Digital Transformation and Retail with Shashank Saxena, Director of Digital and eCommerce, Kroger

Michael:         

(00:03) Hello, digital transformation is one of the hot topics today, and retail is certainly a hot topic because we all spend a lot of time in stores. And on this episode of CXO-talk, episode 105, we’re talking with someone from Kroger, one of the largest retail organizations in the universe. I’m Michael Krigsman and I’m here with my you know, I’m going to say it. I’m going to say it, with my brilliant co-host Vala Afshar. Hey Vala.

Vala:   

(00:41) Wow what a great compliment. Another fantastic way to end a Friday afternoon, having a incredible thought leader, Shashank on the show with us and then now this compliment so this is turning out to be a great show already.

Michael:         

(00:59) You know, what a great way to end the week.

Vala:   

(01:04) Absolutely, no better way.

Michael:         

(01:06) Alright, so we’re here with Shashank Sexena, and Shashank you work for Kroger. Welcome to episode 105 of CXT-Talk.

Shashank:       

(01:17)Thank you Mike and thank you Vala for having me on the show. It’s a delight to be here.

Michael:         

(01:22) Shashank, what is your title and what do you do for Kroger.

Shashank:       

(01:28)So I’m currently the Director for digital and e-commerce technology at Kroger. So all the teams that write the web apps, mobile apps, tablet apps, e-commerce applications, they all report up through me. I’ve been in this role at Kroger for around two years or so and before this I have a background in the city, so it’s been an exciting journey here at Kroger.

Vala:   

(01:48) Can you tell us a little bit about Kroger, the size, scope you know so our audience can get a full appreciation of you know the size of your company.

Shashank:       

(01:59) Sure, so Kroger is one of the largest retailers in the US. We ended this year I believe at $108 billion in terms of revenue, so we’re a Fortune 25 company.

(02:10)We’re known under different brands names in different parts of the country. So if you go to the west coast and you go to southern California, you may know Ralphs. Ralphs is actually part of the Kroger Company. King Soopers out in Denwoodthat’s part of Kroger. You go up to the Pacific north-west and you see Fred Myers or QFC Food, they’re part of Kroger. So we’re know under different names in different parts of the country.

(02:32)So Kroger is actually pretty big in terms of size and operation. We have big manufacturing plants I think under 40 manufacturing plants. We have a strong pharmacy business and of course traditional grocery retailing in food and perishables is one of our strong suits. So Kroger I think is 130 years old in terms of when the company was formed and it’s been growing ever since.

(02:53)We operate 26,000 or so supermarkets, along with gas stations, convenient stores, jewelry stores so you’ll see Fred Meyer jewelers and Littman jewelers they are all actually owned by Kroger. (Tom?) In terms of the gas station chain and fuel chain, that’s actually part of the Kroger Company.

(03:09)So it’s a very well diversified company in the retail sector which with multiple formats and multiple geographies in the country.

Michael:         

(03:17) So people don’t realize that beyond the Kroger brand, that you’re almost as large-  you’re like number two behind Walmart right?

Shashank:       

(03:27)That’s true yep.

Vala:   

(03:30) That’s amazing.

Michael:         

(03:30)So you’re just extraordinarily large organization and so how does your role interact with the retail parts of Kroger. So let me ask it this way, what exactly do you do?

Shashank:       

(03:49) So traditionally Kroger has been a brick and mortar retailer. We’ve been around the online spaces, so we’ve had jewelry ordering online for the last few years.

(03:59) Now with the whole emergence of Omni-channel and digital commerce we are starting to get a little more involved in terms of how we interact with our customer. What we allow the customer to order on-line and the experiences that we build for our customer. So that’s my role for Kroger in terms of taking the traditional brick and mortar retail and starting to provide and build out the Omni-channel experience.

(04:21)It’s been two years that we’ve been on this journey. Right now we are very heavily focused in terms of digital coupons. So we’ve just completed over a billion and half coupons recently. And we’ve been public with the announcement that we’ve merged with YouTech which is a digital coupon company out in Silicon Valley technologies. So we’re actually growing our digital presence within Kroger and how we connect with our customer and serve our customer digitally.

Vala:   

(04:48) So Shashank let’s shift the focus, and thank you for the background and the incredible profile of Kroger. But we are talking about digital business transformation and you know you gave us a hint of some aspects of that when you talked about digital coupons. But the term is pervasive and not just in retail, but certainly all business, digital business or dead business in my view. But why don’t we talk a little bit about you know the dynamics and how they’ve changed in the retail space. I mean may be some would argue from the introduction of the iPhone in 2007 to all of the other technology trends of mobile and social, cloud, and data and so on and so forth. How does this impact retail?

