SCOTTSDALE, Ariz. -- The rapidity of change in formats and markets requires that a new look be taken at what constitutes real corporate assets and how they are measured, according to Roger M. Laverty 3rd, president and chief executive officer of Smart & Final, Vernon, Calif.
In his speech at the Food Marketing Institute's Midwinter Executive Conference here last week, Rocky Laverty pointed out that "hard" assets such as bricks and mortar are less valuable in a rapidly changing marketplace, such as the present one, and that a capacity for institutional learning and rapid change are actually what counts most.
And, he added, understanding the nature of the market and the place of information technology in forging a quick-time response to change can be instrumental to a company's success.
"Today's market changes occur at an absolutely lightning speed. Now concepts start up and mature and fade in shorter and shorter spans of time.
"We have seen many examples of this in recent years. Warehouse clubs started up and zoomed to the top and matured at rates never before seen in the life cycle of a new concept."
As a result, he said, retailers must be poised for constant change and must remain unfettered by commitment to traditional hard assets: "Investments in hard assets of bricks and mortar risk being out of date and worthless far more quickly than ever before."
Rapidly changing markets are perpetuated by consumers who are increasingly capricious, and who are always prepared to jump from one shopping choice to another.
"The profusion of options increases fickleness, reduces loyalty and, frankly, creates tremendous confusion in the marketplace," he said.
The response from retailing must be to abandon the notion of market share and be prepared to go after share of customer.
There are two actual corporate assets that make that possible, he said. One is corporate people as measured by the "sum of their skills and ability and their capacity to learn, evolve and adapt."
The other asset, he said, "is the information you have in high-quality databases, the tools you have to access that data and the environment in your organization that ensures you always pose the right questions. This information is the collection of your company's total wisdom and knowledge.
"These assets, taken together and properly used and incorporated into a business strategy, will establish and maintain that most critical of all links -- the link with our customers: That link must be made unbreakable." The information-driven outlook about the value of a corporation contrasts sharply with the prevailing business notion -- found in food retailing and elsewhere -- that is based on a repetitive model of activity.
Such an outlook presumes that large tasks can be broken into discrete functions, each of which should be performed with increasing efficiency over time.
"Traditional U.S. corporate philosophy has always been based on the repetitive-process model. This model, derived from the machine age, focuses on the concept of successive refinement. That's doing the same thing over and over again and, hopefully, in the process, finding ways to do it quicker and cheaper with each iteration.
"The food industry has clearly followed this model, to some extent. When problems develop using this model -- when business slows -- some of us go out and hire people, usually M.B.A.s and accountants who have never done any actual work, and these individuals help us 're-engineer' our processes.
"This is mostly a euphemism for downsizing or rightsizing: cutting people. When you rightsize an organization, you are admitting the failure of senior management to find a successful strategy to grow that organization.
"It's never the fault of the people who get downsized, but a reflection of an undue reliance on the repetitive process model which seeks to find ways to do things cheaper and quicker instead of different and far-reaching and with a look to the future," Laverty said.
