Targeting Transformation

With his industry in flux, can target’s first outside ceo transform the nation’s third-largest retailer?

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With his industry in flux, can target’s first outside ceo transform the nation’s third-largest retailer?

He happens to be the leader of one of America’s most recognizable companies, a $70 billion operation with 341,000 employees, but Brian Cornell may well be among the most disarming CEOs on the planet. Here at Target’s Minneapolis headquarters, he strolls into a nondescript conference room in a weekend button-down shirt and denim pants and almost immediately relaxes you with questions about summer vacations and family. His voice is soft; his face, friendly. You could almost be chitchatting with one of Target’s accommodating cashiers. Welcome to the new breed of captains of industry: alert, probing, but totally casual.

At Target, though, Cornell is a CEO of a different ilk for other reasons. Before he was hired in 2014, the retail Goliath had never in its then-52-year history picked an outsider to run the show. And though he had experience in retail stores, his most recent job was CEO of a PepsiCo food division. Indeed, to some, the choice was as curious as, say, finding organic grapes at Target, which are right there in the food section of some of its stores.

“Most of the leadership had done a lot of the homework prior to my arrival,” Cornell tells you. Well, yes, but Target was something of a mess when the now 57-year-old came aboard. Store visits were nosediving quarter after quarter. An ambitious expansion plan in Canada was faltering. Target had arrived late into the e-commerce game. And, oh, don’t forget the 2013 data breach that affected 40 million customers.

Enter Cornell, a transformative leader at a time that called for transformation. In one giant swoop, he closed those Canada stores with a decisiveness Target hadn’t seen in decades, then focused his efforts on where the chain could succeed. Slicing through its legendary bureaucracy, he brought in key leaders from outside the company who emphasized innovations and carefully re-energized those who stayed. Less than a half-year into the Cornell era, Target’s new product lines and growing digital operations were leading to better-than-expected holiday sales. Shareholders were happy. In fact, the stock hit a new high in 2015.

His sophomore year, as for most CEOs, has been a different story, with earnings softer and the stock down earlier this year. Still, Cornell hasn’t lost his fans. “He’s really done everything he said he would,” says Joseph Feldman, senior managing director at the Telsey Advisory Group. “He’s changed the mindset of the company.”

By his own account, Cornell still has a lot of work ahead. The big-box industry is very much in a state of flux, with no one quite sure how massive store chains will ultimately fit into an age of shopping by smartphone and operating in the shadow of an ever-looming Amazon. Target, for its part, had lost the edge that made it so famous, as the savvy purveyor of cheap chic. Which brings us back to Cornell’s outsider background; it allows for a type of agility and fresh perspective that’s difficult for an insider to pull off.

Stationing his office near the company’s gleaming social media control center, dubbed “Guest Central,” Cornell has brought a refreshing sense of detailed analytics to the company’s decision-making. On any given day, the company may be mentioned as many as 50,000 times across social media. Standing in the control center, an airy double conference room with a huge wall of blinking screens, it can feel as if every single one of those tweets or Facebook likes has been recorded. “It eliminates a lot of guesswork,” explains a company spokesperson, as a tour group gawks at the display.

It isn’t all science, though. Cornell also likes to rely on at least some instincts, based on far smaller samples. In one well-recalled example, he broke with company tradition by visiting stores incognito—meeting shoppers without warning managers. That kind of casualness applies to his dress, his manners, and to his policy that “hour” meetings last only 45 minutes to allow for mental breathers.

From all these efforts has emerged a list of turnaround strategies, including one centered on its youngest customer. In a move dramatic enough to make the cover of Bloomberg Businessweek magazine, the company created a line of cool kids’ clothing—with the idea of attracting not only them but their tag-along parents. After all, kids today make choices our parents made for us, from what movie to see to which restaurant to visit. As Cornell puts it, Target needs to be “famous for kids.”

With almost equal fanfare, the company also teamed up with a boutique fitness studio called SoulCycle to offer, of all things, free spin classes. That dovetailed nicely with a wellness effort you might not expect from a discount retailer. And the surprises go on, with the company designing products that solve “pain points” for customers and opening up a handful of “flexible format stores” for urban customers, where merchandise is customized to neighborhoods.

But what else does this inventive CEO have in mind to get Target on target? Briefings editor-in-chief Jonathan Dahl and Tierney Remick, vice chairman, Board and CEO Services at Korn Ferry, asked him to look backward and forward at his time at the company so far. (Questions and answers edited for clarity.)

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You arrived at a tough time for Target. What was your plan?