Shashank:       

(05:36) So overall in retail right, I think it’s broader than just digital and what digital is doing in terms of transformation. Digital is one of the key pieces, but from a consumer standpoint and as we’ve seen the economy bounced back and we have a decent economy going on right now. Customers are not just looking for the lowest price point. What they’re looking for is the best value, which a lot of the times may or may not be the same thing.

(06:01) We’ve seen the rise of the value base shopper and what we tried to do is provide value to our customer. Another industrial trend in what we are starting to see is health and wellness.

(06:08) So our Simple Truth organic brand, we launched a private flavor brand in-house. 18 months in the launch a became a billion-dollar brand and cost $1 billion in revenue. So the whole rise of health and wellness, not just in terms of active lifestyle and how we choose to live, but also how they choose to track diets and how to maintain and the healthy habits that people are making and the choices they are making is reflecting in their shopping behaviour in the store, with the wearable technology Fitbit bands, and now the Apple Watch is about to come out soon and it will be interesting to see what happens with that.

(06:41) But health and wellness is another big macroeconomic trend that we are seeing which is impacting retail. The rise of the millennial shopper is another trend that we are seeing that is impacting retail, because we are at this point right now where we have this multiple generations shopping retail stores at the same time, and a lot of retailers of where they get hung up is that they try to be everything for everyone, and that is always harder to do to compare to focusing on one narrower demographic.

(07:07) So to summarize of what I’ve just said right, the digital the rise of the value shopper, the rise of the millennials, and the boom in the health and wellness, are macro-economic trends that are starting to shape digital transformation in retail.

Michael:         

(07:19) So, you are at the mercy in a sense of the expectations of consumers, and these broader macroeconomic trends. And how do you discern what those expectations are, and then how do you translate those expectations into activities that Kroger must undertake in order to meet what those consumers want from you.

Shashank:       

(07:50)So, in terms of understanding the customer needs right, we are very very focused in terms of what our customers are asking for. But if you start looking at what do you want to build from an innovation standpoint is very different from just catering to a customer needs. Because if a customer is asking for a certain feature and you deliver on that feature, I don’t necessarily think that can be categorized as innovation as much as it is just customer service, where someone asks for something and you’re going ahead and serving up that feature.

(08:18) And innovation is pretty different in my opinion right, so you talk about innovation and digital transformation, generally it can happen in one or two ways. Either you go ahead and innovate through evolution, which is step features and functions, or through revolution and we’ve seen industry go ahead and do both. There are multiple examples out there, so Vala you mentioned about the iPhone and at launch of the iPhone that I would categorize as a revolutionary innovation because it changed the whole ecosystem around us.

(08:49)Where today someone sitting in a garage or in their moms basement can go ahead and write an app and reach out to millions and millions of customers worldwide. And the reach to millions of people was a luxury of fortune 500 companies, not necessarily small mom and pop shop or someone in their garage. So that has changed the trend, right and that’s why I call that revolutionary innovation.

(09:11)Whereas, if you look at small step feature functions and enhancements, they are evolutionary innovations. So the example I gave is right down the Street is P and G, Procter and Gamble and if you look at Tide. Tide has dominated the laundry market for a really long time, and what P and G did with Tide to come up with the same category but come up with new subcategory under the category. I call that evolutionary innovation, because they didn’t change the way you do laundry altogether. But they simplified the process by giving it (the ready pods? 09:41). So that’s how I categorize this in terms of revolutionary versus evolutionary innovation.

(09:49)We are very focused on our customers and our customer feedback is a great thing. And we try to incorporate that but we again keep the distinction very clear in terms of when we are trying to be revolutionary versus evolutionary.

Vala:   

(10:02) How do you make that distinction. I mean let’s for an innovative company like Kroger and leaders like yourself as you’re developing your let’s say technology investment thesis for the next one to 2 years, and I’m not sure you can go beyond that given the pace of innovation. But let’s assume it’s a forward looking roadmap, you know what are some of the – is it customer feedback, and is it your internal entrepreneur and think tank organizations that decides that you’re going to make a bet on something that might be a revolutionary versus evolutionary – and how much of the company culture dictate which approach you’re willing to take in order to do deliver the best value to your and customers.

Shashank:       

(10:42)So this is a little bit bigger and more broader than just Kroger and how Kroger thinks about this right. If you look at these examples I’m giving, none of these are Kroger specific. When you think about revolutionary and evolutionary and who determines that, for revolutionary innovations, customer feedback has always been a misleading feature. And the reason I say that right, I’m going to quote three or four different examples.

(11:08)When customer surveys were created where would you allow someone to come and stay in your house and rent out a room to a stranger for the night with your family, the feedback on that was absolutely negative. They said no way in hell am I going to allow a stranger to come and stay.

