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    SAP for Retail

    8 Posts authored by: Gerard Yeo

    Retail Human Resource (HR) leaders continually strive to leverage their human capital assets to drive value and create business differentiation through people.  As with any enterprise capability, the ability to access, analyze and report on success or failure is paramount.  Human capital management (HCM) analytics are, at their most basic level, a report of workforce demographics or specific operational measures such as headcount or payroll costs.  At their most strategic level, however, they are a critical force for superior retail performance.  Supported by predictive HCM analytics, the right strategy can enable a retailer to execute critical plans without any talent-related disruption, or serve consumer demand in the most cost effective way.

     

    Although winning the war for talent is an imperative for retailers, there appears to be much room for improvement.  In a recent survey by the Human Capital Institute1, 43% of respondents still use spreadsheets or other manual reporting methods to capture and analyze HR data, and less than 20% possess the ability to collect, aggregate, and derive insight from HR data.  Additionally, only 11% of respondents use mobile devices to communicate HCM analytics data and less than 10% have real-time access to HR data. So how do retailers plug the skills gap?2

     

    At the upcoming 2013 National Retail Federation Convention, NRF13, we plan to show you how SAP SuccessFactors provides cloud-based HR business execution solutions that deliver business alignment, team execution, people performance, and learning management to retail enterprises of all sizes.  The NRF makes a great case for the importance for talent in retail in this short video:

     

     

    I hope to see you there at booth #1407!

     

    Notes:

    1. The State of HCM Analytics: Talent & Technology Imperatives, Human Capital Institute (HCI), October 2012.

    2. Plugging the Skills Gap: Shortages Among Plenty, Economist Intelligence Unit, May 2012.

    One of the more interesting findings in the latest annual survey1 of Financial Executives International (FEI) members by Gartner was that the top technology initiatives for 2013 are analytics (63%) and enterprise business applications (44%), followed by mobile technologies (32%) and cloud computing (18%).  These priorities are perfectly aligned with where SAP is investing with its 5 markets focus

     

    These results are also consistent with the traditional roles of the CFO as operator and steward, as well as the new evolving roles of strategist and catalyst being assumed by financial executives2.  The role of steward entails preserving the assets of the organization by minimizing risk and getting the books right, while that of operator means running a tight finance operation that is efficient and effective.  Increasingly a CFO needs to be a strategist, helping to shape overall strategy and direction, as well as a catalyst by being an agent of change by establishing accountability and a focus on value throughout the organization. These varied roles make a CFO’s job more complex than ever.

     

    The issues faced by the retail CFO and the Finance line of business will be explored as one of our themes, Operate and Execute Better, at the upcoming NRF Big Show in New York from January 13-15, 2013.  We will have a number of sessions, demos and experts to enable you to experience first-hand how financial solutions enable retailers to run better and achieve superior financial performance.

     

    Other areas that will be covered under the Operate & Execute Better theme are Human Resources/Talent, Real Estate and Sustainability.  Here’s a preview of what to expect from SAP at the show.

     

     

    I hope to see you there at booth #1407!

     

    Notes:

    1. Top 10 Findings From Gartner's Financial Executives International CFO Technology Study, Published: 16 May 2012, Analyst(s): John E. Van Decker.
    2. CFO in Transition: Four Faces of the CFO, Deloitte, August 2009.

    The Digital Revolution: Creative Destruction or Retail Reinvention?

    Following my first RETAIL FUTURES: Other People’s Money (Part 1), let’s continue with another two strategies that will help retailers ensure their businesses not only survive, but thrive, in the digital retail era:  

    1. Leverage digital channels to enable your customers to get what they want – with Pizza Hut introducing online ordering in 1994, and Amazon.com launching in 1995, electronic retailing is nothing new.  Since then however the pace of innovation has accelerated exponentially with Web 2.0, mobile devices, social shopping, geo-location and other technologies spawning a multitude of business models for multi-channel retailing. There is even a concept called social vending that PepsiCo is piloting.  Increasingly, it appears that the mobile device is the weapon of choice for retail innovation as in the case of the Starbucks app which replaces both the loyalty card and way to pay with a single swipe.  One vision of how these technologies will converge was shown by digital marketing agency Resource Interactive at the recent Shop.org annual summit in the video the future of shopping. 
    2. Listen to the voice of the customer – a unique aspect of the new digital channels is that they enable two-way communication in ways unimagined before.  Even if a retailer did not initially start, or is not part of, a direct communication with their customers they are now able to join an ongoing conversation.  By tapping into the vast stream of digital consciousness as it is being generated at a mind boggling rate by people, devices and sensors retailers are able to discern what is being said about their products and their brands.  This unique feedback loop is enabled by text analysis technology which is able to scan huge amounts of unstructured data and pick out key words, as instructed by a user, on such things as brands, products, locations and sentiments.  The insights gained can help retailers understand not only sentiment about their products, prices and services, but also the whole customer experience and in turn illuminate what potential there for improvement, differentiation and further innovation.

