The Case of the Miscast VP of Global Product Strategy

Kirk, a serial entrepreneur, joined a b2b, specialty products firm. His challenge? Turn strategy chaos into predictable performance.

Kirk’s Problem

Kirk’s boss miscast him to the Board of Directors as a knight in shining armor. Groc-Corp does need a rescuer. Its cash flow is negative. Its product strategy is Me2.

Money was not the reason Kirk joined Groc-Corp. Three companies he started as an entrepreneur created great wealth. When they were sold, he became rich and didn’t need more money.

In place of money, Kirk wanted the challenge of helping turnaround a large firm. Kirk had been a consultant to large firms, including Groc-Corp. He wanted direct control of product strategy. And, the Board gave it to him.

His main problem? Changing the mind-set of engineers, marketers and business managers. Groc-Corp is a manufacturer of POS¹ electronic equipment used in grocery markets. Two years ago, with private equity investment, it was spun out of a major technology firm.

Kirk needs to unsettle a familiar framework inherited from the parent firm. “We know our customers and we know what they need.” And, move to a framework with fast decisions based on real-world data on what customers want.

Kirk’s Solution

Build an effective, teamwork framework based on outside-in data.

Do this by engaging a marketing intelligence expert. Using the expert’s report, the team bases its decisions on real-world data instead of out-dated, inside opinions.

Kirk engaged me to produce the report.

Meeting with his team, they decided on two key questions they wanted answered. 1. What do potential buyers think about the team’s speculative POS concept? 2. Why?

Tasks for eliciting and analyzing information needed by Kirk

• My first task is to build a list of 120 well-informed people in the grocery store market.
• Second task is to chose, at random, people on the list and cold-call them.
  All respondents hear the following phrase: “My client is working on decision-making software for grocery stores POS systems. It provides real-time information about customer’ purchases. And, the supply chain support for those purchases.”
• Third task is to analyze data collected during the calls. For statistical significance, I used the Central Limit Theorem² in the analysis. 

Executive Summary: Real-World Intelligence on Acceptance of Groc-Corp’s POS Concept

Forty-two respondents entered into deep conversations with me.

Thirty-eight respondents were “Not Interested” in the client’s concept.

Lack of interest in the concept because the pain of changing from current POS system is not worth the gain.

Four respondents, with consulting practices, preferred to remain neutral about the concept’s value.

Grocers’ culture is resistant to change and doing things differently.

How do grocery stores make money?

By focusing on raising profits from investment, and not from profits on each dollar of revenue.

• They do this by selling grocery inventories faster than they have to pay suppliers’ bills.
• With inventory turnovers >17 per interval, the grocer uses their suppliers’ money, interest free, to grow

“ George, last year groceries had an average inventory turnover of goods of 15x. Trader Joe’s turnover was 88x. Wegman’s turnover for produce is 100x. Investment in a new POS system, must not drop the turnover number below 17x.”
     Principal Consultant … Grocery Communications

Respondents said stores must meet two vital customer expectations.

– Low prices

– Convenience

POS systems help manage:

• Operational levers dealing with low price. Shrinkage (theft) and Cost Control.
• Merchandising levers dealing with convenience. Self-Checkout.

“Shrinkage is a constant problem for us. Customers seem to like our self-checkout POS system. But the large firm we bought the system from is slow to cleanup system glitches. Customers get annoyed. And, thieves use those glitches.”
     Owner … Grade A Markets (Also Co-owner of Wakefern Wholesale Distribution)

Checkout-free technologies threaten future sales of current POS systems.

Rapid advances increasing the value and lowering the price of checkout-free technologies.

• Facial and image recognition, Cloud computing and payment
  
  • Customers shop and pay without stopping to checkout.
  • Amazon, Walmart, and Kroger are testing handheld devices that can do the job.
    
    • Devices, such as cell phones, that take advantage of fast drop in cost of cloud computing and payment

Outcome

• Kirk stopped development of the team’s Me2 speculative concept.
• By coaching, he moved the team to an effective outside-in framework.
  
  • Rapid response to cleaning up glitches identified by major customers.
  • Sharp focus on cutting out financial fat inherited from the inside-out framework.
• He discussed with Amazon, collaboration on developing their cash-free technology. They showed interest in licensing their technology.

Two years later

• Current POS system moved from a 15% loss to a 5% gain

Kirk resigned from Groc-Corp. Parting was amicable.

• He turned around Groc-Corp’s business. But he was bored after the successful turnaround.
  
  • Board stopped any collaboration with Amazon … too risky.

Kirk went back into the entrepreneurial world. There he continues to enjoy the fun of creating value.

Lesson Learned

When a horse is bred for the challenge of jump racing’s obstacles, don’t expect the horse not to get bored with harness racing.

Endnotes

1. POS (Point of Sales) refers to the place where the customer pays for their grocery products. Electronic POS software-hardware systems automate the buying process, and track key sales data.
2. Central Limit Theorem