Brick and mortar retail was poised for a big year in 2020. Brands and analysts were bullish on customer experience. Saw renewed value in the tangible aspects of the in-store environment and its ability to deliver a more streamlined, curated experience to cut through the fatigue of the endless aisle.
From the ongoing success of pop up shops as physical extensions of online brands, such as Glossier’s forays into brick and mortar, to B8ta’s “Built By B8ta” Retail-as-a-Service model, there was a clear trendline linking growth to establishing a physical experience that clearly demonstrated brand value to customers in a specific moment and place in time.
And, after over a decade on the back foot trying to catch up to the e-commerce boom – and find a chink in the armor of the ever-expanding amazonopoly – it seemed as if the stars had finally aligned for retailers as buy online, pickup instore gained traction and the meteoric rise of the DTC brand ran headlong into the skyrocketing costs of customer acquisition.
For a moment, it seemed as if we were in the midst of a cultural shift – a retail renaissance, as many proclaimed. But, it’s a future we’ll never see, undone by the Covid-19 crisis that turned the last mile of order fulfillment into the new gold rush and provided the final, decisive nudge for a growing list of cultural institutions like Neiman Marcus, Gold’s Gym and J.C. Pennys into the borderlands of bankruptcy.
In this way the virus and its impact has been mirrored in the economic world – at-risk businesses were dealt a swift, devastating blow that ended any hopes of emerging from decline, while those in better health, with stronger resources and reserves, were able to withstand the initial wave of impact and find enough footing to start looking ahead.
But, as companies shift to the long-term implications of how to succeed in this new reality, many are finding this has been a stay of execution rather than a return to normal. And that their prospects for growth are directly linked to their ability to not just change, but transform their business.
No one saw the pandemic coming, but it will disproportionately impact the mid-market in the coming months as the Davids and Goliaths leverage their agility and scale to reshape markets and capitalize on the opportunities the virus has created. And the reason is basic physics.
Momentum is the key to innovation. To paraphrase Newton’s first law, it’s a lot easier to adapt if you’re already in motion and a lot harder to stay on your feet or stay on course when you get blindsided while standing flat footed.
Given the current business climate, this encapsulates the specific challenge that mid-sized businesses are facing in the wake of quarantine. The ability to create and sustain momentum comes down to the relationship between the mass and velocity of an organization, or the organization’s size and rate of change it’s capable of. And, in this, it’s the ends of the scale spectrum that have the easiest access to the means for generating momentum.
Small businesses can move quickly because their organizational mass is low, allowing them to create greater momentum at lower velocity. They can pivot and shift with minimal drop off because what little mass they have is centrally located and in tight gravitational orbit around their founding principles. When an opportunity or challenge presents itself, the organizational debt for changing course is low, allowing them to find alternate paths to their destination without compromising the integrity of the vision.
Large businesses benefit from scale in their ability to withstand the impact of the unexpected as well as the abundance of resources that can be quickly mobilized against an incoming threat. In this way they can make up for their increased mass through an exponentially greater stockpile of accelerants – capital, both human and monetary. It doesn’t come without pain or discomfort, but it’s more inconvenience with potential for upside.
And in the middle lies friction.
Growth shifts the center of balance as it bolts the necessities of support, maintenance and infrastructure onto the streamlined hull of the original design. It must continuously generate greater quantities of energy in order to sustain growth, which decreases performance and agility as it adds the weight of expectations, personnel, overhead and expenses.
Drag also increases as the offshoots of legacy and future pull in opposing directions. Even with meticulous strategic planning to keep the organization in precise formation, the debt accrued in building the frameworks to drive and support scale slows momentum during this maturation phase.
Innovation is easy in stage 1. It’s why you exist, woven into every fabric of your team, your product, your business. During this period of transition, disruption will come from this sector, as those with velocity, or team plus capital, will begin stepping into the voids left by the virus, creating new businesses and new ways of operating that meet people where they are with the services and products they need now.
Innovation is easy to explore and hard to scale in stage 3. While it’s always nice to be able to strap a couple of rockets to a new initiative, the flip side of that equation is the sheer scale of value that the endeavor must generate in order to justify its continued existence. In that sense it’s akin to caloric intake – if it takes more energy to create than it provides in consumption, it’s a net negative to the enterprise. In this environment, we’ll see aggregation coming from this group, with businesses able to reach into adjacent industries, products and services to build out their overall offerings and infrastructure. It’s the perfect buy low opportunity to establish new revenue streams that strengthen their potential and portfolio.
Innovation in stage 2, however, is difficult even under normal circumstances, because it finds the business at a crossroads where change is necessary to growth, but the ramifications of change are felt in every aspect of the business. Squeezed on both sides, with upstarts nipping at their heels and Goliath’s threatening to reach down from above, their challenges have been compounded by this shifting landscape that is forcing them to make big, future and fortune defining decisions on an external and accelerated timeline.
But in that pressure lies opportunity. Newton’s first law also states that every object will remain in uniform motion unless compelled to change by an external force. That external force has been applied and it will give every business a boost in velocity that they must determine how to use to their advantage.
For those in a nose dive, it has shortened the time to arrival. For those on an upswing it has provided a jet stream that will accelerate the path to growth so long as they can stay on course. And for those in the middle, it has delivered a tailwind that will either streamline their transformation or tear the wings off their vessel depending on how decisive or delicate they are with the controls in the coming days and weeks.