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I recently had the pleasure of providing strategy recommendations to several executives from Microsoft’s global retail team, including Shelley Bransten, Corporate Vice President, Global Retail & Consumer Goods. Bransten referred to the recommendations I provided as “powerful.” The ideas I presented to Bransten were focused on topics different from the recommendations I outline below.
Bransten joined Microsoft in September 2018 from Salesforce. Bransten will lead Microsoft’s global retail vision and strategy with the goal to strengthen the company’s market position in the retail sector globally.
Microsoft made a wise decision in hiring Bransten but her task is monumental.
One of my favorite philosophers is Friedrich Nietzsche. I draw upon his quotes throughout the remainder of this article to drive home the point that Bransten’s task is monumental, not only because of the competitive landscape within the retail industry, but also because I think Microsoft should greatly expand its vision and goals for retail.
Microsoft shouldn’t try and strengthen its position in retail. Microsoft should revolutionize retail. Big difference.
There Are No Facts, Only Interpretations
Microsoft is actively engaged with multiple retailers including Walmart. According to Walmart CEO Doug McMillon:
Walmart’s commitment to technology is centered around creating incredibly convenient ways for customers to shop and empowering associates to do their best work.
Whether it’s combined with our agile cloud platform or leveraging machine learning and artificial intelligence to work smarter, we believe Microsoft will be a strong partner in driving our ability to innovate even further and faster.
Microsoft also recently announced that it was awarded a five-year contract from the retailer Gap. According to Sally Gilligan, chief information officer of Gap:
As we grow our value and active business and accelerate online and mobile, the ability to scale our technology in a secure environment to accommodate this growth is critical.
The Microsoft Azure platform provides our teams the ability to deliver innovative and personalized capabilities for our customers with speed supported by a strong depth of technology expertise from the Microsoft team.
If the goal indeed is to strengthen Microsoft’s market position in retail, signing contracts with Walmart and Gap is a sign of success.
However, my concern is that a strategy designed to strengthen Microsoft’s market position in retail is far too limiting to the company. The strategy I recommend Microsoft pursue is reimagining retail by introducing a new retail business model.
That Which Does Not Kill Us, Makes Us Stronger
I think highly of Microsoft and the company’s executive team. Founded on April 4, 1975, Microsoft has literally transformed the world in which we live.
I believe Microsoft can now transform retail.
The mechanism that will allow Microsoft to reimagine retail isn’t Azure, the company’s highly rated cloud computing service. Nor is it the 19 software applications specific to retail that Microsoft has created over the years. Azure and Microsoft’s other retail software applications, however, are important to the long-term success of the company.
The mechanism I refer to is LinkedIn.
Acquired on June 13, 2016, Microsoft CEO Satya Nadella stated:
The LinkedIn team has grown a fantastic business centered on connecting the world’s professionals. Together we can accelerate the growth of LinkedIn, as well as Microsoft Office 365 and Dynamics as we seek to empower every person and organization on the planet.
LinkedIn CEO Jeff Weiner echoed Nadella’s comments:
Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works.
I agree with the sentiments expressed by Nadella and Weiner. My argument is that the following words are also true:
Microsoft and LinkedIn can change the way in which consumers discover, the world shops, and the way in which customers and brands engage.
I have made a similar argument that Facebook also has the potential to transform retail. With 1.5 billion users, Facebook could become a major player in retail by linking commerce and the Facebook user experience.
However, as long as Mark Zuckerberg remains both chairman and CEO of Facebook, and Sheryl Sandberg remains COO, Facebook will not achieve its full potential as a company. (Note to Zuckerberg: Acquire eBay and name Devin Wenig as the CEO of Facebook. Zuckerberg can retain the role of chairman of the board.)
He Who Has A Why To Live Can Bear Almost Any How
The question I am asked the most when I speak on the topic of Microsoft and LinkedIn transforming retail is, “Why?” Why would either company have a desire to change its business model so drastically? The answer is quite simple: The size of the retail market alone in the United States is over $3.56 trillion. Online sales will reach nearly $500 billion by the end of 2018.
Why did Amazon acquire Whole Foods, something I recommended Amazon do in 2013? Among the myriad of reasons is the fact that grocery sales in 2017 totaled $641 billion.
