Jim Barr, Digital & Growth Transformation Leader—Part 2
This is the second part of our three-part interview with Jim Barr, a C-level leader who has worked with iconic brands, including Ritchie Bros., an RHR client, as each struggled to adapt to changes in customer journeys. RHR Senior Partner David Astorino interviewed him. Read Part 1 here.
David: What are some important learnings leaders can use and some key steps they can take to drive their transformations?
Jim: There is likely no single “right” recipe. Some version of these steps may be helpful for leaders to potentially adapt to their own situation. These steps may seem basic, but I’ve seen failures at each stage. They consist of making a case for change, creating a compelling vision, defining a simple strategy, aligning everything toward the strategy, and staying the course. Let me elaborate:
- Make a persuasive case for change. The case usually incorporates some compelling data/insights you may even already have. It comes from studying how the customer journey (i.e., the purchase process) or value proposition is evolving and where it is likely going. At OfficeMax, we learned our core customer had evolved from the back-to-school mom to the small business owner who now wanted printing services and web hosting as much as she wanted pens and paper. The purchasing journey had also changed to include online search engines and product reviews more often than traditional TV and newspapers. We needed to align marketing spend and products around these changes. At Sears.com, Amazon was killing us with endless aisle assortment, so we went from 50,000 SKUs to over five million in less than two years (mostly through drop-ship arrangements). At Ritchie, we did a seller segmentation and found compelling data about our sellers’ behaviors that spurred us to launch new formats and got leaders, investors, and ultimately, the whole team on board. A second tactic is to address head-on what happens if you don’t change. Optimism leads us to believe we can stay mostly where we are. But it is important to depict an honest “hands off the wheel” or “glide path” scenario. What would really happen? The end picture often doesn’t look good, and the business case can help justify resourcing the transformation. Finally, the case for change must be evangelized and repeated. Do it past when many eyes begin to roll!
- Create a compelling vision. Once a need to change is widely accepted, leaders must articulate what success should look like. One helpful tactic is painting a vision of the company three to five years out. It should articulate such things as how customers will interact with and view the company, how its brands will evolve and, of course, revenues and profits. This “true north” vision, once agreed on, becomes a beacon and helps drive decisions. Any major decision needs to move the needle toward true north.
- Define a simple strategy. After the team knows it needs to change and what success looks like, it is necessary to articulate the how (strategy) in an easy-to-understand way. What is the durable, multiyear roadmap toward the true north being sought? This is perhaps the most important step, and it is a challenge. It must move fast enough to get to the vision in the desired time. It must be simple enough to understand and for each associate to see where they fit in and what they should do differently. And it must be realistic and not ask the company to do something it cannot do (e.g., an industrial company becoming a digital company in six months). Typically, effective strategic plans have no more than four or five pillars that will likely persist for three to five years (though tactics under each pillar can be examined and tweaked periodically).
- Align everything toward the strategy. This turns a good strategy into reality. All the key levers must be aligned to the vision and strategy. Key elements include resource allocation, business-model evolution, linking rewards (e.g., bonuses and sales compensation) to the new direction, and making sure the right people are in the right jobs (most often the organizational structure needs a refresh). If you do everything else but don’t marshal financial and people resources to the new direction, change will not happen at the desired speed.
- Finally, be persistent and stay the course. Leading previously successful companies in profound transformations to be successful in the next phase is super rewarding but not easy, and there will be many tough days. It takes a certain type of leader; it takes three P’s—be positive, be passionate in your belief, and be persistent. These will be needed to get your team through the challenges.
David: What are some of the leadership challenges inherent when transforming traditional companies, business models, and brands?
Jim: Every transformation is unique, but there are some common challenges. In addition to overcoming an overly narrow view of competition, a natural economic disincentive to disrupt the business, cultural challenges, and inertia, you need to maintain agility for the long run. I’ll explain:
- A stale and overly narrow view of competition. Many fall prey to a narrow view of competition. As a personal example, in the mid-1990s, Britannica viewed its key competition as being another print encyclopedia, World Book, and believed its own core value proposition—being the most comprehensive (44 volumes, 40 million words) and authoritative (articles written by Nobel laureates)—still held. Unfortunately, it missed the fact that there were much cheaper substitutes that were “good enough,” including free versions bundled with PCs and, later, Wikipedia. I’ve seen some version of this at nearly every company: failing to keep examining the full array of substitutes for products and evolving customer needs.
- A natural economic disincentive to disrupt the business. At the core of each company, particularly those that have been leaders, is the tendency to protect and maintain the core business instead of evolving and strengthening it. Implicit in this is fear that acceleration, adoption of new technologies, and addressing changes in customer journeys and value propositions will come—at least in part—at the expense of the core business. While intellectually rational, this notion is fueled by the illusion that the company has more control over customer choice and behavior than it really has. One form of the innovator’s dilemma is that companies with the most to lose delay bringing innovation to market; companies with less to lose are not bound by this. Kodak was an early leader in transitioning to digital photography but chose to manage the transition too slowly to capture the market, allowing others with less to lose beat them to digital storage, for example. They went from a potential disruptor to being disrupted. When I was at Microsoft in the late 90s and into the 00s, even though we were an otherwise innovative company with many smart people, we protected Windows and Office, leading us to hold back innovations we developed. Others didn’t hold back and capitalized on this. Examples include internet search (Google), tablets, and mobile phones (Apple). I’ve seen this theme repeated across companies and industries: you either lead the disruption or you become the disrupted.
- Cultural challenges. Each company has a unique culture that has led them to be successful in the first place. However, often cultures are designed purposefully to be rigid so the company can persevere and stay on path. Ritchie had sold its services against all other ways to sell used construction equipment, so when its best customers began using online methods, the culture nonetheless initially rejected it and left key customer needs unaddressed.
- Inertia. Change is harder than doing the same comfortable thing, so it takes top-down leadership to make the case, which must be simple and repeated. It must come from the CEO and the board, and they must mean what they say (e.g., changes in resource allocation). Then it must ripple through all key aligning mechanisms, such as compensation. Long-held norms and learned behaviors are hard to break.
- Maintaining agility for the long run. Once a company has reacted successfully to transformation, it is important to keep the mindset of regularly re-examining its markets and customers and adjusting appropriately.
In Part 3 of this interview, Jim describes the leadership skills and capabilities necessary when driving major transformations and the characteristics of a high-performing team.