A satirical examination of one of Terry J. Lundgren’s last public statements as CEO of Macy’s, and why he may be the Mayor of Shark City.
Thank you to everyone who enjoyed my first blog post last week, Amazon and the Battle of Dien Bien Phu. I was overwhelmed by the response and viewership. There was such an outpouring that it convinced me to give this blog thing a go. So, if you are a returning post reader today, my most sincere thanks to you. If you are joining us for the first time, welcome. I hope you enjoy reading today’s post, and please let me know how I can continue to do better for you by leaving me comments.
Last week for my inaugural Omni Talk blog post, I wrote of the comparison between Amazon’s business growth over the past 20 years with the history lessons gleaned from the Battle of Dien Bien Phu — the thesis being that the biases that led to French failure at Dien Bien Phu parallel what has occurred in the retail industry recently, namely overconfidence, a lack of understanding of the core value of Amazon to consumers, and a subtle, unrealized shaping of public opinion by Amazon.
Both Henri Navarre, the French General at Dien Bien Phu, and later the United States failed in Vietnam. The warning signs were there for the United States from Dien Bien Phu, but the mistakes in Vietnam were made anyway. Fortunately or unfortunately, depending upon how you choose to look at it, it is easier to give Navarre and the United States a greater reprieve than the retail industry. The platform is burning right in front of our eyes, and yet the leaders within retail may not be giving the disruption underway the attention it requires. Nor does it appear the leaders are willing to make the hard choices needed to create value in advance of what is likely a biting, forced market correction that may ultimately redistribute prosperity across our national landscape, severely impacting some regions and locales more than others.
To show you what I mean, I want to make a more contemporary analogy this time. As a movie buff, I would like to compare the retail CEOs of today to Murray Hamilton. Who is Murray Hamilton you might ask? I will let IMDB handle that for me:
“Murray Hamilton was one of those character actors whose face would be familiar to most movie buffs at an instant, yet his name may not. That’s a shame, because Hamilton was one of the most versatile and prolific of performers who was never anything less than completely convincing in any role he took on, from priests to gangsters, soldiers to politicians, ordinary men to aliens. His characters would rarely fail to evoke emotion, whether that be sympathy or dislike.”
Or better said, Murray Hamilton was Mayor Larry Vaughn in Jaws (and somehow survived the carnage to reappear in Jaws 2, the often underrated flick, which, random fact, also had the kid from Back to School and Christine in it — the very one Keith Gordon. Like me though, Keith hasn’t aged well. Balding. It happens to the best of us. Not to Clooney though. Damn you, George. Your gorgeous hair, your chiseled features, and now your $1.0B Tequila deal!).
You should know too that perhaps Hamilton’s greatest role (sorry to subject you to further movie loving) was as the cuckold husband Mr. Robinson to Anne Bancroft’s Mrs. Robinson in The Graduate. I could write a whole additional article on the The Graduate, but it would have nothing to do with retail, would be about my frightening pubescence, and so I won’t, at risk of losing you brave souls who have already stayed with me this long.
The Graduate note though is important because what made Hamilton so great in Jaws was exactly what made him great as Mr. Robinson. It is what is captured in bold above, “His characters rarely fail to evoke emotion, whether that be sympathy or dislike.”
Whether he was the mayor of shark infested waters or the husband of a wife who was sleeping with his daughter’s boyfriend (sorry for the spoiler alert. Yes, Jaws is about sharks.), Hamilton made you absolutely hate him and feel sorry for him at the same time. The same type of “sorry” you feel when you think, “Damn, I don’t know how someone could figure out that situation. That is a tough one. Glad it’s him and not me.” Or the same “hate” you feel when you think, “Holy crap, isn’t figuring that out his job? And he makes how much money per year?”
