Do Legacy Retailers Need “Enterprise Agility?”

The retail industry is in turmoil. Korn Ferry’s Michael Distefano points out agility may be the issue.

In a shifting economy and corporate world, agility has become a key predictor of success. Yet studies show only a fraction of the global workforce is considered highly agile. In this regular column, Michael Distefano, chief marketing officer and president of the Korn Ferry Institute, explores the concept of agility: who has it, who doesn’t, and what companies can do to mold it.

Anyone want to buy a department store? Two of the biggest chains in the U.S. are apparently up for sale.

Struggling high-end retailer Neiman Marcus said last week that it was in talks to sell itself to Canada’s Hudson’s Bay Company. Earlier this year reports surfaced that Macy’s, the largest U.S. department store, is also considering a sale. It’s worth noting that Hudson’s Bay also owns Lord & Taylor and Saks Fifth Avenue, two other iconic U.S. department store brands it acquired and 2012 and 2013, respectively.

That these two storied companies are entertaining buyout offers underscores the struggles that legacy retailers have faced in the digital age. Let’s face it, with the possible exception of the major record labels, no industry has had a harder time adapting to digital transformation than retail. The New York Times said it best in its report on the potential Neiman Marcus sale: “The talks highlight wider troubles at department stores, which have had difficulty adjusting to the new ways that people shop, including online. Neiman Marcus, Macy’s, and others have been unable to keep pace with Amazon, which has conditioned shoppers to expect low-cost goods quickly.” (This isn’t just a U.S. phenomenon, of course, read about how this and other issues are affecting the U.K. retail sector).

Put another way, legacy retail companies have been hindered by a lack of “enterprise agility.” Korn Ferry defines enterprise agility as, “an eclectic set of ways of working and organizing principles aimed at increasing the speed and effectiveness of innovation and renewal in order to better adapt to changing circumstances in a volatile, uncertain, complex, and ambiguous world.” It isn’t just about redirecting an organization towards a new strategy, but rather ingraining change into the fabric of an organization so it can cope with continuous transformation.

Legacy retailers have struggled to make change part of their cultural DNA. Some of the larger outfits were not only slow to digital change, but also missed basic consumer behavioral trends such as competition from off-price physical stores like T.J. Maxx. The legacy firms have closed stores, for sure, but still have huge numbers remaining.

Included among the eight factors Korn Ferry specifically identified as hindering enterprise agility are:

  • Many relays between the outside world and developers/designers
  • Silos with different perspectives
  • Decision complexity because of many hierarchicalhierarchal layers (steep organization)
  • Diffuse, rigid, and/or non-shared sense of purpose and direction
  • Facilities not inviting frequent communication
  • Perfectionism and risk aversion; no ownership of issues
  • Full detailed planning; try to minimize changes in requirements during the development process
  • Culture of individual performance; task-oriented, long- term, internal focus

Of these, the last four certainly apply directly to the retail industry, and an argument can be made that the first four do as well.

As the pace of digital change accelerates—and more new, digitally native retail startups such as Wanelo, Stitch Fix, and Zulily better cater to today’s mobile- and social-first consumers—legacy retail brands must become more enterprise- agile. Salespeople can no longer have a monopoly on customer contact; relay decision-making among teams must be abolished; a tolerance for ambiguity needs to be developed; rapid and iterative prototyping has to become the norm; and collaboration has to define the culture. If legacy retailers don’t immediately ingrain these and other remedies into the organization, they risk extinction. As it stands now, they are already endangered.