EXCLUSIVE: Steve Dennis talks retail leadership in age of innovation

Retail executives need to keep up with disruption and innovation and be willing to take risks.

Chain Store Age recently spoke with Steve Dennis, president and founder, SageBerry Consulting and former C-level executive at Sears and Neiman Marcus, about effective leadership in the face of technological disruption and shifting retail business models. 

Dennis is author of the soon-to-be-released book "Leaders Leap: Transforming Your Company at the Speed of Disruption."

What lessons did you learn from your experience as a Sears executive?

Sears was my first foray into retail. I got a lot of exposure my 12 years there to all sorts of different merchandise categories and formats, and also worked on e-commerce very early. But a few lessons stand out.

One is that the mightiest brands can fall, no matter how strong and well-known you are or how much history. When you have a deeply entrenched culture, it's very hard to change.

Sears had the classic innovator’s dilemma, which is when you're big, you tend to try to optimize what you already have. You may be blinded, at least for a while, to disruptors that are going after parts of your business.

Also, Sears didn't act with alacrity against the emergence of the off-the-mall trend as represented by big box competitors like Home Depot, Lowe's or Best Buy. A lot of what those retailers did that made them successful was to focus on providing a solution rather than a product, while Sears was focused on having the best tools and appliances.

A customer remodeling their kitchen, for example, could get the appliances from Sears, but not everything else they needed for the project. That was a fundamentally disruptive business design that really destroyed the golden goose of Sears, which was the appliances and the tools business. Retailers need to focus on the ultimate outcome that the customer wants, not just necessarily the products that they provide.

How would you define a truly disruptive business model?

At the simplest level, it's a business model that resets the basis of the competitive dynamics. Typically, it happens because an outsider or an insurgent competitor finds either some vulnerability in the incumbent’s business model or just finds a new way to solve a problem.

But the main thing is that it takes a part of the traditional competitive structure and changes the basis in a way that causes the disruptor to pick up market share. The most extreme examples in retail are Home Depot and Lowe’s, or more recently Amazon or Shein.

The disruptor creates such a different way of doing business that they're able to gobble up market share. As long as the legacy player sticks with protecting the status quo, it typically makes that incumbent even more vulnerable to being made irrelevant or even put out of business.

How can a leader mentally prepare to take a leap?

Very carefully. But more seriously, preparing to leap means not being overly incremental or not just thinking of a slightly better version of what you're doing. It’s a way to go about your strategy. 

Also, it’s about the willingness to realize you don't have the all the answers. What made you successful in the past may not serve you well in the future. The concept of rethinking or unlearning can be really important. 

And there is an aspect of doing the work, by which I mean the world is complex and hard to understand. So taking a leap requires you to step up your game and dig deeper to understand what's going on and be open to what you discover. 

What does it mean to fail better?

Part of what distinguishes a successful and innovative organization is that they take more chances. They have more practice, take more swings at the plate. Failing better also means having clear milestones, understanding the process to get where you need to be, and then being willing to stop. 

If things aren’t working, quitting is underrated. Clients that I've worked with and companies I’ve worked at have all fallen in love with some initiative they should have shut down long before or held back.

Part of failing better is to be willing to drop or retool things that aren't working. If something is really working, you step on the gas, but you have to know what success looks like and be willing to take quick action. If something isn’t working, whether that is, move on or retool.

The companies that are good at innovation try a lot of things and have a culture of experimentation and testing and learning. They know how to run through a portfolio of initiatives and not get hung up on things that aren't working and then really invest in whatever they can get out of those experiments.

How do you think AI will impact retail?

AI is probably overhyped in the short term, but underhyped in the long term. What that means is, there's so much excitement and activity now, the odds are that AI will underwhelm in the next year.

But I think the impacts from AI are so profound that it could be more transformative than the invention of the Internet or the smartphone. There are some compelling use cases for automating more routine tasks and saving some money.

AI is not necessarily going to replace people. But when you think about something like writing product descriptions, AI can take a task that used to take 20 hours and let you get it done in 20 minutes, which allows employees to take on higher-value tasks. 

We're already seeing tech companies like Google and Meta talk about how much more effectively they're targeting consumers. Imagining some further-out possibilities, the ability to sort through massive amounts of data quickly could have implications for things like creating custom clothing.