What Can Today’s Retailers Learn from the Captain of the Titanic? Plenty.

Like the captain of the Titanic, leadership of failed or failing retailers has been publicly, and occasionally brutally, criticized. In some instances this criticism is clearly deserved, in other cases not.

Sears, Roebuck and Co. & Kmart finally met their iceberg on October 15, 2018, no lifeboats left, no deck chairs to rearrange, and 140,000 retail souls lost. Toys"R"Us and The Bon-Ton Stores, Inc. stores met with their own tragic fates, and JCPenney is wounded and navigating perilous waters.

Meanwhile, Nordstrom, Macy's, Kohl's, Walmart, Target and other retailers are showing improvements, with stock prices up as much as 40 percent year-to-date, and are plotting new courses. Costco Wholesale and The TJX Companies, Inc., continue to stay on their winning course.

Leaders Make The Difference

Recently, I participated in the Annual Retail Forum at Columbia Business School where a keynote speaker addressed a question from the audience:

“How would the speaker approach the precarious position of a challenged major retailer? What steps would you recommend?”

The response was,

“Shut it down…they don’t deserve to stay in business.”

This, “throw in the towel,” response brings to mind a key question we should ask ourselves. What would we do if we found ourselves as CEO of a retailer at risk of complete cataclysmic failure? One obvious metaphor is that of being captain of the Titanic.

You may not remember, but the Titanic had a bonafide captain: his name was Edward John Smith.

Edward John Smith

Raised in a working environment, Edward Smith left school early to join the Merchant Navy and the Royal Naval Reserve. After earning his master’s ticket, he entered the service of the White Star Line, a prestigious British shipping company. He quickly rose through the ranks and became the commodore of the entire company, responsible for controlling its flagships. In 1912, he was the captain of the maiden, and only, voyage of the RMS Titanic.

The first four days of the voyage passed without incident, but shortly after 11:40 PM on April 14th, Captain Smith was informed by First Officer William Murdoch that the ship had just collided with an iceberg. It was apparent that the ship was seriously damaged. The Titanic’s designer, Thomas Andrews, reported that the first five of the ship’s watertight compartments had been completely breached and that Titanic was doomed to sink in under two hours. Over 1,500 passengers and crew, including Captain Smith, would perish in the frigid North Atlantic that evening.

By many standards, Captain Smith acted in exemplary fashion. Smith issued a “mayday” transmission, used a megaphone to shout instructions to passengers and crew to lower the life boats, stay calm and board women and children first. He did his duty, followed procedures, and helped save over 700 passengers. And he paid the ultimate sacrifice by going down with his ship.

Second Guessing

It’s not fair to second guess the captain of the Titanic. Nonetheless, let’s do it anyway.

First and foremost, a change of strategy, as provided by the board of governors, would have helped. The entire collision might have been avoided in the first place by plotting a longer, slower route. Keep in mind that the Titanic was considered “unsinkable,” and the White Star Line was under intense competitive pressure to show extraordinary luxury and blazing speed.

To his credit, Smith followed legacy guidelines and historical emergency conventions:

• Protect the ship and its valuable assets.
• In the event of an emergency, optimize the number of people per lifeboat.
• Save women and children first, then 1st and 2nd Class passengers prior to 3rd Class passengers.
• Save the crew last.

Here’s Captain Smith’s scorecard when viewed through this legacy lens and traditional Key Performance Indicators: (with due respect to the human lives lost)

Paradigm Shift

But what if we change the key performance metrics?

What if we ask different questions, use different resources and challenge the conventional guidelines? The primary objective at the time of Smith’s decision making was to, “put people in lifeboats.”

Titanic carried a total of 20 lifeboats: 14 standard wooden Harland & Wolff lifeboats with a capacity of 65 passengers each, plus four Englehardt “collapsible” lifeboats with a capacity of 47 each. These 20 crafts met the British Board of Trade’s regulations at the time and was sufficient to contain half the passengers and crew. Carrying fewer lifeboats provided Titanic with greater speed and less fuel burn. As she was considered unsinkable, lifeboats were intended merely to transfer passengers to nearby rescue vessels, if necessary. However, with only 14 standard lifeboats, and the traditional “put people in lifeboats” objective, a tragic survival rate in the event of emergency was unavoidable.

However, what if the objective was to, “keep people out of the water, keep them warm and keep them breathing?” (as posed by Tony McCaffrey and Jim Pearson of Innovation Accelerator).

Do you recall the scene in James Cameron’s “Titanic” with Kate Winslet and Leonardo DiCaprio floating on the wooden door? In addition to lifeboats, many objects onboard the Titanic could float in water. Among these buoyant items were life jackets, life buoys, wooden tables, planks, piano lids, and doors.

Could doors, planks or tables be placed on the gunwales between lifeboats to create additional dry areas above the water? How about simply throwing these objects in the water to create more floatation options?

It is estimated that 40 automobiles were onboard. These cars represent 160 tires and inner tubes, plus additional spare tires, which were at the passengers’ and crew’s disposal. Tying together rubber tires and inner tubes might have created a floating raft on which wooden boards could have been placed.

Titanic carried over 3,000 steamer trunks. How could these have been used? Using tables, doors, and tires represents the “destruction of luxury assets,” which is against the primary directive and contrary to legacy behavior. Of course, all of these assets were doomed, under the circumstances, to be lost regardless of policy.

