Tag Archives: OrotonGroup

Retail Concepts Using “Good to Great”

Here is a simple take away cheat sheet that I use when presenting the six concepts of “Good to Great” by Jim Collins and how they relate to the Retail Industry. It is not meant to be a deep dive into the book (some of my upcoming blogs will dig deeper into each concept), but rather a quick reference on the six concepts and a few important points.

Remember the Fly Wheel Effect – all of the concepts work together to achieve the results – there is no miracle moment – it is an evolution. We implemented these concepts at OrotonGroup prior to the major turnaround in the business 10 years ago.

good4

Level 5 Leadership

Personal humility and professional will. They channel ambition into the organisation, not the self. Not a high flyer or larger than life. They look in the mirror when something goes wrong and look out the window when giving credit. Comfortable that they may not get credit for success. Many Australian Retailers achieve Level 4, but few achieve level 5.

First who, then what!

Get the right people on the bus and the wrong people off the bus. Begin with who, rather than what and the transformation will be easier. Great vision without great people is irrelevant. When you need to make a change, make it quickly. Retailers need to have the correct structure with the right people. Nepotism has created issues within several Australian retailers. Only hire friends or relatives if you can separate business with personal.

Confront the Brutal facts (The Stockdale Paradox)

Admiral James Stockdale survived 7 years in a Viet Cong POW camp by hanging onto two contrary beliefs – His Life couldn’t be worse at the moment (the brutal fact) and his life would someday be better than ever (unwavering faith). Be brutally honest about your current situation, but never give up. There are several retail examples in the past few years that demonstrate what happens when you wait too long to confront the brutal facts.

Hedgehog Concept

You need to be the best at your clearly defined niche. You cannot be all things to all people. The intersection between – what you are passionate about, what drives your economic engine and what you can be best at. A Fox knows a little about many things. A Fox is complex. A hedgehog knows only one thing very well. A hedgehog is simple. Department stores struggle with this whereas specialty stores often find this niche and thrive.

Culture of Discipline

Companies build rules to manage a small % of the wrong people which in turns frustrates the right people. A great organisation is high in entrepreneurship and high in discipline (a blend of magic and science). Get everyone going in the same direction with the same goals – communicate.

Technology Accelerators

Technology is not a fix to problems. It helps you achieve a great strategy, but it isn’t a strategy in itself. Use technology to truly differentiate yourself with competitors if warranted. Get the basics right with technology, but don’t get caught up in the hype. Aussie retailers love the concept of technology, but few do it well. If you choose to spend on new technology, make sure that you use it completely – if you collect data – analyse it and adapt your behaviour.

Mike-107

How “Good to Great” worked for me and OrotonGroup

During my time at Oroton, first in the US and then in Australia, we overcame some huge hurdles. My first stint with OrotonGroup was restructuring the US subsidiary and selling it to a group of investors. This took about three years and we faced a myriad of problems from bad outsourcing contract to bad relationships with our department store customers to poorly implemented IT systems. We struggled with a brand that was top tier in Australia, but was virtually unknown in the U.S. Foreign brands trying to enter into the U.S. need to understand what it takes to succeed in a vastly different environment with geographical considerations, more competition and 10 times the population. (More on this in a future article)

We successfully sold the US business and created a franchise arrangement with the new owners. At the end of this process, I casually told the owners of Oroton that if their COO ever quits in Australia, please give me a call. Two years passed and I got a phone call from Ross Lane, the MD of Oroton, who informed me that the COO just resigned and asked if I was serious about moving to Australia and taking over as the COO. I flew to Sydney the next week, accepted the job and moved over a few weeks later.

At that time OrotonGroup was about a $75M company and had Oroton, Ralph Lauren and recently acquired Morrissey. It was making money but was struggling with several aspects of Operations, including a stock turn of less than 1.

After getting my feet wet and getting to understand the business inside and out, Ross and I were introduced to a book called “Good to Great” by Jim Collins. We both read it and liked it so much, we bought copies for the entire management team and adopted the philosophies and terminologies from the book. It began a several year ride of taking a successful business and making it better and better.

The main philosophies in the book were (which I will explain in further detail in future blogs):

  1. You need Level 5 Leadership
  2. First who….then what
  3. Confront the brutal facts
  4. The Hedgehog Concept
  5. Culture of Discipline
  6. Technology accelerators

During the time that I was COO and while we were living the philosophy in “Good to Great” we accomplished great things.

  1. We doubled the size of the business from $75M to $150M and doubled the share price at the same time.
  2. During this growth we managed to keep inventory at the same level through the implementation of a proper merchandise planning department. We more than doubled the stock turn and were on course to get it to be where it should be even with the obstacle of buying Northern Hemisphere Ralph Lauren product for the Southern Hemisphere.
  3. We consolidated three warehouses into one efficient distribution centre.
  4. We moved our head office from the northern beaches of Sydney to the CBD to be closer to our partners.
  5. We issued further shares and raised the capital needed to buy Marcs (seemed like a good idea at the time – more on that later).
  6. Outsourced our clothing manufacturing capability to Apparel Group as it wasn’t our core focus.
  7. Launched the Aldo brand into Australia through a licensing agreement.
  8. Cemented a great working relationship with the executives at David Jones that secured us as one of their top suppliers.
  9. Implemented a new end to end ERP system that, after a few hiccups, was the foundation that OrotonGroup built on and continued to grow with.

This is just a taste of what can be accomplished when you follow the right management philosophies and direction. “Good to Great” helped immensely during this great building phase at OrotonGroup.

011616_0048_TheBuyingPy2.jpg