Tour of Innovative American Retail Companies: A Diary

Dear friends, yet again our company is ready to share knowledge, interesting facts about companies, observations and impressions of the management tour participants.

Between July 25 and August 7, FastForward went looking for retail innovation in Las Vegas, San Francisco and Los Angeles together with our friends VkusVill (a Russian retail chain selling organic healthy foods).

The online shoe store, which began as an office in a bedroom 10 years ago and has since transformed into a multi-billion corporation, is believed to have the best corporate culture in the world.

When Western executives and managers want to describe a business style built on a strong corporate culture, they often say "Zappos-like" or "Zappos-style". In just seven years, Zappos managed to become the leader of its market, and the company's corporate culture played a decisive role in this. It's the philosophy that all Zappos employees follow, from Director General to technical support.

• In the US, the company provides free two-way shipping.
• If a customer dislikes the shoes or they don't fit, he or she can return them and pick a different pair for free.
• A purchase can be returned within 365 days.
• The company has a free 24-hour call center.
• The company's warehouse is also open 24 hours a day. This provides one extra day for shoe delivery.
• At Zappos, call center operators do not use clichés. The longest conversation with a customer lasted 6 hours.
• If there are no shoes of the right type or size in the warehouse, the operator should direct the customer to a competitor's website.

• The Plug and Play global technology center is designed to seek out, select and accelerate promising high-tech companies, helping them grow successfully.
• Plug and Play Tech Center is a community of more than 300 startups, 180 venture funds and dozens of leading universities and corporations.

Interesting information about Plug and Play

• The founder of the incubator Saeed Amidi began investing in his company back in the 1990s and bought a building for co-working, where one of the first startups was Google. PayPal was among those who came next. Those two startups were a great start.
• Plug and Play was founded in 2006. Since then, it has invested in more than a thousand companies and more than 10,000 startups of partner companies. Currently, the company uses working with corporations as its main model for generating profit. Hundreds of companies, including the largest ones (Chinese businesses among them), turn to Plug and Play for their own startups.
• The team focuses on open selection, in which different companies can participate, refusing the closed single-firm selection approach. Closed selection is more convenient for corporations, because it gives them the opportunity to control and coordinate startups according to their preferences, but startups themselves do not really like it. 
• There is a free 3-month acceleration program.
• With the help of its representative offices in different countries, the team gathers and attracts startup that are then introduced to companies. Corporations pay for the services.
• Plug and Play acts as an intermediary, helping startups and companies find each other. At the same time, companies benefit from such mediation, because working with startups discovered by the intermediary is cheaper than looking for them. 

Sprouts Farmers Market, Inc. is American supermarket chain that specializes in organic products.

The Sprouts team has over 30,000 employees and more than 300 stores located in 20 states from coast to coast. A typical Sprouts Farmers Market store has an area of about 2.5-3 thousand square meters (about 30,000 square feet).

Amazon Go is an American chain of convenience stores controlled by the online retailer Amazon. The shops are partially automated, and customers can buy goods at self-checkout without the purchase being checked by a cashier. 

The concept of the store uses several kinds of technology:

• computer vision;
• deep learning algorithms and sensor fusion to automate most of the purchase steps;
• retail transaction payments.

The store concept is seen as a revolutionary model based on the prevalence of smartphones and geofence technology to optimize customer service, as well as on supply chain and inventory management. Before purchasing anything at the store, a customer has to download Amazon Go App for iOS and Android and connect it to their Amazon account.

Airbnb developed an online platform for placing ads and looking for short-term lodging all over the world. Airbnb users can rent their apartment or house (or a part of it) to travelers. The site provides a platform for establishing contact between hosts and guests and processes transactions.

Airbnb offers lodging in 65,000 cities in 191 countries. Airbnb charges a certain commission for its services: 3% of rent pay from the owner and between 6% and 12% from the tenant.

To scrape up some rent money, they let strangers sleep on air mattresses in their apartment. This was what gave them the idea to start a new business. To spend the night, lodgers have to pay their landlords. However, at first, the largest investors in Silicon Valley predicted that the project would fail. Still, Chesky and Gebbia managed to get their startup into a business incubator called Y Combinator. Just a year later, in 2009, Airbnb received $7,000,000 and reported 700,000 successful booking transactions.

