Survival in a demand-driven world

20 April 20184 min read

This is a really interesting read on Loose Threads. It talks about how the world of retail clothing has shifted from being supply-constrained to demand-driven. It looks at how Zara operates in the new world, and how others are struggling because they're still setup on the basis on the old world, which is how they got to where they are today.

If you read between the lines, you may also spot similarities to the three guiding principles I sometimes talk about:

Delivering Value Early and Often

The best quote that illustrates this principle actually comes from another article, in Bloomberg (emphasis mine):

Unlike rivals such as Gap, H&M, and Primark, Zara has no chief designer, and there's little discernible hierarchy. Its 350 designers are given unparalleled independence in approving products and campaigns, shipping fresh styles to stores twice a week.

Clearly, Zara is optimising for delivering value early and often, in a way that it's competitors struggle to keep up with. As a guiding principle, this is the top-level and it's a competitive advantage for organisations who can do it faster and more frequent.

Optimising for end-to-end Flow

Crucially, it's not just the rate or frequency at which value is delivered out of the end of the pipeline, it is the time spent IN the pipeline that matters. You could deliver "fresh styles to stores twice a week" but for them to take 12 months in process to get there. That's not going to do it though… it's far too slow end-to-end.

Requiring the CEO of a company to sign off on most designs and orders is no longer acceptable, nor are products that take nine months to get from design to delivery.

As you can see from the article, this is where competitors are really struggling, because it requires rewiring the thinking behind the company and where decisions are made. This is often super challenging for management and leadership to understand, because it requires them to take their hands off the steering wheel and to trust the people in their teams.

Another quote (from Bloomberg this time) that illustrates how much this principle can affects how the organisation works:

With production nearby, Inditex can quickly switch gears if weather or fashion trends change, getting designs into stores in as little as two or three weeks, while rivals' orders slowly make their way across the ocean on container ships.

I don't know what they call this end-to-end process, but I'd call it something like "Catwalk to Customer", and I'd be considering any and all ways to halve the cycletime from whatever it is today. When you've achieved that, halve it again. And again…

Fast Feedback to Improve Quality

This principle is littered through both the Loose Threads article and the Bloomberg one above, but this is the one that really drives it home:

The feedback loop that often took nine months to get a shopper's opinion on a design collapsed to weeks, if not days or minutes. It's as close to real time as it's ever been.

It should also be clear that these last two principles overlap considerably. Where this is different, however, is that if you don't have the feedback loop in place, you have a really fast organisation that is blind. That's not safe. It's the telemetry you put on the system in the form of Feedback loops that give you the fine grained and fast controls that you need. If the Signal to Noise ratio of those feedback loops is low, you're also going to have problems responding, and you risk overreacting to noise rather than signals. Smart companies these days pour immense effort and investment into building really good feedback loops.

More value, faster flow, better quality. That's my one-line summary. Some may think this is irrelevant to their industry or their company, but then as Deming said, "It is not necessary to change. Survival is not mandatory".

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