Category: Innovations

The Monkey Cage Sessions

monkey throwingI’ve seen a lot of strategies and “solutions” fail over the years primarily because the solution was crafted before the problem addressed was thoroughly understood.

Many times, the strategy or solution was the result of a brainstorming session filled with type A personalities (me included) ready to make things happen.

You may be familiar with the type of session I’m referencing. Usually, there’s a guru consultant leading the charge. He separates the group into teams and gives them Post-It notes and colored sticker dots. “Write down as many ideas as you can in the next 20 minutes. Don’t think too much. Be creative! No idea is dumb. Stick your ideas on the wall. Now go!” After 20 minutes, a leader from each group presents their best ideas to the rest of the room. Then each person in the room is allowed to vote for maybe six of his or her favorite ideas using the colored sticker dots. A few people are assigned the winning ideas and off we go.

Those types of session frustrate me. I’m concerned there’s too much action, too many unspoken assumptions, and not nearly enough serious thinking.

Over the years, I’ve developed a problem solving technique that I’ve found to work a lot better. I call it the Monkey Cage Sessions. The technique is all about thoroughly identifying the problems from all angles before developing carefully considered, thoughtful and collaborative solutions.

It’s got an intentionally silly name because the process should be fun.

Here’s how it works:

Step 1 Define the problems.

We start by gathering a group of cross-functional people – ideally from different levels of the organization – together in a room to talk about the problem or problems we’re trying to solve. This could be as simple as enhancing a Careers page on the corporate website or as complicated as building a complete company strategic plan. It’s important to define the general scope of the problem, but it should be defined fairly loosely so as not to stifle the discussion.

The rules of the meeting are fairly simple. We only discuss problems. No solutions. This is a license to bitch. Let it be cathartic.

I usually stand at the whiteboard, marker in hand, and write down everything everyone says. There is no need to be overly structured here, and anything anyone says is legitimate. We throw it all at the wall and we’ll sort it out later.

Sometimes people want to debate whether or not something another person says is really a problem. If someone said it, it’s at least a perceived problem. It’s legitimate. Also, there is often an attempt to offer an explanation for why a problem exists. The explanation is covering for another problem, so that problem should be written down.

People are always tempted to offer solutions, even when they think they’re offering problems. For example, someone might say it’s a problem that we don’t have a content management system. Actually, a content management system might be the solution to a problem. What problem might a content management system solve? Beware of any problem statement that starts with “We need…” and be prepared to break down that need into the problems needing the solution.

Sometimes the problems offered up are very broad and vague. In those cases, it’s important to work with the group to dissect that broad problem into its component parts.

This first session generally uncovers a LOT of problems, but the problem is still usually not completely identified yet. Which leads to…

Step 2 Categorize the problems

While the chaotic approach of the first session works well to get an initial set of problem descriptions, it’s important to create some order in order to prepare for the problem solving stage. So Step 2 involves writing down all of the problems and sorting them into logical categories. I don’t have any pre-determined set of categories. Instead, I prefer to the let the problems listed dictate the categorization.

Step 3 – Widen the circle

We probably have a pretty good description of the problems now, but we’ve also still likely missed some. For Step 3 we send the typed and categorized list of problems to the original group as well as a widened circle of people. The original group will likely have thought of a couple more issues since the day of the meeting, and the new group of people will almost definitely add new problems to the list. Since this is the final stage of problem description, we want to give this step at least a few days to allow the team to think this through as completely as possible.

Step 4 – Develop the solutions

Finally, we can start solving the problems. Woo hoo!

Now it’s time to gather a subset of the original meeting to start working towards solutions. There should be at least a few days between Step 3 and Step 4. We want to give people some time to think over the full problem set. The group should enter the Step 4 meeting with at least some basic solution ideas. There is no need to come into the room with comprehensive solutions that solve every problem on the list, but the solutions considered should certainly attempt to solve as many problems as possible (without causing too many new problems).

I usually find that by this point many of the solutions are fairly obvious. But there should be good discussion about the relative merits of each suggested solution, and the solutions should be measured up against the problem list to determine how comprehensive they are.

I like to end the meeting by assigning people to lead each of the proposed solutions. Obviously, any suggested solution from this session will need to be fleshed out in a lot more detail, and the leader from this meeting is responsible for determining the viability and solution and then potentially leading the development and ultimate execution to completion.

Subsequent progress is then handled via a separate execution process.