    So in a nutshell, digitalize your products and services, and deliver and gain feedback on them and the whole experience through digital channels.  Today’s shoppers are technically savvier than ever and equally savvy retailers are being rewarded with their business.  By adopting digital and mobile strategies, retailers can ensure that they too will earn a share of consumers’ wallets.

     We’ll leave the last word to Larry "the Liquidator" Garfield:

     "You know, at one time there must've been dozens of companies makin' buggy whips.  And I'll bet the last company around was the one that made the best goddamn buggy whip you ever saw.  Now how would you have liked to have been a stockholder in that company?...

     …Take the money.  Invest it somewhere else.  Maybe, maybe you'll get lucky and it'll be used productively.  And if it is, you'll create new jobs and provide a service for the economy and, God forbid, even make a few bucks for yourselves."

     

    The Digital Revolution: Creative Destruction or Retail Reinvention?

    Delivering an impassioned speech to the shareholders of the troubled New England Wire & Cable Company, corporate raider Larry "the Liquidator" Garfield, played by Danny DeVito in the 1991 film Other People’s Money, tried to explain the company’s predicament:

    "This company is dead. I didn't kill it.  Don't blame me.  It was dead when I got here.  It's too late for prayers.  For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead.  You know why?  Fiber optics.  New technologies.  Obsolescence.  We're dead alright.  We're just not broke.  And you know the surest way to go broke?  Keep getting an increasing share of a shrinking market.  Down the tubes.  Slow but sure." 1

    Today, the retail industry, especially the hardlines segment2, is undergoing rapid innovation, transformation and creative destruction driven by the digital revolution.  Companies that have embraced digital technologies such as Amazon.com, Apple Computer and Google are experiencing unprecedented success while others who have waited to expand their technology horizons have, in the words of "the Liquidator", gone down the tubes or are struggling to keep up.  In the continuously evolving digital retail landscape, how can retailers ensure that their brands and their businesses stay on top?

    Here are four strategies for innovation that retailers can adopt to ensure their businesses not only survive, but thrive, in the digital retail era: 

    1. Digitalize your products – music, video and now the printed word (books, magazines, newspapers) have become digital products along with the rise of iTunes, Netflix, Kindle and iPad resulting in the demise of many traditional music, video and book stores.  What may have been forgotten, and today taken for granted, is the many other products (and industries) that have already been totally transformed by digital technology such as the typewriter, telephone, mail, photography, maps3 and games (not to mention social networking) over a relatively short time.  But of course, you cannot digitalize a gallon of milk, a pair of pants, or a set of furniture4.  You can however add intelligence to your physical products in the form of QR codes, RFID tags and even microprocessors (for example wearable technology and E-textiles) – isn’t that the way the phone got smart?  And of course digital technology can be used to design, customize and personalize your products – ever shell out on a custom pair of Nikes or Levis, or built your own Dell or Beemer5?  Therefore, when designing a new product or service, ask the question, "How can I offer this digitally?"
    2. Surround your product with digital services – as the paraphernalia that are part and parcel of retail transactions such as catalogs, tickets, coupons, payments, receipts and loyalty programs (remember green stamps?) increasingly become electronic, an additional strategy is to develop a complementary set of services to support your product delivery, installation, maintenance, repair, upgrade and replacement (i.e. the consumer lifecycle).  Again, although many of these services are physical and cannot be entirely digitalized they can be greatly enhanced with the use of digital technology.  One example is Fresh Direct, the New York City online grocer, who goes to great lengths to ensure their customer deliveries in the asphalt jungle6 of Manhattan are made within the promised time slots.

    To be continued… check back in a couple of weeks for two more retail innovation strategies for the digital age and the conclusion of this piece by "the Liquidator"!

    Notes:

    1. You can catch DeVito’s full speech at American Rhetoric.
    2. The other retail segments that my fellow Industry Principals at SAP specialize in are Softlines and Food & Drug.
    3. Maps have become much more than just being digital – coupled with satellite imagery, geo positioning systems and augmented reality they have morphed into such things as navigation systems, traffic indicators, real estate valuation tools, business directories (my daughter once asked me what are Yellow Pages) and, the one I love best, a way to visit places you’ve never been to before (or that place long ago where you grew up that’s now a shopping mall – those damn retailers!)
    4. In the future you just might be able to print your own liver: Sir, Your Liver Is Ready: Behind the Scenes of Bioprinting.
    5. You can also pick it up at the BMW Welt, Munich – a great example of multi-channel retailing and a total customer experience.
    6. Asphalt Jungle, a 1950 film noir directed by John Huston.
    Gerard Yeo

    RETAIL FUTURES: Cloudy

    Posted by Gerard Yeo Dec 30, 2010
    No borders, no boundaries1

    In 1966, long before the age of personal computers and mobile phones, Simon and Garfunkel recorded their third studio album Parsley, Sage, Rosemary and Thyme.  On the third track, they opened the song Cloudy with the lyrics:

    My thoughts are scattered and they're cloudy
    They have no borders, no boundaries

    With the growing phenomenon of cloud computing entering its 12th year2, and the continued evolution of Retail Without Boundaries, what does the future hold for this technology and what should retailers be doing about it?