Hamilton evoked the same emotions that people likely felt for Navarre, even Johnson and Nixon at the time. It is the same emotion that I feel for the retail leaders in our industry right now, but I am conflicted. Unlike politics that cross borders, cultures, etc. the retail disruption is isolated to retail, and our leaders are paid (handsomely) to be able to figure things out. The contemporary warning signs of Amazon and the impact of digital on our lives is more palpable than Dien Bien Phu was on the collective public back in the 1960’s. Vietnam was thousands of miles away. Amazon, on the other hand, is in Seattle, seconds away on an iPhone, a device to which some people are so addicted, according to researchers, they even claim to check it during sex (mental reminder for author: remember to ask my wife, Michele, if she has participated in any iPhone research studies when she gets home from work today).
The proximity to and attitude of industry leaders towards the warning signs of the disruption are best encapsulated by my personal favorite clip of Murray Hamilton in Jaws below . . .
The acting in the clip is perfect. The smugness. The nonchalance. The urgency he puts into refocusing the chief’s efforts on vandalism (activity vs. accomplishment?). Even the deft way he redirects Dreyfus’ marine biologist character to feel guilty about his legitimate expertise and white collar education, as Hamilton works to maintain his claim as the smartest, most experienced person in the group, because he is, after all, the mayor. It is Hamilton at his best — Oscar worthy in a very underappreciated film.
But it is just a movie. Why should we care? Because this same situation happens everyday in the workplace. Just change around the characters and the roles. When people are faced with problems with which they are not familiar and about which they are not curious enough to retrain themselves to think differently, these types of attitudes and biases slip out. Problems are only problems if we want them to be. Every problem can be reframed as an opportunity. Amazon is great at this. The mayor in Jaws, on the other hand, just continues to focus on the problems he knows how to solve (vandalism) and sloughs off the bigger issue, the shark, because deep down he doesn’t know how to solve the problem, isn’t comfortable with the answers being presented, and prefers to ignore the negative repercussions of his behavior (i.e. becoming the Mayor of Shark City) rather than admitting his trepidation and ignorance.
This psychological bias is happening to retail CEOs right now. It has and likely will continue to happen in front of our very eyes too if we don’t become louder and more forgiving (are you listening Wall Street) at the same time in order to stop it (appropriately balancing the “sorry” and the “hate”).
Take this quote from Terry J. Lundgren, the current Chairman of the Board and former CEO of Macy’s (even as I type this I am afraid of the smiting power of his middle “J” initial).
Prior to stepping down as CEO earlier this year, Lundgren, in his final earnings call as CEO remarked,
“90% of what we sell at Macy’s and Bloomingdale’s is still sold in a physical store . . . Lot’s of people don’t believe that or understand that. I just wanted to point that out . . . if the department store did not exist today, there would be a group of smart people in Silicon Valley inventing the department store because it will serve a purpose.”
What’s that you say Mr. Lundgren? Sound familiar to any of you? Sound like anyone we know? It sounds just like Murray Hamilton, the Mayor of Shark City and even Navarre at Dien Bien Phu. “Get your picture in the National Geographic” equals “smart people of Silicon Valley.” “Lot’s of people don’t believe that or understand that” is the same thing as General Navarre believing air superiority would win out in Vietnam. Lundgren’s response is smug, it is condescending, with an attitude of I know better than you. Maybe he does, but what if he doesn’t?
Please don’t take this as a condemnation of Lundgren either. I have heard this same sentiment across all levels of retail at many conferences I attend, not just from CEOs. Lundgren, like everyone else, is a creature of his own collective experiences. His response is natural, almost pre-programmed in a way. What we are seeing from him and the industry is a symptom of neuroplasticity.
Neuroplasticity is the idea that the older we are and that the more experience we have seeing things happen a certain way, then the more difficult it is for our brains to retrain themselves to adjust to new contexts. Neuroplasticity is best exemplified by the work of engineer Destin Sandlin. Sandlin recently conducted an experiment where he changed how a bicycle works (for more info see: www.bicycling.com/culture/skills/you-cannot-ride-bicycle or watch the video below).
The video and article showcase it better than I can describe it, but I will try. Essentially, Sandlin and his friends engineered a bike so that if you wanted to turn to the left, you had to turn the handlebars to the right. Total mind blow, right?