(11:25) Well, Airbnb thought of that and that is absolutely wrong. The same thing with allowing a stranger to ride in your car, you have no clue if that person is a serial killer are not and that actually is the same time and the incident where it actually happened in Boston I believe. But apparently that was wrong to. A lot of people ride in cars with strangers today and Ubers valuation is $40 billion, whereas Kroger market capitalization today is $26 million and we can argue in whether it’s about the valuations are overvalued or not, but the fact is Uber has done well, and customer feedback was a misguiding feature or a misguiding data point along that.

(12:03) Actually, Steve Wozniak was in Ohio a few weeks ago and I got to attend this group session with him. And the other data point that was interesting is what he mentioned was when they were first thinking about creating the Apple II, the Apple was actually the property of public domain, because that was before Steve Jobs got his head around proprietary IT. So when they asked about Apple II, and creating the personal computer everyone they had survey, and actually this was IBM that was surveyed.

(12:35) IBM used to sell big machines and computers to be corporations. So when they asked big corporations and buying agents in big corporations, do you think there is a demand for this product? The answer they got unanimously across-the-board was hell no. What they missed out was they didn’t go out and ask doctor offices, lawyer offices, smaller business shops, who could not afford those big computers around, hey are you interested in buying this product. So that is another example where customer feedback has gone wrong.

(13:04) If you see in these examples, they are varying in time right from the 70s until all the way up to 2010 and later, and very consistently when you talk about revolutionary innovation, customer feedback has been a misguiding feature rather than appointed to lead you in the right direction, right.

(13:25) The same thing with Google, I mean overwhelmingly the feedback was the world does not need a fifth search engine, and boy have they been proven wrong or not.

Michael:         

(13:33) So, Shashank but still at the same time you have to listen to your customers. I mean obviously for example in your case you’re making a variety of forecasts about where the future is going, and what are the implications of that for a digital presence and the digital relationship that a retailer has with customers. So you’ve got to place bets somehow, and so how do you make those decisions and following up on Vala’s point. How do you make those decisions about where to place the bets?

Shashank:       

(14:11)So that works really great in terms with evolutionary step feature innovations. Customer feedback is a very very critical driving point in terms of what goes out in the next release on the product roadmap. And that’s not just Kroger but that’s across-the-board and in the industry where good product managers listen to customer feedback and incorporate feedback to evolve the product in the next release.

(14:35)So we’re no different, we do it the same way and we are very very obsessed about what the customer says and customer thinks. And we evolve our products in that way. So one of the things, and this is an example that is actually a few years old, but when Passbook first launched internally, again my personal opinion was I don’t need my loyalty card in passbook becausemy loyalty card is already stored in my app. Now, customer feedback told us the otherwise people were asking for it and the minute we launched it the adoption numbers were huge. So we’ve seen our app downloads increase because we listened to customer feedback and incorporate that into the product roadmap.

(15:10)So that is absolutely true in terms of evolutionary innovation, so that’s how I wanted to make the distinctions really clear between evolutionary versus revolutionary.

Vala:   

(15:18) So it seems like a healthy balance, you know you’re maintaining a beginners mindset, even if you are introducing revolutionary concepts, it always has that feedback loop where you can enhance and incrementally bring in innovation and value to your customers.

Shashank:       

(15:33)Absolutely and then the other thing, so customer feedback is absolutely critical. It is the center of everything we do and it should be that way. Now, over and above that you also need to start factoring in macroeconomic trends right, not just the overall trends in factors in retail, but trends that impact digital in particular. So for example, we’ve see the explosion of data, the emergence of platforms, the rise in mobility, and how do you start using these in a very focused way to add value to the life of your customer.

(16:02) So even in terms of explosion of data, from when you have woken up in this morning up to when this hangout started, there has been more data uploaded on YouTube than the entire content Hollywood has produced in its 100+ years of its existence.

Vala:   

(16:21) Wow, can you repeat that one more time.

Shashank:       

(16:25)So since this morning up until now, up until when this Google hangout session began, there has been more content uploaded on YouTube as content that Hollywood has produced in its 100+ years of its entire existence.

(16:41)So, understanding that trend and what’s going on with data explosion is really really critical, right. No customer feedback is going to go ahead and explain that trend to you. You sort of have to understand and build that. Now you have to incorporate customer feedback in terms of user experience and how these things evolve, but you need to understand the macroeconomic trend as well. Same things with the emergence of platforms, right. If you think about 10 years ago, 10 years ago if you were a game developer, the best career option for you was getting a job at Saga on the Nintendo or Atari or EA sports, one of those game developers.

(17:18) But today, if you look at the trend or even the last few years, you can use a platform like Facebook to launch a game like Farmville, Cityville, Mafia Wars, Zynga are based on that.

(17:29) So, how do you use platforms to go ahead and change the distribution bara bang to the digital. So the digital is actually transforming a lot of businesses, right. The same thing with Candy Crush and what we’re seeing today with King’s is (IPO owned as well?). So that bara bang is shifting because of the platforms and the reach and the distribution channels that these platforms have created for small businesses, and mom and pop shops, and even kids sitting in their mom’s garage or basement and writing apps because the whole platform distribution mechanism has changed.