    Imagine

    To do so, let’s imagine…

    …a time, in the not too distant future, where your personal computer will be your mobile phone (or vice versa).  You will not have any applications installed on your device, or data or files – instead you just tap into business processes, databases and folders running remotely on servers in the cloud, collaborating with other business processes, users, avatars and automatons as needed.

    No computer viruses to deal with. No data to back up.  No upgrades or patches to install.  No crashes or need to reboot.  No lengthy implementations.  No data centers to maintain.

    Always on, a single charge runs for days since the machine has almost no computing power.  In fact you logon (biometrically) with any machine.  But if you lose your personal machine, you just get another and deactivate your old one.

    On Device, On Demand, On Premise

    So, how can we take advantage of this now?

    As SAP has outlined in its product strategy, the best way to capitalize on the advantages of emerging technologies like mobility and cloud computing, while at the same time leveraging your investment in your current technology platform, lies in pursuing a three thronged approached which is neatly summed up as On Device, On Demand On Premise.

    This has the potential to give retailers a tremendous amount of flexibility in implementing these technologies at their own pace, and to later expand their use as required in response to business challenges and opportunities.  In taking an evolutionary approach retailers will also lower their risk in adopting innovation without disruption.

    Above us only sky3

    A closing thought…

    Adam Selipsky, a vice-president of product management and developer relations at Amazon, says the company learned how to run data centers inexpensively and at a large scale as a result of building its retail business.  Many companies will pare back their data center operations in the next decade or two, turning the computing business into one of higher volumes and lower profit margins—a scenario where Amazon excels.  According to Selipsky "We're four years into a trend that's probably decades long."  Already, Amazon Web Services consumes more computing power than the company's retail business.

    As we end one year and start a new one, we’ll leave the last word to John Lennon:

    You may say that I'm a dreamer
    But I'm not the only one

    Notes
    1. Lyrics from the song Cloudy by Simon and Garfunkel, 1966.
    2. Salesforce.com was founded in 1999.
    3. Lyrics from the song Imagine by John Lennon, 1971.
    The Last Detail

    Playing Navy Signalman First Class Billy "Badass" Buddusky in Hal Ashby’s The Last Detail, Jack Nicholson won the Palme d’Or for best actor at the 1974 Cannes Film Festival.  I first saw this film while in college at the Electric Cinema in Portobello Road, London as part of an all night screening of "Films That Made Jack Nicholson Famous" 1.

    In those days, when not slumped in the back row of the cinema transfixed by the silver screen, I was trying to master Computer Programming 101, a required course for my Chem Eng degree.  For the nerds of that time computing was all batch processing with 80 column punch cards.  Interactive computing or timesharing (as it would initially be called) was still a few years away.  Real-time computing did exist but in our world this was reserved for direct digital control of chemical plants and processes (and the occasional game of Colossal Cave).

    Retail is Detail

    Fast forward 10 years2… One of my first jobs as a budding consultant was to code allocation and replenishment routines for a retailer to automate what they had been doing manually (not spreadsheets but pencil and paper!).  Fortunately, we had the services of a wise and wizened retail consultant that had been parachuted in from the US who taught us all we needed to know about exponential moving averages and Poisson distributions.  More importantly he told us that we needed to perform our retail calculations efficiently – you see, he warned, "retail is detail".  We were dealing with 168 stores, 2,000 SKUs and 52 weeks of history which generated over 40 million data points.  With an overnight batch window (from store closing to store opening) of 6 hours, and executing RPG code on a System/38, our allocation and replenishment routines needed to run fast.  (Another retail project we had at that time, and which our US consultant helped us on, was to build a Merchandise Planning application (top-down, bottoms-up) on a PC using spreadsheets – we usually went to get a cup of tea – sorry no Starbucks then – when we hit F9 to recalculate).

    Today, retailers have thousands of store, tens of thousands of SKUs and stores that stay open 24 hours, 365 days a year.  There are also more channels, customers, competitors, e-mails, tweets, RFID, the Internet of Things (objects attached to the Internet) – the list goes on – all generating even more data.  This adds up to a mountain of data with dual challenges – it is harder to find what you want and it takes longer to process it.  As Eric Schimdt, CEO of Google, said at the recent Techonomy conference: “There was 5 exabytes of information created between the dawn of civilization through 2003, but that much information is now created every 2 days, and the pace is increasing”.