It might have been a tough time; I also think it was an opportune time. The company was at a point where we were taking inventory—the existing leadership team talking to the consumer, really understanding the business. So I was able to take the time to learn the business, understand the team, and work with our leadership to shape some of the priorities. We made some challenging decisions, but the timing worked out well.

What have you zeroed in on?

Being more externally focused. We’re reconnecting with today’s consumer, the new modern way of shopping, and bringing an innovative spirit back to the company. We also recognized we couldn’t play defense. We had to get back on the offensive, and that started with understanding the consumer.

We hear you’ve done spur-of-the-moment incognito visits to the stores.

Yes, often the team members don’t even know we are in the store until we are walking out. It allows me to get a lot of feedback from our teams in a way that isn’t orchestrated, and firsthand accounts from real shoppers, pointing out aisle by aisle what they like. I’ve heard a lot of stories about the memories they had of Target. It gives me a sense for the pulse of the consumer.

So you use anecdotal evidence—but have also pushed for more analytics. Does that make sense?

Analytics play a critical role in how we lead the business. But you also have to get out there and see it firsthand. The analytics can lead us to a conclusion that a product is going to be a big winner, but you have to put it out in the retail environment where real people get a chance to look at it. So, for our business it’s always the combination of both, because what looks great in a perfectly staged environment doesn’t always apply in the real world.

How else are you using data?

We face an additional challenge: We can do virtually anything in five or 10 stores. But, we have to replicate it 1,800 times. You can get fooled by testing something and think, “What a great idea! Everyone loves this! It’s working great!” But when you have to do it 1,800 times, you find out if it’s really sustainable. The math is really important. It has to be something that’s scalable.

Retailers are facing enormous challenges that require change. Can you describe your “flexible format store” effort?

We’re positioning some of our stores to fit fast-growing urban centers, with flexible formats that bring us into New York City and Boston. We’ve recently opened up new locations in Philadelphia, in Boston, in Queens and Manhattan.

Do they sell different things?

We’re focused on having the right, carefully curated assortment, tailored to the local community. So what we’re doing in Philadelphia is actually different from what we were doing in the new store in Boston. One is in much more of a traditional urban neighborhood. The other one’s right by Boston University, with an assortment that appeals to college students.

Target was slow to e-commerce. You’re changing that?

We’re focused on making sure that digital application makes it easier and more convenient to shop, and allows us to build a more personalized relationship with the shopper. We rolled out an app several years ago called Cartwheel, which is our digital savings app. I can almost guarantee if you go into one of our stores this afternoon, you’ll see a cart in one hand and a phone in another.

What else?

We’re also using that digital connection to make it convenient for you to shop at your desk or in your kitchen, and come by a couple hours later and pick up that order. There are some evenings where it’s just a lot easier for a working parent, for example, to say, “Target, you do the shopping for me. I’ll be there at 6, and I want to just be able to pick up my order.” And I’m going to make sure that the technology ensures the order is right, it’s there when the guest wants it and I’ve got a team member who greets them appropriately—the human touch supported by technology.

It’s working?

We find that almost a third of the time our guests who order online and pick up in-store keep shopping. That’s a really important part of our growth platform.

Let’s shift to Wall Street. What does a CEO need to do to keep the investment community happy?

Of course we’re under pressure to do that. We have to be really clear about our strategies and priorities. We had an investor conference just a few months ago, and when I opened it up I reminded them that the priorities we’re going to talk about today are exactly the same ones we talked about last year. We’re going to continue to focus on the things that matter most to our guests.

How does a CEO balance the need for strong quarterly results with long-term plans?

The reality is we’re a publicly traded company. We’re a big publicly traded company. We don’t get any time off. It’s not as if we can say, “I’ll see you in two years.” So we’ve got to make sure that we’re showing progress, that we’re clarifying our progress against the initiatives that we’ve said will guide the company going forward. But we also need to be thinking about what’s next and where we want to go three to five years from now. So it’s important to strike the balance.

Speaking of balance, tell us about your views on wellness in the workplace.

It’s what I would describe as energy management. How do you manage yourself like athletes would manage themselves? So, in preparation for a big meeting, how do you make sure you have the right combination of rest and preparation time? Say an employee tells me, “Brian, I was up until 2 in the morning working and came back at 7.” That might mean they’re prepared, but do I want this person to lead a big meeting or make an important decision when they are completely fatigued?

What else helps?

I make every effort to cap some “one-hour” meetings at 45 minutes and encourage my leaders to do the same. Maybe now you can call home to check on your child, or take a walk and recharge, or have a healthy snack.

I found one of those snacks myself—at your store here in Minneapolis. Organic grapes.

It’s where today’s consumer is going, that’s what they’re looking for. It’s one way Target’s guests are at the center of our transformation.

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