Amazon Replaces Merchants with Bots: How Levi's, Wolverine Worldwide and Saks Can Compete

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I came across an interesting article in Bloomberg last week. Amazon has been synonymous with robotics and automation, but for the most part that has been relegated to stocking the shelves and other operational tasks in the warehouse. Interestingly, according to the article, automation is starting to take over the roles of the white collar workforce as well. The article states:

“Machines are beating people at the critical inventory decisions that separate the winners and losers in retail. For the staffers deciding how many books, games or plastic pool toys to peddle, the tradeoff can be stark: Order too little and you miss out. Order too much and you’re forced into costly clearance sales. Amazon’s algorithms, refined through years of monitoring customer behavior, are getting the Seattle-based company out of the guessing game.”

Data-backed decisions are a topic that I discuss a lot on Forbes. It’s something that I firmly believe in. Retailers and brands can no longer rely solely on intuition given the power that the consumer has at his or her fingertips. Customers can find any product they want at the price they want, so how are retailers and brands going to deliver that differentiated product AND keep up with Amazon?

Not all retailers can be as fortunate as Walmart, who has the ability to purchase other companies to keep pace with Amazon. Acquisitions like Jet.com and Flipkart are enabling Walmart to compete on the web and in India, respectively. I will be writing more about this next week on the BUILD vs BUY mentality that Amazon and Walmart are exhibiting. For now though, its partnership with Lord & Taylor and acquisitions of ModCloth and Bonobos are also enabling the company to stake a firm claim in fashion. I expect Walmart is already on the prowl for its next acquisition, which likely would be similar to Amazon’s new technology.

So, while Amazon’s strategy has been to develop technologies internally and Walmart’s is to acquire technologies, how can the rest of retailers and brands like Levi’s, Wolverine Worldwide and Saks Fifth Avenue keep pace? Not everyone’s checkbook can afford a multi-million or even billion dollar investment, but you MUST compete.

It’s the same principle as any other facet of your life. If you’re heading on a trip and you need a GPS system to navigate you there, your first thought isn’t, “I should develop something.” Instead, you log onto the App Store, read reviews and download what you think is the best GPS solution for your needs.

The same is true in this scenario. As I’ve stated before, there are numerous technologies that retailers and brands should be doubling down on to compete with Amazon and position themselves best against their competition. Technologies that aid in critical product development and inventory decisions are just the latest that Amazon has shined a spotlight on.

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Why This CEO Started a Secret Company to Compete with His Existing One

Eighteen months ago, FreshBooks CEO Mike McDerment did something that might blow your mind. In secrecy, he started a brand new company to compete with his existing one.

Finding Space to Experiment.

In my recent interview with McDerment, he described a moment in the winter of 2013 when he had been feeling uneasy about the steady growth of his business. Freshbooks, which had long been the darling of the DIY bookkeeping industry, needed to keep innovating to remain competitive.

The reality, which McDerment recognized, is that software products, by their very nature, are malleable and constantly changing. In today"s business landscape, consumers expect products to be constantly improving.

But how do you make major changes in a way that does not disrupt existing users? Especially when their livelihood depends on your product?

How does a company allow for the exploration required for innovation without screwing up what it"s already getting right?

McDerment asked himself these questions. And he believes he"d found the answer by rolling out an updated product, but not under the FreshBooks brand.

And so, he started BillSpring.  

Newcomer BillSpring could market its product as "in development," thereby creating the space for experimentation and attracting new users with its updated design.

Sure, this strategy is logical, but it"s jarringly unconventional. However, McDerment says Freshbooks has sought to establish a culture of putting people at the center of every decision, so for him, it was an obvious move.

Being Human-Centered.

FreshBooks took the coveted first place spot in the highly competitive Great Places to Work survey. The secret sauce, according to McDerment, is the company"s ability to embody a human-centric approach to all facets of the business: from product development, to hiring and training.

Employees aren"t the only people who matter when it comes to making decisions at FreshBooks. Customers are in constant focus--a concept McDerment calls customer proximity.

To make sure that all team members understand customers, all newly hired employees spend a month in customer service. And this pitstop in customer service occurs without exception, not even for the new CFO, who had taken three companies public. Despite not having any customer-facing interactions, he too spent 30 days getting to know customers on the front lines of customer service.

As a result of this mentality, the company is hyper-sensitive to customer satisfaction. So in retrospect, the decision to create a completely separate brand is no surprise. In fact, it"s a considerate way of introducing change.

A Considerate Approach to Introducing Change.

Whether change is as simple as a minor feature update or something as significant as starting a whole new company to compete with, the consideration of the impact on all people involved should always remain at the forefront.

It"s not just what Freshbooks values, but as so many companies have proven, it"s just good business. 

Eighteen months after the experiment, Billspring had shown improvements in business performance and customer satisfaction, exceeded those of Freshbooks. At this point, McDerment finally decided it was time to come out of hiding, dissolving the Billspring brand and merging the products back under Freshbooks. 

"When we launched we didn"t want our users to worry. So if they said "you know what? It"s great but not right for me" then they could return to Freshbooks classic," McDerment says. "We did everything in our power to not destabilize our users" business, and so the vast majority of people recognized that and chose the new version when they had the chance." 

The Takeaway: Create the Conditions for Innovation.

The extreme stealth-mode approach may not be the right answer for other companies looking to navigate change and growth, but creating the conditions for change and growth is--for the organization and, more importantly, the real people they serve.

Despite the radical time and cost investment, McDerment stands by his 18-month experiment to deliver positive outcomes for its employees and customers. Ultimately, affording the freedom of time and space is what has enabled the award-winning success that the company enjoys today.

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