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I’ve had very good luck over the years using this technique. Some of the primary benefits I’ve found are:

  1. Better understanding of the problems
    As the initial meeting wraps up, most people are inevitably feeling enlightened about the problem. They’ve outwardly expressed their own assumptions (which sometimes even they didn’t know they were making) and they’ve understood the perspectives and assumptions of others. They’ve seen the problem in an entirely new light.
  2. More comprehensive solutions
    The heightened understanding of the problem and the critically important time between steps to allow the team to be more thoughtful in their ideas. Those ideas are usually pretty all-encompassing solutions to start with, but the discussions in Step 4 lead the team to collectively choose the best of the best of the solutions offered.
  3. Better execution
    Solutions are nothing but fancy ideas until they’re executed. And poor execution can cause even the best ideas to fail. The process of fully defining the problems and sharing that work with wide circles of people is an incredibly important stage that sets the foundation for success in execution. When the execution team provides input in the process and understands the basis for the solution, they are far more supportive in the effort. They are also far more prepared to make the daily, detailed decisions that are often the difference between success and failure.

So, that’s the Monkey Cage Sessions. I hope you find it helpful. If you try implementing the process in your business, I’d love to hear how it goes.

What do you think? Would this process work in your organization? Have you ever used a similar process?


“We tried that before and it didn’t work”

Light bulb“We tried that before and it didn’t work.”

Man, I’ve heard that phrase a lot in my life. And truth be told, I’ve spoken it more than I care to admit.

But when something fails once in the past (or even more than once) should it be doomed forever?

I was lucky enough to hear futurist Bob Johansen speak last week at Resource Interactive’s excellent iCitizen conference, and he said something that really stuck with me:

“Almost nothing that happens in the future is new; it’s almost always something that has been tried and failed in the past.”

It’s so true. Think about Apple’s recent successes. MP3 players floundered before the iPod came along. Smartphones existed in limited fashion before the iPhone changed the landscape. And tablet computers had been an unrealized dream for quite some time. In discussing the tablet computer in 2001, Bill Gates famously said that “within five years I predict it will be the most popular form of PC sold in America.” When that didn’t happen, it wasn’t hard to find people predicting the tablet’s failure: “The Tablet? It isn’t RIP. But it’s certainly never going to be the noise Bill Gates thought.” But then along came the iPad and its million units sold in the first month alone. And don’t get me started on e-books, which many loudly proclaimed were bound to fail. Jeff Bezos begs to differ.

We humans have this tendency to throw the baby out with the bathwater when something fails.

But the reality is that the success of any new idea — be it a product, a promotional idea, a merchandising technique, a sales tactic or website functionality —  is dependent on many different variables. Execution matters a lot. But we’re also dependent on many other situational contexts in the idea’s ecosystem, like timing, audience/customers, design, the economy, and the general randomness of life. Even slight tweaks to any of those variables can be the difference between success and failure.

In the others words, we shouldn’t automatically assume a past failure of an idea means the idea was bad. To be clear, I’m not suggesting there aren’t bad ideas that deserve to remain in the trash heap. However, we should at least break down the failure of an idea that we must have considered worthy at one point. (Why else would we have tried it in the first place?) What went wrong and what went right? Was it the execution? The positioning? The audience? Did we even have enough data points in our measurement that our findings of failure are statistically significant? Did it really fail?

Once we’ve broken the failure of the idea down into its component parts, we’ll have a better sense of whether or not the idea itself was at fault. We’ll have a much better understanding of the problems we would face if we tried it again, and that better understanding will give us a better platform from which to base our next attempt if we so desire.  We’ve all heard the stories of Thomas Edison’s thousands of failures before he finally got the incandescent light bulb right. Would we all be in the dark today if he gave up?

What do you think? Have you good ideas junked because of past failures? Was it the idea or something else?

The iPad: A Retail Revolution?

There I was standing in line at the Apple store at 8:30 on the morning on April 3, waiting to pick up a brand new iPad. My mission? Check out this new device to see how retailers might use it to get ahead. Yeah, OK, and I really wanted one for myself, too. But I was legitimately interested in playing with it to determine good retail uses. And I definitely think there are some potentially revolutionary ways retailers can take advantage of the iPad.

