch them with the agility that Amazon does? Is that a process you’d like to learn?

Jeff Bezos recently announced that Amazon has topped 100 million Prime members. Amazon Prime started just like every other idea in the nearly 2000 experiments Amazon runs in a year. Let’s spend a few minutes to understand their process and then look at how you can effectively adopt it as your own.

Every test begins with a team developing a 6-page narrative memo. No PowerPoint presentations are allowed.

We’ve also learned that what’s most important to the process is the perspective that these memos take. The keys to these memos are to write them from the point of view of the customer’s benefit and to start from the end result or the final goal. This is what Amazon calls “working backwards.” It’s what we teach as Reverse Chronology in our Buyer Legends process.

It may help to think of these internal memos as low-fidelity rapid-prototypes to keep your company agile.

When you start from the end-point and craft the narrative from there, you’re not tied to the present conditions, which means you’re not tied to optimize what already is, and you also build believability for what your idea could BECOME rather than starting from what it might be right now. Prime didn’t become a billion dollar idea overnight. And there were some challenges that had to be ironed out with it before it scaled as big as it did.

So if you started just with the idea to “test” this out, it wouldn’t have been a success.

You had to start with the idea that Prime Members became Amazon-exclusive with their buying and what that would look like and mean for the company, AND then you work backward on how to make that happen.

These documents are well-researched and carefully considered. They are intended to help others in your organization fully comprehend the recommended experiment, all logistics and the anticipated outcomes. Before a meeting starts everyone sits, reads these memos and add their questions in the margins.

These narrative memos align the organization and allows them to commit with the knowledge and resources to see the test executed. Keep in mind no team at Amazon is larger than two pizzas can feed. So there are thousands of teams developing ideas on a regular basis. How many of these ideas could your teams develop regularly if they had the tools and the skills to craft these memos?

We had the pleasure of developing our Buyer Legends Process in order to train Google’s teams to emulate this rapid, customer-centric, innovation process. Like all teams, they needed to communicate more efficiently, prioritize based on well-documented ideas and improve execution time and outcomes. They required a process to provide direct communication instead of implied instructions. Since developing the Buyer Legends Process to achieve those goals, we’ve used it to help dozens of companies from startups to existing brands to be like Amazon.

 

Would your company benefit from more customer-centric innovation, executing with greater precision & agility and developing a growth system like Amazon’s? Drop me a note if you want to chat further about this innovation process.

Read More
What we can offer you

Four Pillars Ongoing Support

After our workshops, we work with only a few select clients. Your business must be committed to the Four Pillars (as described in Be Like Amazon) on a long-term basis .

Workshops

We kick-off the workshop with a two-day onsite visit. We help you create the Four Pillar foundation for your organization. The entire process takes between 4-8 weeks and the typical investment is $30,000 – $100,000.

Speak at Your Event

We can speak at your event. Our fees are $20,000 in North America, and that includes travel. International fees are $20,000 plus business class travel, from Austin, and lodging. Contact us to discuss your event