    Details, Details

    Of course, thanks to Moore’s law we have had, and will have in the future (at least till 2015, the experts say, when we will reach molecular limits), greater and greater computing capacity.  However, as CPU speeds and memory capacities have increased, other aspects of computing performance such disk access speeds have failed to keep up.  As a result of these disparities in speed, access latencies are more and more often the bottleneck in system performance (and not the efficiency of code… Smiley Face)3.

    While processing in memory has been around since the 1990’s, it has only been in the last few years that it has become commercially viable.  The recent introduction of SAP’s HANA (High Performance Analytic Appliance) means that Real Real-Time Computing is Here!  Although in the first iteration SAP HANA is initially positioned as an analytics engine, the roadmap calls for an extension of in-memory computing to on-line transaction processing.  This will present enormous opportunities for retailers to leverage the next generation of computing power.  Of particular relevance to retail would be applications that involve:

     

    • Optimizing large, multi-dimensional matrices such as Merchandise and Assortment Planning, Allocation and Replenishment
    • Scanning large numbers of rows (records) or objects (media – image, audio, movie) for forecasting, purchase behavior, customer segmentation, loss prevention, etc.

    (I am tempted to go back to being a programmer to see just really how fast is fast.)

    The Devil is in the Details

    So, show me the money (or, if you are so inclined, where’s the beef?).  Does it really matter that we can process 460 billion records in 0.04 seconds rather than 20 minutes?

    In 1990, amidst the business process reengineering frenzy of the early days of ERP, George Stalk, Jr., of the Boson Consulting Group published the seminal work Competing Against Time: How Time-based Strategies Deliver Superior Performance and gave birth to the concept of Time Based Competition.  Time is a resource and a firm that makes better use of time (in responding to the changing market situations and other environmental conditions) acquires a competitive advantage.  One of his prescient observations (also note the size of Walmart at that time, and that it was not the largest retailer but number three) was:

    "Wal-Mart is one of the fastest growing retailers in the United States.  Its stores move nearly $20 billion of merchandise a year.  Only K Mart and floundering giant, Sears, are larger.  Wal-Mart’s success is due to many factors not least of which is responsiveness. "

    The main premise of Stalk’s book is that costs do not increase when lead times are reduced; they decline, and costs do not increase with greater investment in quality; they decrease.  For retailers this is especially true today as we enter the ever increasingly interconnected world of mobility and multi-channel retailing and the online shoppers’ need for speed can mean lost sales in a matter of seconds.

    With some trepidation, we’ll leave the last word to "Badass" Buddusky: "***** ******! That's what I call quick."

    Notes
    1. The other films were Easy Rider, Five Easy Pieces, Carnal Knowledge, Chinatown and One Flew Over the Cuckoo’s Nest.
    2. How you go from chemical engineering to retailing in 10 years is another story – stick with this blog and you may find out.
    3. Unfortunately, according to Gates Law, the speed of software generally slows by fifty percent every 18 months thereby negating all the benefits of Moore's Law.  This could occur for a variety of reasons including: "featuritis" and bloatware.
    Green: covered by green growth or foliage1

    Harkening back to a bygone era, John Ford's 1941 Oscar winner (beating Citizen Kane and The Maltese Falcon to the prize - two films according to the American Film Institute that are ranked among the greatest ever made) How Green Was My Valley, based on the novel of similar name, tells the story of the Morgan family and the disintegration of a Welsh mining community foreshadowed by the growing slag heap that eventually engulfs the valley.  In the opening sequence the valley is described through the eyes of a young Huw Morgan: "Green it was, and possessed of the plenty of the earth. In all Wales, there was none so beautiful."

    However (like the novel and film) our planet is fast losing its greenness.  According to the World Wildlife Fund (WWF) in the latest 2008 edition of their biannual Living Planet Report we are consuming the resources provided by the Earth's natural systems much too fast - faster than they can be replenished.  Just as reckless spending is causing recession, so reckless consumption is depleting the world's natural capital to a point where we are endangering our future prosperity.  As the Director-General of WWF International puts it: "The recent downturn in the global economy is a stark reminder of the consequences of living beyond our means.  But the possibility of financial recession pales in comparison to the looming ecological credit crunch."

    As our demands continue to escalate, driven by the relentless growth in human population, consumption, urbanization and globalization our global footprint now exceeds the world's capacity to regenerate by about 30 per cent.  If our demands on the planet continue at the same rate, by the mid-2030s we will need the equivalent of two planets to maintain our current lifestyles.  The world's leading scientists warn that we have less than ten years to avoid the worst-case scenarios projected by the Intergovernmental Panel on Climate Change (IPCC, established by the UN in 1988 it shared the Nobel Peace prize with Al Gore in 2007).  As greenhouse gas emissions continue to rise we will soon reach critical thresholds triggering consequences that we cannot reverse resulting in the extinguishing of our pale blue dot2.