Yes, it’s really something profoundly different

Understanding the value of the iPad starts with understanding why it is truly different than anything we’ve seen previously. Many of the attributes you might use to describe it have existed previously, but it’s the combination of those attributes that truly represents the revolution. The fact that it’s self-contained, light weight, and unburdened by a keyboard and a mouse means that it’s easy to hold and carry around. And it’s easy to share with others. It turns on instantly, and the battery lasts for a long time. The touch screen interface feels natural and intuitive. The apps it can run are powerful and capable of more functionality than most web pages. The combination of these attributes provides a powerful platform for retailers to leverage.

Here are just three ways retailers can leverage the power of the iPad:

Take catalogs to the promised land
For years, we’ve had visions of using technology to take catalogs to a new level. But online versions of our print catalogs just haven’t really taken off. Sure, we’ve added hyperlinks to make them interactive, and some have even incorporated multimedia elements, but the online versions really haven’t bested the old fashion print version. I believe a main contributor to the lack of the online catalog’s success is the fact that it’s just not comfortable and cozy to flip though an online catalog. Viewing on a computer screen using a keyboard and a mouse is not comfortable and convenient. The extra benefits of the interactive nature lose out to the lack of comfort in browsing.

But the iPad brings the comfort. It’s easy to sit on the couch and flip through pages with your fingers. It feels pretty natural. It doesn’t get hot, and it’s easy to just turn it off when little Suzy needs help with her homework and instantly turn it back on later with a single press of a button. Interactivity and personalization are possible with an internet connected device, of course, so catalogs created for the iPad can be extremely relevant, fun and informative. And they provide a direct connection to purchase capabilities. It’s really a beautiful thing. I believe catalogs that take advantage of these capabilities will be a huge hit with consumers.

Sales floor assistant
Part of the dream of true cross channel integration is the ability to bring the advantages of technology into the physical store in a way that can improve the shopping experience for our customers. Initially, some retailers used kiosks or POS-to-web integrations to provide these experiences. Lately, we’ve had lots of discussions about providing these capabilities to the mobile phones our customers carry with them into the store.

With the iPad, a sales associate can carry with her all the product data, the customer data, and the recommendations available online. Because the device is so easily shareable, she can easily pull up recommendations and hand them to the customer. She can show the customer how the brown lounge chair he’s viewing in the store would look in the red color that’s available via special order and place that special order on the spot. Or she can play a demonstration video of the food processor that struck the customer’s interest and easily show customer reviews. The possibilities are endless.

Virtual planogram and visual merchandising guide
Many retailers are still creating giant visual merchandising and planogram books, printing and binding them, and snail mailing them out to each store. It’s a costly process and not very flexible or efficient. Last minute changes mean reprints or sloppy additions to the original book.

With iPads at each store, we can send full color, highly customizable guides that are custom made for each store, if desired. They will be easy to carry to the racks, and they can even have built in check boxes to help track when the work is done. Efficiencies abound.

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Of course, there could be s significant capital investment to stock each store with set of iPads, and some of the consumer catalog capabilities I mentioned will not bear much fruit until the iPad is more common — or until the inevitable stream of competitive products hits the market and reduces costs. But there’s little doubt these types of devices will become fairly ubiquitous. And when they do, the retailers who are ready take advantage of the capabilities will be the retailers who come out ahead.

What do you think? Do these ideas seem nutty? What ideas do you have?


Why most sales forecasts suck…and how Monte Carlo simulations can make them better

Sales forecasts don’t suck because they’re wrong.  They suck because they try to be too right. They create an impossible illusion of precision that ultimately does a disservice to managers who need accurate forecasts to assist with our planning. Even meteorologists — who are scientists with tons of historical data, incredibly high powered computers and highly sophisticated statistical models — can’t forecast with the precision we retailers attempt to forecast. And we don’t have nearly the data, the tools or the models meteorologists have.

Luckily, there’s a better way. Monte Carlo simulations run in Excel can transform our limited data sets into statistically valid probability models that give us a much more accurate view into the future. And I’ve created a model you can download and use for yourself.

There are literally millions of variables involved in our weekly sales, and we clearly can’t manage them all. We focus on the few significant variables we can affect as if they are 100% responsible for sales, but they’re not and they are also not 100% reliable.

Monte Carlo simulations can help us emulate real world combinations of variables, and they can give us reliable probabilities of the results of combinations.

But first, I think it’s helpful to provide some background on our current processes…

We love our numbers, but we often forget some of the intricacies about numbers and statistics that we learned along the way. Most of us grew up not believing a poll of 3,000 people could predict a presidential election. After all, the pollsters didn’t call us. How could the opinions of 3,000 people predict the opinions of 300 million people?

