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Lessons from Other Industries: Don’t become a Target

Target

Photo Credit: Patrick Hoesly

By Tom Kaiser
May 13, 2014
Filed under Features, Top Stories

It’s easy to pile on a company having a tough time, but the case of Target —in the news since the big holiday data breach — has included a few curious moves. It named new chief information officer, long-time CEO Gregg Steinhafel resigned, its big Canadian expansion missed expectations by a country mile and a first-person report from inside Target headquarters suggests its corporate culture has become an impediment to the company’s future.

Target is based near Boating Industry offices in Minneapolis — employing approximately 15,000 in our fair city — but the recent history of the company once viewed as the super-hip Apple of big-box stores is fascinating, and offers lessons to those inside and outside of the mass retailing universe.

Data breach

I was one of the shoppers impacted by the Target holiday data theft, which also involved a few other retailers — none as large or visible as Target. Millions of account numbers were stolen, and major banks dipped into their own pockets to send customers new credit and debit cards.

Target fell on its sword by apologizing sincerely. Steinhafel communicated directly with bullseye customers in stores and by mail, and the company offered free identity theft protection for all impacted customers. It spent an estimated $61 million recovering from the hack.

Replacing the CIO was a smart move, as evidence pointed to negligence on the company’s part for missing early-warning signs. The company’s response has been mixed — not great, but not bad.

Future plans

Canada’s middle class is now healthier and wealthier than America’s, and maple leaf-ers love crossing the border for low prices and quality goods at stores like Target. The company’s research showed higher incomes across the north border, and priced goods at its Canadian stores higher to compensate — significantly higher than stores in depressed Detroit, for example.

Canadians noticed the price hikes, and haven’t shopped with the enthusiasm expected by Target’s red-shirted company brass. Sloppy supply chain problems have also plagued the Canadian store rollout, but no significant course corrections have been reported.

Also of note, while e-commerce continues gaining steam as more Americans get their daily essentials delivered by mail, drone (coming soon!) or bicycle, the company has been slow to respond to such changes with a largely unknown in-store pickup program and limited rollout of smaller, urban-format stores.

Culture

The strongest marine businesses put a major focus on their culture, with many storeowners and trainers saying it is the most important component of a successful business.

Target’s culture is the stuff of urban legend here in the Twin Cities. Its endless networking events have led some (check out this possibly over-the-top first-person account of working at Target HQ) to suggest the key to succeeding at Target isn’t to work hard, but to be popular. Its networking events are surely a boon to the bars and restaurants of downtown Minneapolis.

Another curious move that’s created some chatter, Target has chosen to build a massive corporate campus in the far suburbs, literally in the middle of farm fields. While the company maintains a massive presence in downtown Minneapolis, many locals have questioned the logic of moving departments out of a city that’s growing in every possible way when surveys increasingly show the appeal of urban centers for younger employees.

A mixed report card

Building a corporate culture is important, but what I get looking at Target is that its culture has possibly become too distinct, and too focused on esoteric goals rather than the key metrics like sales volume, growth and profitability.

What’s the lesson here? Avoid becoming a target by focusing on your company’s culture, whether your business is a single store or multi-store operation. But do it with the advice of experts, and seek honest, anonymous feedback from your employees. Be careful about becoming a place that’s known for oddities rather than success.

Past achievements guarantee nothing in the future, and there are plenty of large companies that are so inwardly focused that they lose touch of the world around them. For the sake of my friends at Target HQ and the Twin Cities economy as a whole, I hope they get their act together and right the ship.

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