    Green: [POLITICS] advocating protection of the environment1

    Ever since the beginning of the Neolithic Era (New Stone Age, circa 10,000 BCE) as homo sapiens evolved from nomadic tribes of hunter gatherers to more permanently settled agrarian societies (based on the clearing of land, agriculture and domestication of animals and plants) have we been putting a growing ecological "footprint" on the planet's resources.  It is sobering to note that most of Western Europe is deforested - natural woodland covers just 2.5% of present day England.  Even relatively small, primitive communities could produce mind boggling amounts of waste over time as illustrated by the discovery of middens (archaeological term that describes any kind of feature containing waste products relating to day-to-day human life - the Whaleback Shell Midden in Maine for example is 30 feet deep and over 1,500 feet long and wide).  As we now know, we all leave an ecological footprint.  However it is only since 1986 that our collective footprint we has exceeded the biocapacity of our planet and has done so every year since.

    It has only been in the last 200 years that we have begun to consider seriously the sustainability of our planet and the finite nature of the earth's resources.  Early concerns centered on population growth and control - an early influential work was An Essay on the Principle of Population by Thomas Robert Malthus in 1798, a later example being the Limits to Growth by the Club of Rome in 1972 (updated in 2004, Limits to Growth: The 30-Year Update).

    A more recent approach to sustainability has been one of conservation and the application of science to develop alternative technologies (renewable, recyclable, etc. - often called "clean" or "green" tech).  Although the environmental movement has been around for well over 100 years with the founding of the Sierra Club in 1892, it has only been in the last 30 years that it has gained considerable influence.  Firstly, political influence with the founding of the US Environmental Protection Agency (EPA) in 1970, United Nations Environment Programme (UNEP) in 1972, and the UK Green Party in 1973 (the Greens, a pan European alliance of Green Parties, hold 46 seats in the current European parliament).  Secondly, and probably more significantly, commercial influence across a wide range of industries, for example financial services - Goldman Sachs (Sustain, 2004) and retailing - Walmart (Sustainability 360, 2005), Marks & Spencer (Plan A, 2007) and Tesco (Sustainable Consumption Institute, 2007).  If this appears to be retailers jumping on the band wagon, then we must give credit to some of the retail pioneers that based their entire business model from day one on sustainability such as Patagonia 1972, The Body Shop 1976, and Whole Foods Market 1980.

    Unlike the Paleolithic Era (Old Stone Age, circa 2.6 million years BCE), where several human species existed, only one human species (Homo Sapiens) reached the Neolithic Era.  Having survived the ensuing Bronze, Iron and Middle Ages, let us hope we can make it beyond the Industrial Revolution (Industrial Age or Modern Era, mid 1700s) into the promise of the Space (1957) and Information Ages (19723).

    Green: made with little environmental harm1

    For most of human evolution our food supply could be characterized as organic.  It has been only in the last century that a significant amount of synthetic chemicals, processing and genetic modification has been introduced to the food supply.  Today this type of food is labeled conventional though organic food has been the convention for most of our history.  The term organic farming was coined by Lord Northbourne in his book Look to the Land published in 1940.  Due to increasing consumer demand for health and environmental reasons organic food production has had growth rates of around 20% a year since the early 1990s, far ahead of the rest of the food industry.  As a result of the proliferation of organic products, the US Department of Agriculture (USDA) introduced the National Organic Program (NOP) which was made law in October 2002.  The NOP covers fresh and processed agricultural food products but does not cover non-food products that may be sold as organic, including textiles (e.g. organic cotton) and cosmetics (e.g. organic shampoo).

    For non-food products, the EPA published the Twelve Principles of Green Chemistry in 1998 by Dr. Paul Anastas (father of Green Chemistry - currently Director of the Center for Green Chemistry and Green Engineering and Professor in the Practice of Chemistry for the Environment at Yale University - recently nominated by President Obama to lead the EPA's Office of Research and Development).  The Twelve Principles have subsequently been the foundation for numerous initiatives including the Green Chemistry and Commerce Council (GC3) in their recent publication Best Practices in Product Chemicals Management in the Retail Industry (containing several retailer case studies it was encouraging to find several SAP customers including Apple, Boots, REI, Staples and Walmart).  Faced with growing demands to identify and disclose the potentially harmful chemical ingredients in the products they are selling and to substitute chemicals of concern, innovative retailers are incorporating product chemicals management systems into their corporate sustainability strategies.  One example, which was show cased at the recent RILA Sustainability Conference, is Walmart's use of the GreenWERCS tool that will help its suppliers rate their products and compare their score against the industry average.  Suppliers are able to experiment with product ingredients to see what alternatives can reduce their environmental impact encouraging changes in formulations to create more sustainable products.