But then we took our first statistics classes. We learned all the intricacies of statistics. We learned about the importance of properly generated and significantly sized random samples. We learned about standard deviations and margins of errors and confidence intervals. And we believed.

As time passed, we moved on from our statistics classes and got into business. Eventually, we started to forget a lot about properly selected samples, standard deviations and such and we just remembered that you can believe the numbers.

But we can’t just believe any old number.

All those intricacies matter. Sample size matters a lot, for example. Basing forecasts, as we often do, on limited sets of data can lead to inaccurate forecasts.

Here’s a simplified explanation of how most retailers that I know develop sales forecasts:

  1. Start with base sales from last year for the the same time period you’re forecasting (separating out promotion driven sales)
  2. Apply the current sales trend (which is maybe determined by an average of the previous 10 week comps). This method may vary from retailer to retailer, but this is the general principle.
  3. Look at previous iterations of the promotions being planned for this time period. Determine the incremental revenue produced by those promotions (potentially through comparisons to control groups). Average of the incremental results of previous iterations of the promotion, and add that average to the amount determined in steps 1 and 2.
  4. Voilà! This is the sales forecast.

Of course, this number is impossibly precise and the analysts who generate it usually know that. However, those on the receiving end tend to assume it is absolutely accurate and the probability of hitting the forecast is close to 100% — a phenomenon I discussed previously when comparing sales forecasts to baby due dates.

As most of us know from experience, actually hitting the specific forecast almost never happens.

We need accuracy in our forecasts so that we can make good decisions, but unjustified precision is not accuracy. It would be far more accurate to forecast a range of sales with accompanying probabilities. And that’s where the Monte Carlo simulation comes in.

Monte Carlo simulations

Several excellent books I read in the past year (The Drunkard’s Walk, Fooled by Randomness, Flaw of Averages, and Why Can’t You Just Give Me a Number?) all promoted the wonders of Monte Carlo simulations (and Sam Savage of Flaw of Averages even has a cool Excel add-in). As I read about them, I couldn’t help but think they could solve some of the problems we retailers face with sales forecasts (and ROI calculations, too, but that’s a future post). So I finally decided to try to build one myself. I found an excellent free tutorial online and got started. The results are a file you can download and try for yourself.

A Monte Carlo simulation might be most easily explained as a “what if” model and sensitivity analysis on steroids. Basically, the model allows us to feed in a limited set of variables about which we have some general probability estimates and then, based on those inputs, generate a statistically valid set of data we can use to run probability calculations for a variety of possible scenarios.

It turns out to be a lot easier than it sounds, and this is all illustrated in the example file.

The results are really what matters. Rather than producing a single number, we get probabilities for different potential sales that we can use to more accurately plan our promotions and our operations. For example, we might see that our base business has about a 75% chance of being negative, so we might want to amp up our promotions for the week in order have a better chance of meeting our growth targets.  Similarly, rather than reflexively “anniversaring” promotions, we can easily model the incremental probabilities of different promotions to maximize both sales and profits over time.

The model allows for easily comparing and contrasting the probabilities of multiple possible options. We can use what are called probability weighted “expected values” to find our best options. Basically, rather than straight averages that can be misleading, expected values are averages that are weighted based on the probability of each potential result.

Of course, probabilities and ranges aren’t as comfortable to us as specific numbers, and using them really requires a shift in mindset. But accepting that the future is uncertain and planning based on the probabilities of potential results puts us in the best possible position to maximize those results. Understanding the range of possible results allows for better and smarter planning. Sometimes, the results will go against the probabilities, but consistently making decisions based on probabilities will ultimately earn the best results over time.

One of management’s biggest roles is to guide our businesses through uncertain futures. As managers and executives, we make the decisions that determine the directions of our companies. Let’s ensure we’re making our decisions based on the best and most accurate information — even if it’s not the simplest information.

What do you think? What issues have you seen with sales forecasts? Have you tried my example? How did it work for you?

My Favorite Sites of the Year

It’s the end of the year and the end of an amazing decade for e-commerce. So, in keeping with the time-honored tradition of awarding “bests” at the end of the year, I’m listing some of my favorites sites and site features of the year. I always enjoy discovering new sites and techniques when I read other people’s lists like this, so I hope you’ll find something interesting in my web award show.