Thus, Silicon Valley's basic principle of "solving problems for the long term" turned into its opposite for Airbnb. To date, Airbnb service has been used by more than 40 million guests in 34,000 cities around the world.

The lean startup method, or the concept of lean production is a new approach to continuous innovation.

Basically, the purpose of Lean Startup is to help the entrepreneur avoid the risk of spending a lot of money and effort to create a useless product. Over time, lean methods have become very popular, and their application went beyond startups and the IT industry.

This method employs a scientific approach that helps one build a growing business and avoid unnecessary spending.

* Eric Rice's bestseller Business from Scratch. Lean Startup Method is recommended for entrepreneurs and everyone involved in innovation  and launch of products.

There is no such thing as too much useful information, real cases or innovative training. Our group realized this on the very first day of the US Foodtech Tour.

Google Inc. is an American multinational public corporation reorganized on October 2, 2015 into the international conglomerate Alphabet Inc., a company within the Alphabet holding that invests in internet search, cloud computing and advertising technologies.

Interesting information about Google:

• Google supports and develops a number of online services and products and profits primarily from advertising through its AdWords program. The company was founded by Larry Page and Sergey Brin.
• It was first registered as a private company on January 4, 1996 and began selling its shares on the stock market on August 19, 2004.
• Google manages more than a million servers in data centers around the world and processes more than one billion search queries.
• Google's rapid growth since its inception has led to the emergence of a large number of products not directly related to the company's main product, the search engine.
• Google offers such online products as Gmail and the social network Google+. Google's desktop products include Google Chrome, the image viewer Picasa and the instant messenger Hangouts. 
• Moreover, Google is developing Android OS used on numerous smartphones, as well as Google Chrome OS and Google Glass.

Google is the most powerful brand in the world, according to BrandZ, and it was the most expensive brand in the world in 2011, according to Brand-Finance. In 2011, Google was recognized as the company with the best reputation in the United States, ahead of Microsoft, Sony and other companies.

What could be cooler than visiting Google itself? Only a lecture on corporate innovation at one of the most prestigious universities in the United States!

The list of famous Berkeley graduates includes Steve Wozniak (co-founder of Apple), Shantanu Narayen (founder of Adobe Inc.), Eric Schmidt of the Board of Directors of Google and 29 Nobel Prize winners.

Walmart Labs is an American subsidiary of Walmart in San Bruno, California.

The company's website generates profit through advertising based on its categorization mechanism.

The company carries out development in three areas:

1. Platform: using best-in-class public, private and hybrid cloud environments.
2. Supply chain: developing scalable and flexible technology that supports hundreds of distribution and service centers and provides our supply chain partners with the tools they need to deliver to our customers.
3. Trade: online and in-store, search, price, catalog, content, inventory, resupply and replenishment technology used to provide the best experience for our vendors.

The company was founded by a former military officer, Sam Walton in 1962. Currently, the discount supermarket chain is not only the biggest in the US but also the largest company in the world in terms of gross income. The company operates almost 12,000 stores in 28 countries and has a supermarket in almost every city of the United States.

What makes Walmart different from others?

Here are some interesting facts that few people know:

• Every week, over 30% of Americans visit Walmart stores.
• It was Walmart who invented the discounter practice, computer supply control, and additional working hours.
• There is only one organization in the world that employs more people than Walmart (1.9 million), and it's the Chinese Armed Forces.
• About a third of employees work no more than 5 hours a day. Time-based payment is common.

*We recommend that anyone who has anything to do with entrepreneurship read the book by Walmart's founder Sam Walton "Made in America".

Whole Foods Market Inc. specializes in organic food without artificial preservatives, food dyes, flavor enhancers, sweeteners or trans fats that are sold at its 479 stores in North America and the UK.

The company makes an effort to purchase products that meet its quality standards only from local manufacturers and increasingly puts more emphasis on manufacturer-focused programs. In some regions, there is a special employee known as "forager" whose sole responsibility is to look for local products for each store.

