THE EVOLUTION SOLUTION

Godzilla rises above Tokyo Bay.  People scream and run helter skelter, in total panic. How did this happen? Surely we are dead now….

Thousands of articles written, speeches made, forums held recently about Amazon and the Category Killers (see http://www.isourcerer.com/2017/08/the-category-killers.html) like Inditex, Uniqlo, H&M, Lidl. Many if not most refer to “disruption,” “unprecedented challenges” and cast those companies as if they hatched some sinister plan to destroy retail. OR they just ominously appeared, like Godzilla.

My questions to those sky-is-falling moaners:

1.     What exactly did they “disrupt” except for your business?

2.     When did they start disrupting, or

3.     When did you first realize what they were doing and what effect it was having on your business?

4.     Do you understand any of what is happening to you?

Actually, they didn’t disrupt anything; they just EVOLVED. And you didn’t.

The state of retail today follows Darwin’s theory of “Survival of the Fittest.” Per Darwin, those who figured out a new tool or technology better than others survived. Those that slept, ignored or were ignorant, didn’t.

The rise of these companies who will doubtless dominate retail in the future followed a clearly predictable pattern of evolution. And they themselves have evolved into their present state over as much as 40-50 years time. Let’s take a brief tour through the evolution that brought us to where we are today:

1.     Brick and Mortar- The Shopping Experience

The shopping mall, which is an iconic and important part of our shopping experience, is not a new phenomenon. It can be traced back to the Roman Forum, the Greek Agora, and the medieval market towns. (Smithsonian Magazine). When Congress allowed companies to accelerate depreciation in 1954, this made the upfront investment in building malls much more feasible and possible. Coupled with rural population growth, this was simply the evolution of shopping habits beginning in the 1950’s. Enabled by social and legislative changes.

Why did people flock to shopping malls? For the shopping experience. This is no different than the motivating factor going back to medieval times. In the 19^th and early 20^th century, local neighborhood shopping areas afforded people the opportunity to buy what they needed as well as have a pleasant social experience.

Then, department stores evolved from the neighborhood, promising a big selection, dependable quality and better prices. Sears opened its first department store in 1925 in Chicago, JC Penney some years before that.

The first shopping mall in the US was built in 1956, the Southland Mall in Edina, Minnesota. The last one was built in 2006. (Wikipedia). IN the meantime, more shopping malls were built than was needed given the population, mostly due to the whopping real estate profits that could be made.

Now, with enabling technology, it is no longer necessary to run to the shopping mall to buy what you need; if you want to shop for the entertainment or experience, you also have choices. You can sit at home, just as people did more than 100 years ago with the Sears Catalogue. Simply put, brick and mortar shopping with the department store as anchor has EVOLVED to, “ I can get what I NEED online. For the balance of my shopping experience, I have time for a laser-focused, clear, concise and pleasant presentation of what I should want now or this season.” Solution: Amazon and the Category Killers.

2.     Ecommerce-M commerce?

People shopping remotely is not new.

Sears, enabled by Rural Free Delivery, mailed its first catalog in 1896, almost 30 years before it opened its first store. Sears even sold houses through their Modern Homes catalog starting in 1908 (For $930-$3500)!(Sears Archives) JC Penney produced its first catalog in 1925. (Wikipedia)

Quick-when did Ecommerce first appear? How many of you said 1983?

AT&T produced and distributed Viewtron, beginning with a test in Florida, from 1983-1986. Viewtron was a remote terminal on which you could order merchandise, book flights etc. based on NAPLPS graphics language and sent over phone lines.  The idea failed as people were not accustomed to using technology and did not want to spend the $600 cost.

From there, what we can clearly see the EVOLUTION of what we know today as ecommerce:

1984- First B2C online shopping platform in UK- Gateshead SIS/Tesco

1984- Compuserve Electronic Mall debuts in US

1990- Berners-Lee introduces the first web browser, World Wide Web.

1994- Netscape Mozilla, first secure transaction.

2016- Amazon aided more than 10,000 sellers to generate more than $1million in sales on the Amazon Marketplace.

3.     Amazon and Inditex

Wait- How did we get to 2016? When did Amazon start? Answer: In 1994, as Cadavra, later changed to Amazon with the oh so familiar A to Z logo. So Amazon has been EVOLVING along with the enabling technology for almost 24 years. 

So where was everyone else? Why does Amazon account for almost half of online sales today? Jeff Bezos even said, “There is nothing about our model that can’t be copied over time.” But they didn’t. In 24 years.