The overall best e-commerce site award goes to:

Moosejaw.com

Moosejaw has it all. They’ve done an excellent job creating a very intuitive site that provides lots of options to narrow your selection; you can easily sort by price, color, size and brand. They have lots of what they call “custy reviews” available for their products, and you can even choose a “custy reviews” search/browse results page that highlights recent reviews in the product listing. Moosejaw has a great checkout process that does a good job of guiding the customer through the process, and their error messaging is clear and easy to understand. And no commentary on Moosejaw would be complete without mention of their Madness section, which is full of wacky content that keeps you coming back for more. In a final stroke of branding brilliance, Moosejaw provides free Moosejaw flags to anyone who requests them, and encourages people to take photos of themselves with Moosejaw flags at the height of their adventures, literally, like at the top of a mountain. What a brilliant way to make your customers your greatest marketers. As a final point of support for this award, when I asked people around the office for their favorites sites, Moosejaw was by far the most common choice.

Runner-up

Net-a-Porter

Net-a-Porter shows they understand how their customers shop, and they understand that the self-service experience of the web requires extra attention. They have a prominent “What’s New” section, and their landing pages get right to the products (without lots of “window” signs screaming about promotions). Each item in the listing has an alternate view when hovering over it, which is becoming fairly common, but Net-a-Porter uses and alternate view that features the item being worn rather than just showing it from the back. When you click through to the product pages, there are many more product views and some items have an excellent video of a model walking in the clothes so customers can see how the clothing looks in action. Finally, there are details about how items fit and an invitation to contact a “Fashion Advisor” for more help if you need it.

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Best use of video:

K-Swiss

I’ve always wondered why more sites don’t do what K-Swiss is doing with their product videos. Namely, use them as the primary image for the product when they’re available.

When you arrive at a product page that features a video (which, unfortunately, isn’t all of them) the video launches immediately and shows a model walking in the item. You can easily switch the view to see her walking from the front, from either side and from the back.  And best of all, there’s not sound that could get a workplace shopper in trouble. 🙂 K-Swiss also features multiple static images of product to ensure customers are getting as much information as possible.

Runner-up

Ice.com

Ice.com is also making excellent use of video and using it as their primary image when a video is available. And they’re getting great results. Ice’s Pinny Gniwisch reports conversion rates jumping a whopping 400% after customers view a video, and return rates drop 25% for products with videos. Video really helps give customers a much better understanding of what they’re buying, which helps to remove one more barrier to purchasing products online. I’m really impressed with the quality of the short videos they’re producing, as well. The folks at Ice.com clearly understand the value of video, and they’re making the right investment to improve their business.

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Most interesting merchandising tool:

Polyvore

Polyvore is not a retailer, but that doesn’t mean there’s not something to learn from or leverage what they’re doing. They call themselves “a fashion community site that lets you mix and match products from any online store to create outfits or any kind of collage. It is also a vibrant community of creative and stylish people.” They have a really cool drag and drop capability that let’s visitors “create looks” from product feeds from many different retailers. Essentially, the visitors become merchandisers, and they’re looks are posted to be voted on and commented on by the community. The best looks rise to the top. There are some really amazing collections, and of course each product has a buy button. Polyvore is now making their technology available to retailers, as can be seen in Charlotte Russe “Design Your Outfit” section.

Runner up:

Hunch

Hunch is also not a retailer, but as with Polyvore, there’s lots to learn and leverage. Hunch describes themselves as “a decision-making tool that gets smarter the more you use it. After asking you 10 questions or less, Hunch will provide a concrete result for decisions of every kind.” Basically, they ask you a series of questions and then provide product recommendations that match. The general concept is not new, but Hunch’s implementation is the best I’ve seen and it gets better the more it’s used. They’re using the community to build and refine the question sets, and they’re covering a massive range of topics. The whole experience is really addictive.

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Most proactive:

Restaurant.com

Poorly written error messages are the bane of the web and a shameful way to lose sales, as I’ve previously discussed. But even well written error messages can be annoying because they come after the fact. Restaurant.com has taken a proactive approach in their account creation process. As a visitor enters a form field, a small box appears to the right giving the user detailed descriptions about what’s expected to be entered and, when appropriate, giving the reason why it’s important. Try it out to see how helpful it is.

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I could go on and on about lots of great features on a lot of different sites, but the seven above really stood out for me as great examples worth checking out.

But there are tons of great sites I haven’t even seen.

What sites stand out for you? I would be grateful if you’d use the comments section to share your favorites with the rest of us.

Retail: Shaken Not Stirred by Kevin Ertell


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