Here’s why networking isn’t just about landing your dream job — Hal Gregersen

Hal Gregersen, Executive Director of the MIT Leadership Center

Hal Gregersen, Executive Director of the MIT Leadership Center

From Fortune

At a dinner party a few years ago, Salesforce CRM 2.16% Founder Marc Benioff and Dropbox co-founder Drew Houston got to talking. Their conversation led to a new idea, and that idea led to Salesforce’s Chatter, an enterprise social network, Benioff recalled during an interview I had with him two years ago (for an upcoming book about what causes senior leaders, especially CEOs, to ask the right questions before someone else does it for them).

Their conversation led to a new idea, and that idea led to Salesforce’s Chatter, an enterprise social network. Chatter was not just a result of a chance encounter. At the age of 50, Benioff regularly invites 20- and 30-something year-old entrepreneurs to his house for dinner. It’s in this pursuit of perspectives different than his own that he is able to constantly bring new services and ideas to market. Benioff, who is known to buy smaller firms for people (not products), once told me, “I don’t have all the ideas. That isn’t my job. My job is to build a culture of innovation.”

Our research shows that innovators like Benioff have mastered the art of networking ideas. By purposefully growing their networks to include people from diverse industries and backgrounds, they are quicker to act on observations that spur innovation.

Read More »

Despite its woes, GE must stay entrepreneurial – Bill Aulet

MIT Sloan Sr. Lecturer Bill Aulet

MIT Sloan Sr. Lecturer Bill Aulet

From The Boston Globe

When I heard the news that GE is considering breaking itself up into smaller units, I was overcome with sadness. I started my career at IBM in the early 1980s and saw that company brought low, and now a similar scenario is playing out with another venerable firm.

But wait a second, as a professor of entrepreneurship, don’t I want to see a big conglomerate broken up into smaller, more nimble companies that can be more entrepreneurial?

Not in this case. That kind of thinking illustrates a fundamental mistake people make when they contemplate entrepreneurship and existing corporations.

As an entrepreneurship educator, I teach students the mind-set and skills to help them succeed in bringing new, innovative products to market and new ventures into being. But there is a common misunderstanding that entrepreneurship equals startups and that we are preparing our students to join the Silicon Valley depicted on TV dramas. Not so.

Read More »

If retailers want to compete with Amazon, they should use their tax savings to raise wages – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Harvard Business Review 

Walmart announced today that it is raising its starting wages in the United States from $9 per hour to $11, giving employees one-time cash bonuses of as much as $1,000, and expanding maternity and parental leave benefits as a result of the recently enacted tax reform. It is part of Walmart’s broader effort to create a better experience for its employees and customers. The new tax law creates a major business opportunity for other retailers as well — if their leaders are wise enough to take advantage of it.

The U.S. corporate tax rate is dropping from 35% to 21%. Retailers, many of whom have been paying the full tax rate, are going to benefit substantially. Take a retailer that makes 15% pretax income. Assuming its effective tax rate goes from 35% to 21%, it could save the equivalent of 2.3% of sales. Specialty retailers with higher pretax income will save even more.

Retail executives have a choice in how they use these savings. I believe the smartest choice — one that will help them compete against online retailers like Amazon — is to create a better experience for customers and to achieve operational excellence in stores. For most retailers, doing both requires more investment in store employees — starting with higher wages and more-predictable work schedules. My research shows that combining higher pay for retail employees with a set of smart operational choices that leverage that investment results in more-satisfied customers, employees, and investors. Read More »

Retailers are leaving money on the table by understaffing – Rogelio Oliva

MIT Sloan Visiting Professor Rogelio Oliva

From Marketwatch

If you’ve gone shopping this holiday season, you may have had the following experience.

You go into a store looking for a gift but need help from a salesperson. Maybe you need more information on the product, or perhaps you need help finding the right color or size. You look around the store, but you can’t find anyone. Giving up, you leave the store without making a purchase.

If that sounds familiar, you aren’t alone. The proportion of customers who typically leave a store because of poor service is not negligible. Prior research shows that 33% of customers who experienced a problem were not able to locate sales help when they needed assistance, and 6% of all possible sales are lost because of lack of service.

Help wanted

Effective management of store labor is clearly important, as it impacts sales performance. However, labor-related expenses also constitute one of the largest components of retailers’ operating costs. As a result, there is a widespread tendency to understaff to save on those costs.

But what is the right number of employees? This is a complex question, as retail environments are characterized by volatile store traffic, making it hard to determine the correct staffing levels and often leading to inconsistent service.

The traditional method for determining staffing is sales-driven and depends on store budget allocation. A typical sales-based staffing rule is to match a constant ratio of expected store sales to the number of store associates. However, that rule ignores the fact that retail sales are also affected by store traffic and might result in labor-to-traffic mismatches, which can hurt sales revenue. Retailers can’t reach their full potential in sales if they follow that staffing practice.

Another problem is that shopper demand may be different from past sales, as past sales include only customers who purchased and not those who had an intention to purchase but left the store due to lack of service. As noted above, this is a fairly common scenario.

Matching staff to shoppers

To address this challenge, my colleagues and I developed a method to match store labor with incoming customer traffic in an efficient manner to improve sales performance. Our method is unique, as it goes beyond the focus on past sales at individual stores to leverage performance data across different stores within a retail chain. It enables retailers to derive aggregate labor requirements by using traffic data, point-of-sale data and labor data across stores with similar attributes like store format, product mix and market demographics. Read More »

How traditional retailers could lure you back this holiday season – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Fortune

It’s beginning to look a lot like Christmas everywhere you go. Take a look in the five-and-ten—and while you’re at it, look at all the other store windows advertising spectacular sales, holiday discounts, and clearance extravaganzas. The markdowns are as widespread as they are substantial. This year on Black Friday, for instance, the average advertised discount across 17 major retail categories was 45%, according to the price-tracking firm Market Track.

As ecommerce continues to eat away at traditional retail, brick-and-mortar stores seem to believe that the best way to compete is to slash their prices. This tactic might be understandable if, say, the country were in a deep recession. But GDP has been growing for eight consecutive yearsthe unemployment rate is at a 17-year low, wage growth is strengthening, and the stock market is in the middle of a nine-year bull run.

In this economy, it is not necessary for retailers to pander to bargain hunters—nor is it wise. Sure, some holiday shoppers may be lured to the shops in search of a great deal, but if that’s what they’re looking for, they can easily go online. Brick-and-mortar stores cannot match the price-comparing capabilities the Internet offers.

Instead of competing on price, stores should invest to entice customers. By focusing on their core competencies—one-on-one, human-to-human customer service, sensory-stimulating in-store experiences, and promise of instant gratification—traditional stores have an opportunity to excel where websites falter.

There’s good news and bad news for retailers this year. On a positive note, consumer confidence is strong and customers are feeling flush. According to data from the National Retail Federation, sales for November and December are expected to clock in at about $682 billion, which would make 2017 the strongest holiday season since 2014. But on the flip side, department stores as a shopping destination placed a distant third behind the Internet and mass merchants, according to Deloitte’s annual holiday retail survey.

Read More »