He then taught himself how to ride the bike. It took him eight months of consistent daily practice to learn how to ride the bike. Sandlin then gave the re-engineered bike to his eight-year-old son. Guess how long it took his son to learn how to ride the bike — only two weeks!
So when you put this lens on Lundgren’s statement, you can almost empathize with him. Almost. Just like Hamilton focusing on vandalism or Navarre believing the wartime tactics he once knew would work in a new situation, Lundgren is going back to what he knows — physical stores, like many of us would. The problem is, even if you get past the condescension, his statement could not be more right and more wrong at the same time.
Yes, department stores and even malls for that matter, to which most department stores are attached, likely still serve a purpose. But what is that purpose in today’s context? And, what comes first too — the chicken or the egg? Malls or department stores?
Malls and department stores had their heyday in the 1980’s, when baby boomers were reproducing like larvae, Reagan (click for a chuckle) consumerism was rampant, and “living in the burbs” was an aspiration. Malls became a social outlet for families, and especially Members Only jacketed teens.
But, what about now, Terry? Now you have the intersection of four really powerful trends — Millennials, E-commerce, Mobile Technology (and soon to be Voice Technology), and Urbanization. How is the department store, built to serve an outdated context, with decades of architectural, operational, technical, and cultural debt buried within its walls, attached to a mall saddled with all the same debt inside its walls as well, something the “smart people in Silicon Valley” would be rushing to do? They wouldn’t. Instead they would take a page from the discipline of experience design and would reimagine something entirely new, a new product that, yes, borrows from malls and department stores but is in no way the department store that we have today. They would reimagine a new physical, social experience that is birthed from the four trends mentioned above, just like Amazon reimagined retail in the late 1990’s given the dynamics of the time.
I feel for Terry and every other retail CEO. I really do. What is a retail CEO to do under these circumstances? It is a no-win situation. Wall Street and the public don’t give you any rope. What CEO has the guts to fully overhaul his or her point-of-sale systems, order-management systems, operational procedures, and store architectures in the nine-month window between the start and end of holiday and hope nothing bad happens? What CEO has the guts to create an entirely new experience that millennials want but the majority of Baby Boomers and Generation X will not understand? Hit on something millennials like, and chances are the older generations in your stores and the older generations leading your corporate culture will hate it because it isn’t what their more rigid minds have come to expect from their preferred retailer and employer. You will wind up being shown the door as CEO, as customers will get frustrated and shareholders will be upset with quarterly results, even though such poorer short-term results might in fact be the best course of action in the long-run (bravo Nordstrom’s on your recent news regarding going private!).
While today’s CEOs are hamstrung by what I mention above, “The smart people in Silicon Valley” are not. “The smart people in Silicon Valley” will start fresh from the ground up. “The smart people in Silicon Valley” will come, not just from California, but from all over the country and the world too (Alibaba anyone?). They won’t stop until they figure it out. The only answer for today’s crop of CEOs is to use their capital to disrupt themselves and to come up with something entirely new. Said another way, don’t incrementally change Macy’s or any other chain for that matter. Instead imagine the possibilities, dream, and build something fresh inside the real estate you already own. Fail to heed this advice, keep grinding on an outdated model, and before any of us know it, all of sudden, that shark will have “swum up and bitten all of us in the ass.”
Be careful out there,
Please critique, augment, and help me to edit for accuracy (thanks Noah!)
P.S. Lest you think I am just being a hyperbolic chicken little, take a look at what is really at stake here:
Sum total: Two more middle initials, +$20B in market cap, nearly $100B in annual sales, and, most importantly, almost 650,000 employees and their livelihoods. Across just five retailers.
Oh and, Jeff Gennette, fellow Stanford grad and heir to Terry J. Lundgren, now “our nation turns its lonely eyes to you.”
P.P.S. If you liked today’s post, please don’t forget to like, share, and sign up to follow the blog. Thank you to those who did so last week from the bottom of my heart.
Up Next: Retail’s Product Problem — Why We Need to Stop Thinking with Our Small “p’s”