Here’s a thought: Floating nearby, was a hard-to-miss 40,000 square-foot iceberg. A surface large enough to hold all of the passengers and crew.

Stuck in the Past

Legacy procedures work best under historically predictable and repetitive circumstances. However, disruption and changes to the environment create new circumstances. Necessity is the mother of invention. Smith was a victim of the human tendency toward cognitive bias. Prime among these are:

• Confirmation Bias, the tendency to search for, interpret, favor, and recall information in a way that confirms one’s pre-existing beliefs. This bias locked Smith into narrow, legacy thinking.
• Selection Bias, narrows choices to a smaller group of options than actually exist. Particularly when we are under stress, we tend to view options through blinders. In most instances, selection bias narrows our view to historical standards and options, or a small set of options that have been previously discussed.
• Sunken-Cost Fallacy, (not intended as a pun here), the sunken-cost fallacy is the tendency to view prior costs and decisions as being highly influential toward current or future decisions. In this case, “We have 14 expensive lifeboats; we must use these as our primary means of survival.”

As we sit here, warm and dry, it is easy to second guess Captain Smith, who was under extreme stress and a very short deadline to make life and death decisions. I am grateful that I do not face his decisions or circumstances.

Retail Facing the Iceberg

Edward John Smith was the ideal candidate to command the Titanic under conventional operating conditions. Piloting a new, larger ship with untried technology on a faster course through iceberg-rich waters is anything but conventional – and sounds a lot like today’s disrupted retail landscape. You can’t navigate new waters with outdated maps.

Which brings us back to retail leadership operating under disruptive circumstances.

Kmart was originally incorporated as the S.S. Kresge Company in April of 1912, the same month and year of RMS Titanic’s fatal voyage.

And unlike Captain Edward John Smith, Eddie Scott Lampert, Chairman & CEO of Sears Holdings (which owns Sears and Kmart) will not be going down with his ship. He draws his own maps and plays by his own survivalist rules.

Excellence in execution remains essential. However, as Peter Drucker once wrote,

“There is nothing so useless as doing efficiently that which should not be done at all.”

Quite simply, today’s retail leaders must not automatically accept legacy business models, conventional best practices or traditional performance indicators. Inventory turn, maintained margins and average unit retail will continue to be important. However, the cost of customer acquisition, consumer lifetime value, social media engagement, customer review quotients, the acquisition of customer data and other indicators may be of equal or greater value.

When you hit an iceberg, each model, practice and metric must be reevaluated for relevance considering the new, rapidly evolving consumer path-to-purchase, global supply chain, ubiquity of information and competitive environment.

Some legacy retailers are already navigating around their own icebergs. Much of Macy’s and Kohl’s recent success is a result of managing traditional retail metrics, including inventory turn, assortment, brand matrix and store productivity; their new traffic generation and product assortments are in test mode. JC Penney has a new CEO, Jill Soltau.

With the right leadership in place, a willingness to reevaluate legacy practices, evolving performance measurements relevant to today's consumers, and the adoption of non-linear innovation… all is not lost. Even after striking an iceberg, dawn may illuminate not only survivors, but heroes and visionaries. And, when these innovative captains of industry achieve success, they will need to continue to reassess and reinvent. It’s the circle of life and the cycle of business.

Sometimes, the best ships in the world hit an iceberg. You want completely capable leadership at the helm. Manning the lifeboats may not be the only, or best, option.

© 2018, David J. Katz — New York City

Originally published in The Robin Report, October 1, 2018.

Many thanks to Robin Lewis, CEO of The Robin Report and to Deborah Patton, COO (and terrific editor).

This article has been updated... to reflect breaking news in the retail landscape.

Note: There is no indication that, after the collision with the iceberg, anyone aboard the Titanic ordered deck chairs to be rearranged.

---------------------

If you enjoyed this article, please share with your connections. I'd also love for you to hit the "follow" button so I can continue to share with you on a variety of topics. As always, I appreciate your feedback, and I respond to as many comments as possible.

If you liked this article you might enjoy the articles, below:

• The End of Mass Marketing: So Small or Go Home
• For legacy companies facing disruption, corporate innovation won’t be enough
• What if Amazon is Retail's Only Hope?
• Australia & Amazon: The Battleground Down Under
• Disruption is Inevitable, Essential & Painful
• What I Should Have Said, But Didn't
• Everything That Can Be Invented Has Been Invented
• A Customer Complaint, 4,000 Years Old, Lives On.

-----------------------

David J. Katz is chief marketing officer at Randa Accessories, an industry-leading multinational consumer products company, and the world's largest men's accessories business. 

His specialty is collaborating with retailers, brands and suppliers to innovate successful outcomes in evolving markets. 

David was selected by LinkedIn as one of 10 "Top Voices in Retail." He has been named a fashion industry "Change Agent" by Women's Wear Daily, a "Menswear Mover" by MR Magazine, a member of RetailWire's "BrainTrust," and a "Top Writer on Innovation and Fashion" at Medium.

He is a public speaker, co-author of the best-selling book "Design for Response: Creative Direct Marketing That Works" [Rockport Publishers]. He has been featured in The Wall Street Journal, The New York Times, Business Insider, New York Magazine, The Huffington Post, MR Magazine, and WWD.

David is a graduate of Tufts University and the Harvard Business School. He is a student of neuroscience, business administration, consumer behavior and "stimulus and response." The name Pavlov rings a bell.