Inditex, corporate home of Zara, Massimo Dutti, Bershka, Oysho, Zara Home etc. started in 1963. More than 50 years ago. The first Zara store in US opened in 1989. Almost 30 years ago. By 2010 Zara had 5000 stores worldwide. Today Inditex operates in more than 90 markets worldwide. Only very recently is there frantic talk about “fast fashion” as a force in the retail business. Inditex did not get to where they are in a magic burst. They EVOLVED over time. The shopping experience and the value proposition are what customers want. No discounts necessary to attract customers; the values are there everyday. But when they DO have a sale, well, have you seen pictures of piranha working together to devour a prey?

Other category killers such as Uniqlo, H&M prove that this model, too, can be copied over time. These companies also evolved; those department stores that are closing daily-didn’t.

It can be clearly seen that the phenomena that are Amazon and Inditex did not suddenly appear over Tokyo Bay-they EVOLVED over time with the enabling technology.  Everyone else had the same opportunity to evolve-but they didn’t.

As we follow Darwin’s principles, those who adapt best to the changes and challenges over time, survive. Those who do not, don’t.

My conclusion is: Amazon and Inditex are NOT the problem. They are the SOLUTION-the EVOLUTION SOLUTION.

                                                                                                                       

(Next up: How The Evolved create business opportunities and welfare- and how that changes everything about the business process, including sourcing)

HOT TOPIC- Is "DISRUPTION" just another word for "EVOLUTION"?

The word “disruption” has become so PC that it is effectively losing its meaning. The term is being so overused that it is hard to take those who go on about it seriously anymore.

Disruption- When something is removed from or added to the current order or mix, resulting in a new and unforeseen situation or opportunity. This, by its nature, is a rare and serious occurrence. Looking at it another way:

Donald Rumsfeld laid out three levels of information available to us today, in business or politics:

1.     Known knowns- We know all the information about something or someone, with no gaps or assumptions;

2.     Known unknowns: We know that there are gaps in our knowledge, and we usually know where the gaps are;

3.     Unknown unknowns- This is the Black Swan that nobody expected or saw coming.

To qualify to be “disruptive,” the result or action, when known, should be from the last category.

The concept of the Black Swan implies the presence of a difference maker among a world of White Swans.

But then what happens when everyone uses the term “disruption” or “disrupted” daily, and the term gets separated from its actions, becoming only meaningless words? The term loses its meaning when it is so widely used, in so many places and by so many people.

When a bank sponsors a poll of the C-Suite about disruption and asks the disrupted whether they think they will be disrupted, or disrupt, and whether either is a good thing, the concept has been so diluted as to have lost its original value; if you have to talk about it and study it before you do it, you probably are not disruptive. But you may be disrupted.

IN this case, the Black Swan becomes indistinguishable from the other swans, they having done the PC thing and dyed their feathers black.

The name may be marginalized by all the discussion, but the idea of disruptive change is not new. In fact, it goes back through evolution to our very beginnings as erect beings and before. What we can tell from evolution, and as Darwin tells us, the being that appears with a different and better trait, or who acquires some knowledge or ability that makes it superior, such as the use of fire, tools, technology, etc. is disruptive.

So the word disruption or disruptive itself is not the point. And those who use it or overuse it cannot take satisfaction from their indulgence in the term. Only those who find that fire when nobody else has really ARE disruptive-and they probably don’t care what you call what they are doing.

It turns out that the current use of the word is new (and now PC), but the concept is not. The idea of someone doing something that disturbs the current order, and, when it is successful whether through popular acclaim or results, is as old as history.

Let’s go back a little bit in time and see what disruption looked like in our recent history. Late 1960’s, the established world order is disrupted by the Vietnam War. That was the Black Swan for our society. The Unknown Unknown was the level of involvement, the tens of thousands of deaths, and it had a disruptive effect on society. Its effect on the fashion world was a pivot (another PC word) in the way young people dressed. From preppy perma press to bell bottoms and halter tops. Who was the disruptor who marketed the first pair of bell bottoms?

Today’s disruption is NOT caused by Amazon, Zara or any other of the category killers. It IS caused by the evolution of technology which enabled the disruption. So, in the end of the day, the incredible evolution of technology caused the Amazon phenomenon, not the other way around.

This is no different than Homo Sapiens learning to use fire or tools. It is today’s evolution story. The human race continues to evolve, and technology is the enabling tool.