    In conjunction with the rise of organic and green products has been the need for eco certification and labeling (over 300 eco labels are currently listed at Ecolabelling.org).  The latest development in this trend has been carbon labeling.  The world's first carbon label which shows a product's carbon footprint (from production and distribution to consumption and disposal) was introduced in the UK in 2006 by the Carbon Trust.  Tesco has launched range of 20 products such as orange juice and washing powder with a carbon label.  Another initiative is the Product Carbon Footprint (PCF) Project which involves ten European companies (again with good representation by SAP retail customers including dm-drogerie markt, REWE Group, Tchibo, Tengelmann and T-Mobile) working towards an international standard methodology for PCF assessment.  At their recent PCF World Forum held in Berlin in September 2009, Walmart presented their Sustainability Index (initially a sustainability assessment of 15 questions to their top suppliers) and Sustainability Consortium (administered by Arizona State University and the University of Arkansas) which is currently undertaking a global survey of all eco labels.

    Green: not ripe - unripe or not mature1

    While it is not hard to envision how software applications could enable end-to-end business processes for sustainability - such as eco certification, labeling and compliance - it is still an emerging market.  In emerging markets there is a lot of uncertainty as demand for the product, the global economy, and legislation are unknown.  Companies in an emerging industry tend to derive little or no profit while investing in research, development and product introduction.  However the last 12 months has seen frenetic activity in the IT industry as companies have responded to the growing demand for and opportunities in software solutions for sustainability.  Not least has been SAP who acquired Clear Standards, a carbon management solution provider, and developed a Sustainability Map (containing a number of solutions including Clear Standards which has been renamed Carbon Impact).

    As the market for these solutions matures it will become increasingly challenging for retailers to determine a coherent strategy and roadmap for their green initiatives.  At the recent RILA Sustainability Conference there were already more than 50 vendors with solutions that could potentially touch every single business process a retailer operates.  The SAP Sustainability Map certainly helps, but in order to facilitate a better understanding of what is out there (as well as where the gaps are), I have found it convenient to develop a three dimensional matrix or cube to help place where these solutions could potentially fit in a retailer's efforts.

    Along the first dimension are a retailer's key assets that it leverages to compete in the market place: Channels/Buildings, Products, Supply Chain, Technology, People, etc.  Along the second dimension are the key vectors that impact sustainability: Energy, Carbon (closely linked to energy but not exclusively, e.g. deforestation), Water, Waste, Health & Safety, etc.  Finally, along the third dimension are the key business processes a retailer must execute efficiently: Design, Production/Construction, Operation, Compliance and Reporting.  Obviously these are macro categories which can be further decomposed such as Channels (store, catalog, Internet) & Buildings (stores, warehouses, offices), Energy (HVAC, lighting, refrigeration, power), etc.  Additionally, there could be more categories in the future but for the time being these seem to be big building blocks to start with.

    Green: [FINANCE] money (slang)1

    There is no doubt that the green economy will eventually be big business.  The United Nations Environment Programme (UNEP) operates the Green Economy Initiative (GEI) which is designed to assist governments in "greening" their economies by reshaping and refocusing policies, investments and spending towards a range of sectors, such as clean technologies, renewable energies, water services, green transportation, waste management, green buildings and sustainable agriculture and forests.  Mean while in the private sector Al Gore is well on his way to becoming the first carbon billionaire and Tom Siebel has corralled a constellation of stars to sit on the board of his start up C3.

    Green business opportunities have driven large increases in the number of products making environmental claims (up 79% over last year) and the amount of green advertising (almost tripling since 2006).  Greenwashing is the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service.  According to TerraChoice (an environmental marketing firm) more than 98% of "green" products committed at least one of the Seven Sins of Greenwashing such as the Sin of Irrelevance - e.g. products claiming to be CFC-free, even though CFCs were banned 20 years ago or the Sin of Lesser of Two Evils - e.g. organic cigarettes, environmentally friendly pesticides or non-toxic bleach.  In response to these issues, the Federal Trade Commission (FTC) has published the Guides for the Use of Environmental Marketing Claims to prevent the false or misleading use of environmental terms in product advertising and marketing and reduce consumer confusion.  Although compliance to the guides is voluntary, the FTC may take corrective action under Section 5 of the FTC Act, which makes unlawful deceptive acts and practices in or affecting commerce, and has already taken action in a number of cases involving alleged deceptive or unsubstantiated environmental advertising claims.

