All organizations do change when put under sufficient pressure. This pressure must be either external to the organization or the result of very strong leadership.
Bruce Henderson – CEO Boston Consulting Group
Companies in traditional industries are the most susceptible to tech disruption. In our neighborhood in Portland Oregon U.S., a retailer occupies a city block. The store sells electronics, food, clothing to several neighborhoods.
The store operates on thin margins and can’t find VUCANs to work at minimum wage. The store decided about six months ago to automate. Customers scan their own products. Store outsourced merchandising, security, and shelf stocking. This retail business model is coming faster and sooner than many workers expected. Customers see the future of retail morph in real time due to automation. Our corner retailer wants to evolve into a ghost company, especially if they can’t find sufficient front-line workers.
In the U.S., Walmart, Target, and Home Depot are the three largest retail employers and are front-line to the COVID pandemic. Walmart is famous for its enormous Supercenters, which are open 24/7 with full-time and part-time employees. However, Walmart is competing with Amazon and other online retailers. Walmart is taking a hybrid approach to remain competitive, investing in automation and its workers by offering higher wages, online training, and paid degree programs. Walmart is a people intensive business and is following the same model, but automating more slowly.
Starbucks, UPS, and many big box retailers are focusing on their workers because customers want the people experience. Employee turnover is expensive. According to surveys, turnover for each front-line worker can cost up to $5,000 or 20% to 30% of an entry-level salary. Turnover in low-wage occupations can run up to 50% in the first 6 months so there’s a bottom-line inducement to retain and upskill these workers.[i]
Hard Lesson Earned: COVID is accelerating automation because of social distancing. So, how does a retail company evolve into a tech company quickly and effectively? This is one of the toughest questions facing many companies. And, there’s no easy answer. Since, it’s based on VUCA context, segment, business model, people, systems, risk appetite, and urgency.
[i] Walmart Tests ‘Upskilling’, Wall Street Journal, September 4, 2015.