So we should not be annoyed or distracted by the fact that anyone with a mouth or pen is free to use the word “disruptive” even if it is just talk. Let’s look at today’s evolutionary actions and where they are headed. That and only that will enrich us, or at least save us.

For example, given Amazon’s information database, the danger to its competitors is no longer disruption-it is domination.  And, as Steve Dennis said on Forbes.com, the buzzword ecommerce has lost its meaning when separated from all other commerce, and has merged into the singular concept of-commerce.

When something occurs that truly changes the status quo, everybody who failed to be on the front end of that change wants to talk about it—as if, by using the PC word, such as disruptive, their failure to be the first one with the new tool or the first to use it is forgotten or forgiven.

So what is the moral of this story? Simply that words will come and go, but what really counts is the action. If you don’t want to be part of the crowd who is talking about something they didn’t have the vision to do and who is figuring out how to catch up, be the first with the tool. OR, take the appropriate actions to get in front of the evolution. Talking can’t do that.

Finally, disruption is really just evolution. Enabled by some force or development that has evolved, the disruptors are the carpe diem actors who seize the opportunity to lead the pack in our next step of evolution.

Where are you on the evolutionary scale? As in Darwin’s work, those who fail to evolve, or do so too late, are headed for extinction.

“Pivot or Die?” First, Let’s Define Die…

An October 11 article in Sourcing Journal Online entitled, “Pivot or Die: The Megatrends That Will Capsize Your Supply Chain if You’re Not Paying Attention” begins with the following—warning?:

“If last year meant change for the apparel industry, this year it’s time for a pivot. And in particular, a pivot toward more sustainable business practices.

Without it, extinction will be a sure bet.”

Wow. Extinction. Die. Let’s get our arms around this. Define “die.” Is this the whole apparel industry? Is it the people who are affected by current levels of pollution and non-sustainability? Or is it both?

Clearly the article and an associated piece dated October 4 in the same journal entitled, “Report: The Industry Has the Circularity Concept All Wrong—And What Companies Can Do to Get It Right” are saying that a. there are too many garments being produced in the world and b. the only way to save the world from choking on too many discarded garments is to massively recycle them.

Sounds like a plan? Let’s get practical. With 7 billion people in the world and most of them wearing garments of some sort, what kind of effort and organization will it take to impact even a significant portion of them? The article mentions some efforts that are being made, but think about it. From pretty much zero now, a whole infrastructure would have to be built, such as what we have in most countries and areas for paper, glass and plastic. Garment recycling bins outside of each building and house, and an infrastructure to collect and process. OMG.

And, what about the effort, as I wrote about in my last article, “Water, Water Everywhere and Not a Drop to Drink”, http://www.isourcerer.com/2017/10/china-water-water-everywhere-and-not.html that countries like China are beginning to make to address pollution at its production source? Isn’t this where the effort should start instead of asking people to buy less clothes and trying to organize a way for them to recycle what they don’t want anymore?

This, to me, is where the apparel/textile industry needs to make a major effort now because a. this pollution is killing people and b. it can be accomplished with consistent effort on the part of  governments, producers and buyers but NOT without disruption of the supply chain in the short term.

Regarding clothes recycling and reducing consumption--how to do that? Ask retailers to put a quota on how much is purchased by each person? That ,when the very foundation of traditional retail is challenged by lower sales and profits? When buying clothes online is easier than ever?—it would take a herculean effort even to get a basic agreement from (major rather than small) manufacturers and retailers about producing less (?) and how the structure of clothing recycling will go down. Not to mention getting consumers into it. Even with the current efforts to recycle polyester and other fibers, there is a very long way to go until recycling has any significant effect, much less global effect.

So the big emphasis, push and pressure today must be at the production level, of fibers, yarns, fabrics and finished goods to meet production standards that drastically reduce or eliminate the local and global harm to environments and people-air, water, land, etc.

That can be done in our lifetime with everybody on the same page.

WAKE UP CALL-Governments, massive producers like Walmart, Amazon, Zara, PVH, Macy’s etc. get on this now. Simplify your social compliance regimens and add requrements about environmental impact.

But not today. Or tomorrow. At this point the apparel industry, considering the number of producers globally, is at ground zero in this effort. It will take time.

Then, once we produce clothing without or with minimum environmental harm in the first place, we can think about recycling on a global scale. Otherwise, the recycling effort may be coals to Newcastle..

Levis 501 for Women- One of the greatest marketing stories ever told

I recently recovered some files that had been missing for a long time and this was one of them. I led the team that created, marketed and manufactured the first Levi's 501 made and fit for women in history. This was acknowledged by the corporation to be a breakwater event in the business of Levis during the 1970's and early 80's, when the company was struggling to compete with a plethora of designer jean labels.