ByteFoods manufactures automatic vending machines and refrigerators and offers the most efficient and affordable solutions for fresh food in the workplace.

• The company uses an IoT-enabled refrigerator to improve on-the-job dining opportunities and provide the highest quality appreciated by local food brands such as Slingshot, Rustic Bakery, Urban Remedy, Blue Bottle and others. It's like a mini Whole Foods in the office.
• Byte Foods has developed a technology similar to Amazon Go but made it smaller so that it would fit in glass refrigerators installed in offices, hospitals, universities, gyms and virtually everywhere people go to spend time out of the house.
• These smart Internet of Things (IOT)-enabled refrigerators are stocked with high-quality food, snacks, first aid kits and drinks from local producers; staff buy groceries directly from the fridge with their credit or debit cards.

Fast food with a touch of healthiness: Shake Shack.

FastForward Managing Partner Alesya Glushchuk had this to say about the company and the atmosphere:

This place has a light, weekend kind of vibe. At every company we've been to, they say one thing: the company's strength is in its corporate culture. Our speaker said something that truly resonated: "It is important to choose the right people with the right values. For example, why would you date a guy if he's so-so?"

At the moment, the chain has 200 burger joints that employ 4,400 people. The menu includes burgers with real meat, tasty shakes and excellent ice-cream.

When we came to the restaurant and said we had a meeting with the branch manager, the employee pointed to the man who was frying patties. It was the branch manager. At Shake Shack, it's common practice for new employees to start with working at the restaurant.

Imagine a company that makes clothes

• with a lifetime warranty,
• offers tailoring repair services or sends a sewing shop to your city to mend your clothes,
• exchanges your old things for new ones,
• donates a tenth of its income to environment protection initiatives,
• invests in sharing economy, uses only natural and recycled materials and cultivates industrial hemp to make clothing that will last forever,
• thus reducing the amount of waste that comes to landfills.

• We want our customers to become owners, not just consumers. It's a simple but critical message: use your things longer and don't pressure our planet."
• Extending the life of clothing is one of the most important things we can do to reduce our impact on the planet. Proper care and repair of our clothes reduces the need to buy more over time, thus avoiding new CO2 emissions, waste and water consumption needed to produce new clothes.

The company's main objective is to generate value. The company generates value for its customers who pay a lot for its products, but what they get for their money is quality. Patagonia also benefits the entire industry by developing new technology and models and helping the environment. To a great extent, sports and tourism are ways to interact with, explore and conquer the outside world. Unlike other companies, Patagonia puts a lot of effort into making sure this happens in harmony with nature.

The company donates 1% of its turnover or 10% of its profit to environment protection funds. Seeing such generous donations makes one understand that it's not just marketing, that the company believes in what it does. In the time since its inception, Patagonia has donated about 50 million dollars to various environmental organisations.

All Patagonia apparel is made of recycled materials, while its cold-protective clothing uses Traceable Down. It means that the down used was collected painlessly.

Nearly all of the company's employees travel around the world and engage in extreme sports. They do it for fun, but also to look for new solutions and test the company's products.

Visiting Amazon Go and meeting the speaker, Digital Products Director at the large pharmacy chain Walgreens (who used to work with Amazon Prime) was what caused a lot of talk, emotions and a lengthy discussion among the tour participants.

One of the participants, Olesya Teplitskaya shared her observations:

"Globally, the company (unlike Google) does not seek to change the abstract future but creates products that people need here and now. Mission: deliver products as quickly and conveniently as possible. To provide its customers with the things they need most, the company has to understand its audience as best it can, which is why it is obsessed with clients and data that give insight into customers".

