Now that we’ve settled down to a panic since my last blog topic, we can start to consider what needs to happen before the end of this financial year.
A Review is a good place to start – an assessment of past performance to gain insights and learnings. What I’ve observed is how many businesses do this step, tick the box and leave it there, without actively translating it into a Preview – an extrapolation of those insights, combined with direction, interpreted into a strategy.
The importance of a clearly defined strategy is not news, and there’s no shortage of models and education on the subject, including the time honoured “begin with the end in mind” from Stephen Covey.
The concept I want to emphasise here is the causality …
“The Merchandise Budget is a financial expression of the business strategy;
the Merchandise Plan is a dynamic version of the Merchandise Budget”
They start out the same, and the plan is updated regularly with course corrections to maximise opportunities and mitigate risks based on new information as the business trades.
It is the roadmap by which we navigate our way back to achieving the Budget, or better.
Therefore, if the original strategy is absent or lacking, the foundations of the entire Planning framework from Budget through to Merchandise Plan could be unstable. For all the learnings that may have been gleaned in a post seasonal review, the business will still not be set up for success.
The very deliberate link from Review into Preview is vital
Here are some perspectives and ponderings for tackling the Review-Preview stages.
I often imagine the review through the lens of twisting a Rubik’s Cube. There’s a big box of data that’s available, and you manipulate it over and over again, considering it from multiple different angles, in varying combinations and see what you find. There’s an element that’s predictable, because there are standard things that should be reviewed; and there’s an element of discovery, because it’s only once you see the data arranged that way, that the learning emerges and takes you deeper down a line of exploration and enquiry. It’s often here that the ah-ha moments reside. There’s merit in being clear on what you’re looking for, and not going down too many rabbit holes. There’s also a risk in doing the activity on auto pilot and missing the signs. The skill lies in finding the balance between trend vs detail, and identifying what’s truly relevant at each of these levels.
Throughout the review, root cause thinking is a critical success factor
This is where the quantitative data is elevated to the qualitative realm. The genuine understanding of where you won and lost, supported by how and why, is what unlocks the transition into strategy, enabling you to own the learning, consider what you would do differently, and apply it forward.
I suggest being deliberate about …
Going beyond just WHAT you observe, and determining WHY it occurred.
Being wholistic with your measures, considering Sales, Margin and Stock, and how they interrelate.
Maintaining perspective around growth areas, while protecting your hard earned base.
Working collaboratively (Planning, Buying, Marketing, Production, Operations, Supply Chain) to find the story in the numbers,
Of course, it’s good practice to bank as you go. Form a habit of conducting Review-Previews promptly at the close of each relevant time period, while things are still fresh in your mind. Build this into Department calendars for all functional teams. This will help to:
spread the workload into more manageable bites
preserve relevant IP as teams change over time, and
facilitate root cause thinking, before the details inevitably fade into just numbers on a page
If “why” is the hashtag of Review thinking, then “how” is the hashtag of Preview thinking.
The below example gets its own pride of place. I’ve found it to be a common occurrence, and unfortunately a common pitfall.
A review reveals performance below target margins, with higher than planned markdowns. So a decision is made to reduce markdowns next season.
On the surface, this makes sense; we know that less markdowns are linked to higher profits. But it’s not a straight forward cause and effect relationship, and the weakness is revealed in asking “how?”.
How will the business go about reducing markdowns?
Through a change in product? Through range rationalisation? Through a shift in price architecture? Through buying less? Through enhanced allocation and stock consolidation?
There is a myriad of ways to reduce markdowns. To achieve the desired end, the business must first correctly identify that high markdowns were the problem (wholistic review), understand WHY this was the case (collaborative, cross functional root cause analysis), and put in place a clear strategy as to HOW this will be addressed going forward (preview with perspective). Anything less is unlikely to produce the intended outcome.
If you aren’t already playing in this space, I encourage you to amp up your traditional post seasonal review, append a preview, and watch how this starts to knit together your pre-season and in-season efforts.