Proud of my work and the lasting effect it has had on Levis. For more detail, please follow the link:
https://www.linkedin.com/in/isourcerer/detail/treasury/summary/?entityUrn=urn%3Ali%3Afs_treasuryMedia%3A(ACoAAAAxf0oB0ru219NXjtHkStnmRrpstpHn01E%2C1507308728655)

China: Water, Water Everywhere and Not A Drop to Drink (BTW, don’t breathe either)

China’s pollution problems. OMG. Having recently moved back to the NY area from Shanghai, I shudder at the amount of bad air and water, either directly or through the food and drink, I might have ingested in 10 years. Poison!

Blue skies, fresh air (like today in NY)? Almost never. Oh, and let’s add to the toxicity the constant construction all over the city (and for 6 months at my apartment community) that adds to the poison mess. We are breathing that every minute! What we do for money…

Some scary details-the charts look like those intentionally scary commercials for the evils of smoking):

1.     Air- take a look at this:

This chart was from 2015!

Pollution levels in the last year reached critical levels in major cities such as Beijing which were not tolerable for humans, and during which times movement had to be restricted. Not great for business.

2.     How about water? Some information from the Guardian:

“In 2015, 3.78bn cubic metres of untreated wastewater was discharged across China, including 1.98m cubic metres in Beijing alone. This is water that has been ruled unusable for agricultural, industrial and even decorative purposes dumped into rivers and lakes.”

“In Beijing, 39.9% of water was so polluted that it was essentially functionless. In Tianjin, northern China’s principal port city and home to 15 million people, a mere 4.9% of water is usable as a drinking water source.”

In Shanghai, where I lived, “85% of the water in the city’s major rivers was undrinkable in 2015, according to official standards, and 56.4% was unfit for any purpose.” (Deng Tingting, The Guardian, 2 June 2017)

Now that we are all poisoned and dying, what, above all, are the consequences for our business?

Bloomberg reported, “What started with inspections in the Hebei region around heavily polluted Beijing—and where 176,000 small businesses could be forced to close by the end of September—was extended to all four major municipalities and 10 provinces as of August.”

Finally, the government is shutting down factories as a result of failed environmental inspections: “In an effort to combat decades of air pollution and contaminated soil, the Ministry of Environmental Protection (MEP) has been investigating different provincial areas since April. Nearly 18,000 companies, about 70% of the businesses examined, failed to meet environmental standards for controlling air pollution, the MEP reported in June. The latest round of inspections has focused on Jilin, Zhejiang and Shandong provinces, with many factories shutting down as a result.”

So, after years of turning a blind eye to the problem in favor of unparalleled export growth, the devil is claiming China’s soul: Clamp down on polluters, or the death toll from passive ignorance and corruption will result in epidemic and death which will give

China a black eye in their quest to be a frontline political and industrial power.

Also a raging pollution problem is in conflict with the major political initiatives, “One Belt, One Road” and “Made in China 2025” which are meant to enhance China’s position as a preeminent world industrial power. Not funny, but we could change it to “One Belt, One Road to Awful Death” or “Made in China 2025-if anyone is still alive.”

Seriously, if the Central Government is sincere in clamping down on pollution, regardless of the reason, that is exactly what they should do. I think they are, if not only because they must.

How about our business? For example, Dyed/printed goods- Fewer suppliers, less capacity, longer lead times, higher prices. Unpredictable delivery dates. Aargh…

So, in the short term, we have no choice but to deal with it, and accept the increased prices and longer lead times. And we have no choice but to ask our garment suppliers about their downline suppliers’ status with the government program, as well as measures they have taken to control pollution so they can stay open.

Long term, the benefit to us will be a sustainable industry that doesn’t kill people in the process. And, new technologies like digital printing will reach maturity because they are fundamentally better, regardless of higher cost. More people will invest in sustainable technology, so costs will decrease.

Those suppliers who invest in advanced technology and pollution control will survive. Those who do not will end up on the scrap heap of history.

Advice to CFOs-book this as an annual charge for technology adjustment-because nobody knows how long the process will take and when prices will begin to decrease. We know it won’t be short- China government has been amazingly fast at making changes, but, since this involves so many suppliers, we have to say at least 3-5 years down the road.

One thing is for sure- China will emerge on top of this situation-she always does. It’s all worth it-for industry and for the people.