The grocery industry is so large that Amazon’s executive team, primarily Jeff Bezos, understood the need for Amazon to have a major presence in the grocery industry.
Microsoft and LinkedIn must take advantage of opportunities where they exist, even opportunities that LinkedIn and Microsoft may not see today.
But what I find most fascinating is the how Microsoft and LinkedIn can transform retail. At a high-level, this is how the two can accomplish the goal:
- Become masters of search and user experience. The power of Facebook is that it implicitly understands the desires of its users. Microsoft and LinkedIn must create a platform with extensive content to enlighten users.
- Create a seamless environment for discovery (explicit desire, product searches) and commerce (implicit decision to buy something).
- Once users come to understand what they like on the platform (discovery), give them the ability to search for the product or service they wish to buy on the LinkedIn platform.
- Expand LinkedIn into an e-commerce, cross-border commerce and marketplace platform. Utilize analytics to capture and analyze search and purchase data. Personalize the data for future targeted marketing and selling to individuals, and provide brands with data that will increase sales. The latter point is key.
- Expand the communication between consumers and brands on LinkedIn. Maximize the ability of a consumer to share their experience with a brand and the purchase of a product via LinkedIn with friends, family, coworkers and the public.
- Maximize the ability of consumers to use the platform to recommend new products and services. CPG and FMCG companies struggle to innovate. A combined LinkedIn/Microsoft platform will increase collaboration. In turn, collaboration will accelerate product innovation. Beat Amazon with speed and breadth of innovation.
- Serve the customer in the office using a retail channel I term Direct to Customer in Office (DTCO). This is an ideal strategy for LinkedIn and Microsoft to pursue.
- Create a new retail model. I believe the Shopping Fulfillment Center is an ideal business model for Microsoft and LinkedIn to implement. In addition, Microsoft should explore potential retail acquisitions. Target, Sprouts, Overstock.com, Spreetail and eBay top the list of retailers I recommend Microsoft assess for an acquisition. Seek out strategic partnerships, like Salesforce for example.
- Become a logistics platform. Reimagine the communication, collaboration and execution across the supply chain, manufacturing, logistics and last-mile delivery associated with retail. Maximize factory direct shipping to customers. An acquisition of or a strategic partnership with XPO Logistics is encouraged.
What I have outlined is achievable. Is it without risk? No. As Microsoft becomes a powerhouse of retail it can potentially lose retail clients. The reward is so great, however, it is worth the risk.
A question that Nadella and Weiner must answer is this: Does Microsoft want to serve retailers, become a leading retailer, or do both?
From a strategy perspective, it is a must-have for Microsoft and LinkedIn to maximize the capabilities of each to expand into retail. Threats from Facebook, Google and Amazon are too great for Microsoft and LinkedIn not to do so.
Retail analysts and Wall Street executives that have heard me speak on this topic or who have read comments I’ve written on this topic have responded favorably.
Most analysts believe as I do that Amazon has not only increased in size, it has increased its ability to threaten and disrupt entire categories at an accelerated pace. Retailers in many ways are looking for a savior, or what I term the “anti-Amazon.” I’m convinced Microsoft and LinkedIn can be the alternative.
Grocery and food retailing are especially areas that Microsoft and LinkedIn should reimagine. I could write for hours on the way both companies can leverage a capabilities-driven strategy and introduce a new business model for grocery retail.
Analysts also agree with me that Facebook has the potential to become an even bigger threat than Amazon. Facebook, however, is currently in a world of hurt. The company is bleeding users and its reputation is in tatters. Nadella and Weiner should launch a disciplined and rigorous strategy for creating a better customer experience that will pull users from Facebook.
The Doer Alone Learneth
The executive team and associates at LinkedIn and Microsoft are doers. I simply do not see the value to either company for not thinking big when it comes to retail.
Microsoft must have a burning desire to grow and the only way to achieve such a goal is by learning and challenging the status quo. Microsoft and LinkedIn must have a culture and a mindset focused on creating and leading at all times.
I believe Microsoft and LinkedIn are special companies with unique capabilities and a highly skilled team of executives and associates. Challenge and unleash the talent to reimagine, design and develop. Revolutionizing retail/commerce should be the moonshot for both companies.
Microsoft transformed the world of business. It is inconceivable to me that Microsoft and LinkedIn working together can’t transform retail as we know it.
Date: December 6, 2018