The Industry Changes Overnight

October 30, 2009

In this month’s Harvard Business Review, on page 20, it says, “Managers may believe that industry structures are ordained by the Good Lord, but they can – and often do – change overnight”, Peter F. Drucker, “The Discipline of Innovation”, HBR, May-June, 1985.

1985, huh.

Where were you in the ‘apparel’ industry in 1985, a mere 24 years ago? How many department store chains existed regionally and nationally in the US? How many US apparel factories, owned by brands and independent contractors, did we have (and where were these producers located)? Can you remember all the textile mills, many of which were easy to spot from I-85? And, how easy was it for you to get a pair of Levi’s?

Well, it changed and its changing. As the bumper sticker says, “SHIFT HAPPENS”.

When I came into this industry with IBM in 1990, and did my research to learn the job, I began giving talks about the big 3 trends I found – Globalization (this was 4 years before NAFTA but they were already lobbying for it); Consolidation (we were seeing brands buy brands and retailers merge); and Computerization (VERY self-serving, because this was my job – and my hero back then and into today remains Alan Brooks of NGC, one of the industry’s earliest application software innovators).

Well, you can give this same talk today can’t you. It goes like this - the world is flat; there’s Walmart and not-Walmart; and the internet has set you free.

But the key takeaway for me is the phrase, “Managers may believe that industry structures.....”. Are there industry structures? Really? That would imply there are strategies, there is clarity, there is some stability and predictability. Is there? Or are we still chasing the low cost needle in what-have-you-done-for-me-today mode? For those few who go back to 1985, there is the conviction, as Mark Twain put it so well, “history does not repeat itself, but it does rhyme”. Here is how it rhymes for one.

An AAPN member wrote me a personal email saying, “Many merchants are only used to costs going down. The customer has been trained to this also - they now believe that each year they will be able to get more features and higher quality at a price lower than the year before. But the cold reality is that inflation is coming. And in this current economic environment with unemployment still increasing, it will be difficult for the customer to swallow a higher retail price. So the retailer will be challenged with margin pressure. We have not had to deal with an environment like this in decades - most retailers have never dealt with it due to their age. We are all naive if we think we will be able to continue to obtain lower costs. We are going to have to pay more, plain and simple.”

These comments segue nicely into those Marshal Cohen of NPD made recently at MAGIC, “Retailers don’t know enough to know where the problem is in the chain. They are just now figuring out they do not have the answers and many are getting in over their heads. The advantage is in sourcing and production. There needs to be a new measurement for senior management – not how cheap you got it but if it sold. Retailers are stunned when things get stuck in a part of the pipeline they don’t understand, and this crosses all departments like it crosses the whole chain. Sourcing knowledge – the lack of understanding of sourcing is the issue – this is where you reach out to the people who do know, the professionals.”

Well, these retailers are in luck. The professionals they seek are right here in AAPN, some 600 of them from 180 organizations across all 40 links in our chain. One email from us to them and within minutes, definitive answers back to you. Today, in the internet age, one proven form of an ‘industry structure’ is our instant network of skilled and experienced professionals that gets results. It is how we tie them together that sets us apart.

Since 1981, AAPN continues to find and receive, centralize, accumulate, consolidate, analyze, interpret, distribute then add to our unique library of exclusive industry insights from owners and executives on the ground floor, some of whom go all the way back to 1985. So, yes, the industry does change overnight.......but we catch it in the morning.

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