MM: Great result! So take us through what the merchandiser did with page-profit analysis.

TM: One of the things that we saw immediately that was advantageous when you think about the fact that all it is – is data. You used to look at a Quark or InDesign page—and say, “Okay. That’s a design page. Type in the information. Import a picture.”

Once the mindset or paradigm shift happened, people started looking at that as data. Then you started saying, “You know what? There’s other data we might want to be able to look at on this page, after we’ve already sent the page to the printer.”

If you can populate data on a page in a price table, does there have to be a price? No.

It could be the amount of sales for that particular SKU or that particular product grouping. Or it could be the number of units that were sold that year. All you have to do is change the data field that it’s pulling to the page.

MM: In the current state, Tom, you had merchandisers that would own a particular category or categories of product. With a felt-tip pen, they overwrote on a print catalog page the quarter or the beginning inventory position, end inventory position, items sold, gross revenues.

TM: Sales and gross profits. And they would actually be looking at a green bar, writing information into a catalog—sometimes using the spreadsheet on their screen to compile data if they needed to compile it. Because the green bar wouldn’t do that.

Each of the product managers would be doing this. So there were five product managers that would spend two to four weeks every cycle populating their pages in their catalog.

All of the product managers wanted to have all of the information, so they’d switch books and they’d mark up somebody else’s book—until all five product managers had all five master books marked up with that information—hand-written.

MM: So the idea then in the future-state is, “Wouldn’t it be cool if we took a PDF or the InDesign document that had the 900-page document and simply did an automated overlay?” A data overlay from the database of beginning inventory position—end inventory position—gross revenues—profits—returns. Simply just published directly—almost as a transparency or an overlay to the actual thing on the page.

TM: Absolutely. That’s exactly what we did. We could do that in the course of a weekend.

MM: With that kind data without the effort, merchandisers could begin to understand patterns and correlate particular presentations or configurations of products that produce a “lift,” in terms of increased sales. Thus, they could begin to understand, “If I put that product here, I get a 3% bump. If I put that same product over here, then I take a 5% hit.”

TM: Yes. There are additional modules that you can get that even do more forecasting than those types of simple analyses, too.

MM: Such as?

TM: It’ll say, “If you put it in the upper right-hand quarter or the lower left-hand corner.” Or, “Is it on the first page of the section or is it on the cover, too?” “Is it on the back cover? Is it on the inside front cover?” “Are you presenting it on the web differently? Are you even presenting it on the web?” There are lots of different ways to look at that type of data.

MM: So then as you develop the future-state capability, you started to really define work-cells that enable you and your automation team to really optimize the productivity of individual workers. Did I get that right?

TM: Yes.

MM: Your work validates one of the emerging principles of an innovation culture or an ingenuity culture: you must have in place a change-management process that you invoke whenever you need to accommodate an innovation.

TM: Yes. That would be an excellent model for any company.

MM: I believe that a lot of people consider innovation as a top-down thing. Yet, the real innovators with whom I have interviewed consider innovation as bottom-up activity, from the actual users – the stakeholders in the workflow. The reason? Because the actual users are the one’s closest to what actually has to get done, and, specifically, the nature and likely root causes of the pain.

TM: That’s absolutely true. However, upper management—even though it’s not their idea—must actively support an innovation or change for it to happen.

MM: However, most change processes run into trouble when it simply becomes a top-down mandate, as opposed to a bottom-up collaboration and discovery of, “What’s the best way of doing this one piece?” Effective change processes maintain the context of business priorities and individual needs.

TM: Absolutely.

Value Chain Analysis

MM: You also did something else at Hubert that I consider most extraordinary: you had developed this end-to-end visual depiction of the entire catalog development and publishing process—in part, what Michael Porter of Harvard Business School calls value chain analysis. In your telling me of this, you tied together several principles that others could apply in achieving similar results. Let’s start with, “Get it right upfront.”

TM: Yes. That was a theme that became our mantra.

It means making sure that you do things right the first time, and therefore you don’t have to worry about it later. That lives in several different areas. It can live as a whole—meaning if we hadn’t done the research and the white paper and all that stuff upfront, would we’ve been as successful.

But you can take it down to the minutia, too. That is, we identified during the current process that there was a maximum of 7 times where a price could be entered into the system. Now, that 7 times didn’t happen all the time—but it wasn’t unusual for a price to be entered at least 4 times into the system at some point.

MM: That means manual data entry of a pricing data 4 or 5 times against 50,000 SKUs?

TM: More than that. Yes.

So if you think about the opportunity for error there, and we’re talking about entering where it could be somebody writing it down on a sheet of paper. That’s “entry.” Right? Or putting it into a spreadsheet and not into a database. That’s entry. Putting it into one database and then another database. That’s two entries.

That’s what I’m talking about—how that is looked at. The idea was, “Let’s find the point where it should be entered—the right point—upfront. Let’s find out where it should be entered, who’s responsible for that entry, and—when you enter it—make sure you do it right.”

MM: Let me unpack it a little bit. First, you had this wonderful, messy, warts-and-all visual depiction of the entire end-to-end process—to which all the involved parties contributed. Then, you got everyone to physically signed off on the visual depiction. In effect, your got everyone to, “Yes. That’s my contract with reality.”

TM: Yes.

MM: Just in that process of getting them to put their signatures to the visual end-to-end process map, you dissolved all or most resistance to change.

TM: Right. When we came out of that, everybody in that room was eager for the next step. Not afraid.