The walls of his office were covered with giant sheets of paper, and the smell of magic marker permeated the office. Within seconds, I had what felt like an ice cream headache from the odor of the markers. Boxes and parallelograms dotted the giant sheets of paper, all connected by a series of complex, multi-directional arrows. The flowchart documented the path an order takes from being captured in a call center or online, to the distribution center, and then to the corporate data warehouse.
Mr. Morgan closed the door behind me. I secretly hoped that the room was well ventilated.
"Take a look at this, Kevin!" Mr. Morgan showed me a Powerpoint slide he created earlier in the morning.
- Call Center Employees With The Largest Average Order Values In 2008 Generate Average Order Values Of $148 In 2009.
- Call Center Employees With Normal Average Order Values In 2008 Generate Average Order Values Of $139 In 2009.
- Call Center Employees With Below-Average Order Values In 2008 Generate Average Order Values Of $136 In 2009.
"I thought about your data from last week --- you said that telephone customers have better annual retention rates than online customers. Your findings match my findings. Telephone customers have bigger average order values than online customers. And the biggest telephone orders come from the best employees. Online, there's almost no human element, outside of live chat. The human element is so important to a direct business. Pepper says e-commerce is stripping the human element out of business, maybe she is right."
Glenn Glieber personally hired Mr. Morgan in 1991 as a COBOL programmer. Mr. Morgan became Chief Operations Officer in 2000, after Gliebers Dresses made it through the Y2K challenge with almost no need for incremental programming support. I asked Mr. Morgan about the craziness surrounding Y2K.
"I have a successful career because I wrote code that included a four-digit year instead of a two-digit year. Attention to detail makes all the difference."
I wondered how the Operations guy gets things done at Gliebers Dresses.
"Nobody ever listens to the operations guy. People complain a lot. We process 450,000 orders a year, and we make a significant mistake on 0.05% of the orders, 225 in total. But that's almost one order a day. So every day, I get a lecture from somebody about how my team failed."
I asked Mr. Morgan what he meant when he said that "nobody ever listens to the operations guy."?
"There's a lot of problems with our business, obviously. I listen to customer calls every single day. I hear the 61 year old woman asking questions on the phone, telling my employees that the merchandise is too young and trendy for her. I read customer comments on Twitter, suggesting that our website is old fashioned, very Web 1.0 --- and I know I have to balance that feedback with the fact that our 61 year old female shopper will be freaked out if we migrate the website out of Web 1.0 mode. And I hear all of the complaints from marketing and creative about how they can't innovate given our platform. That drives me crazy."
What, exactly, is driving Mr. Morgan crazy?
"We don't optimize what we already do. Why don't we have ten versions of an e-mail campaign, based on prior buying behavior? E-mail sales will instantly improve by 25%. That's low hanging fruit, put bow-tie-guy on that one or let my team do it."
"We argue about placement of the shopping cart like it is the single biggest deciding factor in determining how our website performs. If we simply followed shopping cart best practices, we'd improve performance by another 10%, it's that simple. I've got twenty ideas from Woodside Research and Neptune Research that we could implement right now, each would improve productivity by 5% - 10%. I really think we could dramatically improve the productivity of the website if we simply followed established best practices. We don't have to innovate. We simply have to execute better. Our conversion rate could improve from 8% to 12% if we just plugged the holes in the purchase funnel.
I asked Mr. Morgan if the website was his area of responsibility, then why wasn't he implementing his own ideas and reaping the benefits?
"Because we sit in these meetings and argue about how much conversion would improve if we had a forty second greeting video featuring runway action from Milan instead of taking the customer directly to the homepage. I prioritized that idea at the bottom of the book of work, and by burying it down there, it will never get done. I could implement ideas, but then my Executive team partners call me a 'cowboy', and they won't partner with me on anything else. Trust me, I've been there! So I need to navigate the political waters on these things, using Woodside Research and Neptune Research to back up my ideas. I have a lot of ways we could improve productivity, right now."
I asked for an example.
"We talked earlier about shopping cart abandonment. Our abandonment rate is 68%. The customer finds out that shipping and handling is $12.95, and buh bye, she's gone. We lose a lot of new customers because of shipping and handling. You wouldn't need to be here talking to me, no offense, if we somehow solved that problem. We'd have all the new customers we needed."
How do you fix the shipping and handling problem when your company is not profitable?
"I don't know how we can compete. Finance analyzed this thing to death, we cannot increase sales enough to cover the profit we'll lose by giving away shipping and handling. And honestly, the folks at Zappos don't have free shipping, they have $3 shipping per item. But they get you your shoes in one day. We can't get our merchandise out of our distribution center in two days. In fact, our entire distribution center needs a multi-million dollar overhaul, we need robotics and the whole nine yards. We should have a distribution center closer to our west coast customers. We cannot afford a west coast distribution center when we're not profitable."
I asked Mr. Morgan how to get out from under the problems the company faces.
"I think we go with Glenn Glieber's advice, we find fifty 2% solutions. Let's just follow best practices, and recapture the incremental revenue that's leaking out of the bucket. A simple improvement in the conversion rate, from 8% to 10%, would result in a sales increase of maybe seven million dollars. SEVEN MILLION DOLLARS! Who wouldn't like to see that money drop to the bottom line? Now we have two million in earnings before taxes, and we take that money and reinvest it in the infrastructure of the business."
Fifty two-percent solutions. Seems like we all have fifty two-percent solutions. And somehow, business performance doesn't change a whole lot. Sometimes, simple implementation of ideas can be the secret sauce.
When clients ask me what single contribution I can make to their business in less than three months, I say "improving your processes that will go directly to your bottom line." The clients' eyes just roll with unbelief.
Companies have a tendency to go for the big, risky new ideas rather than incremental improvement.
The pressure is on for monumental change that do not rely on the fundamental direct marketing of incremental improvement. But that's what is called for first. As your COO states, this is the "low lying fruit."
And the people who know the most about how to do this are the ground floor employees who deal directly with customers every day.
We need to get back to the basics and walk with what we know instead of newfangled ideas that suck up all available management and financial resources!
Tremendous post Kevin. Thanks for bringing it to our attention with such a well developed story.
Seems like there's a little bit of all of us in each character.ReplyDelete