    The pace of green job creation is likely to accelerate in the years ahead.  A global transition to a low-carbon and sustainable economy could create large numbers of green jobs across many sectors of the economy, and indeed could become an engine of development.  A recent report Green Jobs: Working for People and the Environment, produced by the Worldwatch Institute, examines the impact of an emerging global "green economy" on the world.  Efforts to tackle climate change could result in the creation of millions of new "green jobs" in the coming decades as the global market for environmental products and services is projected to double from US$1,370 billion (1.37 trillion) per year at present to US$2,740 billion (2.74 trillion) by 2020, according to a study cited in the report.

    Counter balancing this view is the recently updated Occupational Outlook Handbook, 2010-11 Edition published biannually by the Bureau of Labor Statistics (BLS) which projects over the next ten years (2008-2018) of the 20 fastest growing occupations in the US economy (as well the 20 top occupations that will generate the most new jobs) half are related to healthcare which is experiencing rapid growth, due in large part to the aging of the baby-boom generation who will require more medical care.  Interestingly enough computer applications software engineers are also in the top 20 rankings of fastest growing and most new jobs (they also have the highest median annual wage).

    Green: innocent - naive and lacking experience1

    I'll leave the last words to Huw Morgan: "In those days, the black slag - the waste of the coalpits - had only begun to cover the side of our hill, not yet enough to mar the countryside nor blacken the beauty of our village.  For the colliery had only begun to poke its skinny black fingers through the green."

    Within a lifetime, the valley was no more.

    Post Script

    My apologies (again) for the length of this blog.  It was meant to be a collection brief observations of the RILA Sustainability Conference in October 2009 which I had hoped to publish last year.  As I put my thoughts down I found the topics to be considerably broader and deeper than originally thought - and in reality this blog only scratches the surface.  As some of you may concur, like a properly designed and written software application, it would be remiss to not attempt to have a more integrated, holistic view.

    Notes
    1. Definition from the Encarta® World English Dictionary [North American Edition] © 2009 Microsoft Corporation.
    2. Photograph of the Earth taken in 1990 by Voyager 1 from a record distance of 3.7 billion miles, showing it against the vastness of space. The idea for taking the distant photo and its title came from scientist and astronomer Carl Sagan whose reflections on the photo include:

      "The Earth is the only world known so far to harbor life.  There is nowhere else, at least in the near future, to which our species could migrate.  Visit, yes.  Settle, not yet.  Like it or not, for the moment the Earth is where we make our stand."

    3. With a little license, the beginning of the Information Age is given as the year SAP was founded. Alternative dates which may also be considered include:1953 (IBM 650 - first massed produced computer), 1977 (Commodore PET, Apple II, Tandy TRS-80 - first personal computers), 1989 (World Wide Web).
    About This Blog

    I plan to write about future scenarios for retail industry and the interplay with trends in the economy, technology and society - and of course how SAP is playing (or should be playing) a role in the industry.  So here goes...

    The Year of Living Dangerously

    So... it's not Peter Weir's 1982 film starring Mel Gibson and Sigourney Weaver, nor the events of 1965 in Indonesia on which the film is based.  No, we have to go back more than 70 years before we lived as dangerously as this.  According to the International Monetary Fund, in their recently released World Economic Outlook of April 2009, by all measures (and they have many) we are experiencing the worst recession since the Great Depression.  We are currently in the midst of the fourth global recession since the end of World War II.  By the IMF's exacting standards not all recessions are global in nature.  For example, the bursting of the dot com bubble and the ensuing recession of 2001 does not qualify as a global recession as growth in major emerging markets such as China and India remained robust.

    To top it all, this is the most synchronized recession meaning - with almost 75 countries currently in a recession at the same time - this downturn has the distinction of involving the most countries.  Although it is clearly driven by asset deflation and reduced economic activity in the advanced economies (G8, Euro Area, etc.), concurrent recessions in emerging economies (BRIC, ASEAN, etc.) are contributing to its depth and synchronicity.

    A Whole New World

    What constitutes a global business cycle?  In the 1960s, it was sufficient to answer this question by looking at cyclical fluctuations in advanced economies, the United States in particular.  These countries accounted for nearly 70 percent of world output and the rest of the world was largely dependent on the advanced economies.  Today, with the share of advanced economies in world output down to about 55 percent, the influence between business cycles in these countries and global business cycles can no longer be taken for granted.  Indeed, in 2007, as the slowdown in economic activity in the G8 economies began, the hope was that emerging economies would be somewhat insulated from these developments by the size and strength of domestic demand and by the increased importance of intraregional trade.  This however did not turn out to be the case.

    Today, the countries of the world are more integrated than ever before through global trade and financial flows, creating greater potential for spillover and contagion effects.  This magnifies the feedback, in both directions, between business cycle developments in advanced economies and those in emerging economies, increasing the odds of synchronous movements and global business cycles.

