The direct merchant has a similar tool, one that allows the merchant to understand what went wrong during 2008. This tool is called the "post mortem".
The post mortem is a dynamic process, one that includes all business leaders as well as key employees responsible for managing or analyzing business units. And by the way, if you want to train high-potential employees to become good business leaders, simply invite them to sit in on the post mortem process, allowing them to hear the viewpoints of each business leader.
All companies have a different post mortem process, but there are elements of the post mortem process that are similar across brands. Let's review a few of the tactics retailers employ:
- A Common Set Of Metrics: A good post mortem process utilizes a set of metrics agreed upon by all business leaders. The post mortem is not the place for the merchandising executive to get into a shouting match with the CFO over how to define inventory turn.
- Historical Perspective: Whatever metrics, reporting, or "KPIs" you choose to evaluate, look back at least five years. It is important to look at metrics prior to 2003, pre-bubble.
- Storytelling: There should be one person in the room who links stories together, who pulls stories out of metrics and facts. In a multichannel business, you'll frequently observe business units with wildly different presentation styles. The catalog division will bring forty pages of mainframe-based reporting. The online division will offer fourteen color powerpoint slides that summarize results. The story is somewhere between the mainframe reports and powerpoint slides. One individual should be able to tell the story that individual department heads are unable to communicate. This individual does not have to be the Chief Marketing Officer. The individual should be a "trusted advisor", an unbiased individual who does not have a political agenda. I've seen the VP of Inventory play this role well at one company. I've also witnessed a CFO play this role well. It is my opinion that this person should not be the CEO/President/Owner.
- Accountability: This is not the time for the VP of Creative to suggest that the presentation was "brand right" regardless of business performance. This is not the time for the VP of Database Marketing to sling arrows at everybody. In a good post mortem process, the VP brings metrics that illustrate the contribution of the business unit to EBIT, positive or negative. The environment is safe, allowing the presentation of negative metrics. I recall once promising to deliver $9 million in EBIT, only to deliver about $5 million in EBIT --- a $4 million dollar failure. The failures must be presented.
- Actions: You'll know you are in a bad post mortem process when all you are doing is reviewing metrics. You'll know you are in a good post mortem process when all participants are asking questions about the actions business leaders plan to put into action.
- Go Beyond Your Discipline: A good post mortem process encourages the Web Analytics leader to go beyond what Omniture provides. In a good post mortem process, the Web Analytics expert co-presents with the e-mail marketing manager and catalog circulation director and online marketing director, offering integrated solutions. The inventory director and merchandising director share a vision for the future.
- Product: Thoroughly examine the difference in performance between new and existing product, differences in merchandise sales by channel and advertising medium, price points, return rates, search engine trends, customer demographics, new vs. existing customers. This might be the most important part of the post mortem process.
- Visualization: Good post mortem processes put catalog spreads, e-mail merchandising, and online landing pages on the wall for all to see. The merchant points out campaigns and landing pages that worked well (measured via profitability), while outlining those that failed. Visualization is important, given that more than half the room will be uncomfortable analyzing metrics.
- Everybody At The Table: This means your Finance and HR teams sit at the table, giving an account for actions during the past year. If your CFO traded dollars for euros, only to have the value of the dollar strengthen, hurting profitability, it needs to be discussed openly. If your HR team won't pay to relocate entry-level workers, and you cannot find entry-level workers, it needs to be discussed. This process isn't all about beating the merchant team into submission, it is about everybody in the company finding ways to improve.
- Social Metrics: This is a new area, but is one that is very important. A good post mortem process will include a review of what the customer is saying about the brand, comparing recent blogosphere/twitter sentiments to those of a year ago. Since the information is free and easy to obtain, this becomes a must-have in any post mortem process.
- Competitive Performance: It is good to bring in a trusted advisor, one who can objectively describe what is happening with competitors. In the catalog world, this might be your Millard or Abacus or Merit Direct sales rep. Online, you might consider inviting somebody from Google, Yahoo!, MSN, Coremetrics, Quantcast, or any other online organization that offers a broader perspective.
- Multichannel Fornensics: Good post mortem processes take the results of the past year, and project the future. Ultimately, the future is what matters --- being down 20% in 2008 is one thing, but if this downturn yields a -13% decrease in 2009 due to customer file weakness, then management has another set of challenges. You'll use Multichannel Forensics to provide this view of the future.
- A Roadmap: Given what happened in the past, the post mortem team creates a roadmap for 2009.
- Signalling: After the post mortem process, the executive leadership team signals to the entire company the findings of the post mortem process, outcomes, and consequences. The signalling tells the employee that this process was important, and that the company expects accountability from all employees.