Innovation, more innovation and nothing but innovation

• This is a company of conscious entrepreneurs, where everyone works on products as if they were their own business. Each month, employees are asked what they have come up with during this time, what they tried to change or do differently. Even the storekeeper always tries something new in his area. 
• At the same time, the company's structure is very rigid and hierarchical. When working on a project, every employee within a single department has a lot of freedom and opportunities to try out his or her ideas (in this, Amazon is unlike Google). For example, Amazon may green-light an idea because it believes in the person who came up with it, even if it doesn't appear to have potential in the beginning. 
• When an innovation concerns other departments, it is necessary to agree on priorities, and if two department managers cannot agree, the issue is passed on further up the chain.
• The company's operations are based on 14 principles that sometimes contradict each other (which is fine, because balance creates truth). The speaker confirmed that other teams sometimes refuse to support an initiative not because they don't want to create anything new, but because they have serious arguments against the project, based on some of the 14 principles.
• Initiatives come from people and departments, but it creates the necessity to fight for resources all the time. Sometimes, people can be transferred to a different department to work on a higher-priority project, and it's up to their manager to explain, once again, why he or she needs them more that the other department does, based on hard data. Projects can be outsourced, but still, there is a culture of confrontation at Amazon (again, unlike Google) where it's acceptable for employees to have heated discussions and even yell at each other.
• According to the speaker, Jeff Bezos says, "If you can prove your point with data, you win, but if you have no data, I win." Analytics and customer data are very important, because they show what the company should do to satisfy customers. Therefore, all decisions about innovation and new ideas are supported by analytics.

Thought management

Whole Foods on Amazon: "They say Jeff Bezos is the world's worst boss, but that doesn't mean that everyone else working for him should be the same."

Core idea for management: each manager should spend a lot of time communicating with subordinates, teaching them and showing them how to think, but at the same time it is important to avoid micromanagement.

Amazon's 14 Leadership Principles help managers in this (the list is taken from https://hr-portal.ru/blog/14-principov-liderstva-amazon):

1. Customer Obsession

2. Ownership

3. Invent and Simplify 

4. Leaders Are Right, a Lot

5. Learn and Be Curious

6. Hire and Develop the Best

7. Insist on the Highest Standards

8. Think Big

9. Bias for Action

10. Frugality

11. Earn Trust

12. Dive Deep (leaders work at all levels, know all the details, audit often and are skeptical about instances where metrics clash with reality). No task is completed without their knowledge. Before, we often confused this principle with micromanagement, but it was explained to us that they are very different: checking and keeping tabs is not the same as telling a person what to do.

13. Have Backbone; Disagree and Commit

14. Deliver Results

All managers are evaluated based on these principles.

• Each manager has about 8 direct subordinates, and they have their other people reporting to them. Once a month, the leader has to meet not only his or her subordinates but their subordinates as well, bringing the entire cluster together, and the meeting should take at least half an hour. At these meetings, the manager learns about challenges, sees what works and what doesn't, asks whether the employees need any help, but most importantly, shows how he or she would have resolved the issue, teaching the employees the way a leader thinks.
• On the one hand, Amazon seemed to us something like a creative "juicer",  but on the other hand, the speaker told us that he had managed to arrange processes in such as way that he could leave the office at 3 o'clock in the afternoon. At the same time, it remains a mystery how Amazon employees really feel.

STRATEGY

• Amazon believes that if you reduce the number of steps, the demand for the service increases. 
• The tour participants were surprised to learn that it is 15-20% cheaper to have purchases delivered than to buy them at the store. Delivery itself must be paid for, and the price varies depending on when the order was placed, so some customers order delivery 2 days in advance.
• All the stories we heard confirmed that the strategy used is the opposite of the one described in Connecting Company in terms of customer co-focus. While VkusVill is now ready to create unique things that can be sold only in some stores, Amazon only launches products that can be offered to customers all over the market.
• Amazon's strategy for working with partners is very interesting: they follow the Apple model, wishing to engage partners with the same ease and simplicity that the iPhone platform has with application developers.

Before deciding whether or not to cooperate with someone, Amazon checks the prospective partner against several values it considers important:

• whether the product matrix changes;
• whether the cost for customers reduces;
• whether the speed of order increases (Whole Foods gave an example of local presence, delivering products faster and selling only fresh produce)
• whether the customer's perception of the brand improves.

*We recommend the book "The Everything Store: Jeff Bezos and the Age of Amazon".

In our tours, we combine business meetings with guided tours, which means that every day is filled with new things learned, as well as emotions and impressions. During the tour, the group was able to enjoy the beauty of Sequoia Park in California and Death Valley in Nevada. The first tour day was especially memorable because of our trip to the unforgettable Grand Canyon!

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