    Déjà Vu All Over Again1

    In addition to the IMF, a whole host of high powered think tanks and organizations are tracking this recession closely and comparing it to previous ones.  One of the most prestigious is the National Bureau of Economic Research (NBER) which is the nation's leading economic research organization (16 of the 31 American Nobel Prize winners in Economics and six of the past chairmen of the President's Council of Economic Advisers have been researchers at the NBER).  Their data on Business Cycle Expansions and Contractions goes back as far as 1857 but unfortunately does not include the South Sea Bubble3 of 1720 as the United States did not exist at that time.

    A couple of items really stand out - firstly, this is going to be one of the longest recessions (peak to trough) since the Great Depression. The longest recession, which incidentally is known as the Long Depression, lasted 65 months from October 1873 to March 1879 eclipsing the Great Depression's 43 months.  The current recession started in December 2007 so we are currently about 18 months into it and counting (note: the average post war recession lasted 10 months).  Secondly (but of little comfort), most of us reading this blog have lived through (and hopefully benefited from) the longest economic expansion on record which lasted 120 months from March 1991 to March 2001, a period of great technical innovation with the wide scale adoption of the World Wide Web (the term Internet was first used in 1974, although the technical foundations were conceived in the 1960's) and ERP software (again conceived in the early 1970's but not globally adopted until the advent of 3 tier client server architecture).

    McKinsey has put forward some interesting insights in their paper Mapping Decline and Recovery Across Sectors.  They show how we can learn from past recessions and how despite claims that the current recession is "unprecedented" it seems to be following many of the same patterns the four previous ones did - patterns that may offer insights into the performance of sectors in the coming months and indicators for recovery.  One pertinent fact and of no surprise to retailers is that the Consumer Discretionary industry has always been the hardest hit (and the Utilities industry almost always comes out unscathed).  However, in the last four recessions higher consumer discretionary and IT spending have led the way out of the recession.

    The Future Ain't What It Use To Be2

    While it is clear that recessions do not last forever what is not so clear, but increasingly becoming so, is that we will emerge from this recession into a New Economic Reality or New Frugality.

    It is sobering to note that recessions not only have financial but also social and cultural effects.  In fact the Great Depression changed consumer behavior and shopping attitudes for a generation.  In 1952 when Ozzie and Harriet were a model family and Americans had never heard of a grande latte, most people only had a couple pairs of shoes and going out for dinner once a month was a treat.  Ozzie and Harriett might seem frugal to us but they didn't think so.  After the privations of the Great Depression and wartime rationing they probably felt that a house filled with matching furniture was downright extravagant.  Fourteen years later Ozzie and Harriet's nuclear family and values were fast disappearing and the show was canceled in 1966 (today it holds the distinction of being the longest running live-action/non-animated sitcom in US TV history).

    From a historical (and social) perspective, it is interesting to note that the mantle was taken up by All in the Family (1971 - 1983) - ranked #1 in the yearly Nielsen ratings from 1971 to 1976 and the only show, along with The Cosby Show and American Idol, to top the ratings for at least five consecutive seasons - followed by The Simpsons (1989 - present) which is the longest running American primetime entertainment series.  We may explore this further in future blogs... (art reflects life reflects art).

    As for timing of the recovery we'll leave the last word to the IMF who in their World Economic Outlook Update of July 2009 state that the advanced economies are not projected to see a sustained up turn in activity until the second half of 2010.  So, if this turns out to be correct the Financial Crisis of 2007-2009 will have lasted about 30 to 36 months, about 6 to 12 months shorter than the Great Depression!

    In The Trenches

    What does this all mean for retailers who are in the trenches battling at the frontline of consumer spending?  At a recent dinner with a select group of retail CIOs in New York there was consensus that retail executives, boards and investors are looking to attain better capabilities to enable them to navigate increased market turbulence and stronger economic headwinds.  These capabilities fall into a number of categories:

    • Transparency - increased ability to identify and measure exposure to and the impact of the worldwide economy on activity in their retail segment and as well as their enterprise.  What is the effect of macro economic trends and leading indicators such as commodity and energy prices, asset deflation, consumer spending and unemployment on their business?  This will hopefully help them see where and when future storms are brewing.
    • Clarity - models and analytics to make sense of all the data and trends.  So if we now know when the storm is coming (or maybe since we are in the midst of one, when it is ending) what should we do - what investments should we make in our products, channels, people and technology?  Where should we scale back and how judiciously?
    • Speed - the ability to rapidly deploy financial, human and technology assets for efficiency, innovation and growth.  This may not necessarily mean acquiring new assets, but redeploying or redirecting assets and getting more out of what you already own.  How can our technology partners help us with this?

    My apologies for the long missive in this first blog... I would appreciate any comments you may have.

    Notes
    1. Quote attributed to Yogi Berra, former Major League Baseball player and manager.
    2. Ibid.
    3. When Sir Isaac Newton was asked about the continued rise of South Sea stock he answered "I can calculate the movement of the stars, but not the madness of men."

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