With Scale and Trust You Can Accomplish a Great Deal — Brian Cornell, CEO Target
The Industrialist’s Dilemma — January 16, 2020
When Brian Cornell joined Target as its CEO in August of 2014, the company was struggling with the fallout of a data breach the prior year, as well as an ill-executed growth plan into Canada. The company seemed on the verge of becoming the next large US retailer to succumb to the inevitability of eCommerce.
But in the words of Lee Corso from ESPN’s College Gameday…
With a tremendous run over the last few years, beginning with its massive investment in upgrading its stores beginning in 2017, Target has earned its spot as a leader on the retail playing field. Cornell discussed some of the company’s key strategies, and even shared what it was like to rally himself and his team after a disappointing Q4 in 2019.
You Can’t Save Your Way Out of a Recession
When Craig Menear of Home Depot visited us last year, one of the things he discussed was the importance of not fighting the inevitable. If customers are going to shop increasingly online, retail companies need to meet consumers where they are — not where they used to be. Like Menear’s company, Target’s strategy has been to lever their core customer relationships and blend digital purchasing with in-store fulfillment for providing both speed and convenience. The “weekly family Target run”in the United States has remained one of the key foundations for Target’s customer engagement, and has enabled Target to deliver both a great customer in-person experience combined with digital convenience. Cornell pointed out that having to choose between these two market requirements was a false choice for them to make.
When Target committed to invest $7 billion on in-store upgrades and new footprints, Wall Street slammed the company initially, but time has proven that the old adage that you “can’t save your way out of a recession” was necessary to attract continued customer engagement and traffic. In addition, the company’s reach into communities all over the country has allowed them to partner with up-and-coming brands like Casper and Harry’s to deliver exciting new purchase opportunities. As my colleague and former boss, Jeff Immelt, is fond of saying, “You have to run towards the disruption — not away from it.”
With Scale and Trust You Can Accomplish a Great Deal
Given the increasing complexities of running a massive retail organization, where data analysis, digital engagement, supply chain management, operational excellence, merchandising and a host of other skills are required for success, Target has shown that this complexity can be used to its advantage. The company made decisions to in-source key functions such as its digital competencies with the company’s large Silicon Valley presence (which currently has more PhDs on staff than most university math departments) as well as developing owned brands such as Cat & Jack and Good & Gather, in order to use its reach and footprint to deliver a compelling customer experience that is fresh, timely and relevant.
And, yet, Target has not tried to do it all on their own. They have partnered with brands such as Disney and Levi’s to ensure that customers get a wide variety of products when visiting their stores or online locations. These partnerships allow the company to deliver a holistic experience both online and offline that most of their eCommerce competitors are unable to do, and in ways that their physical competitors have struggled to emulate. The ability to execute a very complex set of operational challenges has served as a competitive advantage that both large and small retail competitors have had trouble emulating.
You Are Never as Good as People Say, Nor Are You as Bad…
Before class began I teased Cornell that when the company reported a weaker Q4 than expected (which caused a drop in the company’s stock by almost 7% the day prior) I had to change my teaching plan from what was going to be a coronation to a discussion of “the party’s over.” He broke into a big smile and shared the gentle banter he had with his children the night before about his not being nearly as brilliant as everyone had been saying.
During the class session he highlighted that in good times it is critical not to let the praise go to one’s head, but also that difficult times are an opportunity to step back and see what went wrong and how to get it right in the future. While he remains extremely bullish on the company and its opportunities going forward, he reiterated the need to own the fact that the company had not delivered as planned, and that they had to figure out what he and the Target team had missed. It was a rare insight into a leader who has to balance the accolades along with the challenges of operating at a massive scale and in the public eye, while needing to keep driving retail’s continued disruption.
It many respects, this moment is an insightful test of Target’s ability to move from surviving to thriving in the next phase of the company’s evolution.