Michael:         

(18:01) So what about the role of business models in all of this. So as you are thinking about these different types of innovations and you’re looking at the macroeconomic trends, and you’re thinking about what consumers are going to be wanting, how does the notion of a business model come into play? Weave that in for us.

Shashank:       

(18:26)Whoever has the answers to that, that is actually a million-dollar question because no one has really figured it out. A lot of the innovation these days – 10 years ago what we were seeing was just hard-core deep down tech innovation, right. The kind of stuff Google was working on in terms of tweaking on and regardless of tech innovation. But in the recent past in the last five years or so, or what we are starting to see is business model innovation.

(18:48)So if you look at Airbnb and Uber, they are not hard-core tech innovations because the technology powering that is pretty simple for the most part. But what is innovative there is actually the business model and how it’s funded with low infrastructure cost and low start-up costs and crowdsourcing economies, so that has become the transformation piece of it.

(19:12)We think about business model innovation pretty often, and we are starting to see that emerge more and more. But we also think about it in terms of how do we personalize the offerings, because personalization is a key differentiator.

(19:23)I don’t know if you remember the movie, but there was this movie called When Harry Met Sally, and there was this scene where she goes ahead and orders a coffee on the plane, and she wanted black coffee with exactly 2 spoons of sugar with no milk and she gave the whole list, right. And the screenplay writers and directors use that as a metaphor for character development to show that hey, this person is opinionated. She has an opinion. She wants her coffee a certain way. At that time it was trying to maintain that this is a high maintenance person, right. At least that’s the character that they were trying to portray.

(19:57) Today, we call that same thing personalization. Right, start-ups made a great business model out of I want my coffee my way and I wanted to be consistent the matter which Starbuck’s location I have. And that personalization was it being high maintenance, is the different in terms of customer expectations a few years ago was as today.

Michael:         

(20:17) Mass customization.

Shashank:       

(20:20) Exactly yeah, so that is another emerging trend that we are seeing and business models will evolve as they start understanding customer preferences, or rather the change in customer preferences.

Vala:   

(20:30) So, one can argue that Uber is a big data company and not a transportation company and if you’re going to deliver customization and you know, you have to have to have a segmentation strategy. You have to be able to analyze customer behaviour and data, and respond in real time. There is just a tremendous amount of you know not only talent, but technology and process transformation in order for you to deliver value to the right person, at the right time, at the right location and across the right channels. So my question to you you know in marketing I think data scientists is a role that’s going to emerge as perhaps as one of the most important future hire or hire today. Where do you see in terms of talent, whether it is the digital group or the marketing or IT, where are some of the skills required to successfully you know evolve as an organisation and as a business?

Shashank:       

(21:20) No, actually you were bang on accurate, right. So I think data is really critical in the role of data scientists, data analysts, data engineer and all of these profiles is going to become critical.

(21:41)One tech trend that we are seeing is the move from structure data to unstructured data. A lot of companies have built tremendous competence in products around help to use structured data and how to use relational databases and databases structured that we have learned how to mine over the course of years and built excellent competencies around.

(22:00) But the move towards unstructured data was sort of almost changing the paradigms in the industry because what you can start doing with unstructured real-time data, I don’t even think we have seen the tip of the iceberg yet on that one. So as you said I totally agree with you in terms of those roles and how they evolve in the industry.

Michael:         

(22:19)So tell us about your team. Tell us about your team and tell us how your team relates to some of these trends. I don’t know if you’re comfortable talking about that specifically and if not talk to us about some of the things going on in grocery retailing like with Google and with Amazon for example.

Shashank:       

(22.47) So we look at competitors, but we don’t obsess over competitors because we’re obsessed with our customers right, so we focus on customer needs and what our customers is asking for.

(22:57) Overall from my teams standpoint right, one of the things you will start seeing and hearing about, and I’ve actually heard this example at least 200 times since I’ve been at Kroger which is why I’m going to share this is, Hey Shashank, wouldn’t it be cool if Kroger actually started doing push notifications, where you walk passed the shelves of Tide and it pushes an alert saying a dollar off Tide.

(23:18) Well, that’s really great but launching that feature has a lot of other downstream implications. When does that feature become old when that customer has walked passed 10 shelves and you’ve bombarded them with hundreds of different messages? And there are multiple apps that are doing that, so I’m actually just trying to close the gap between your question and in the way we think.

(23:38) I have apps on my phone today, that when I loaded them on my phone and when I’m driving to any location, I pass the CBS, I pass the Walgreen, I pass the Safeway, I pass the Target, and it keeps bombarding me with push notifications saying, walk into the store right now, get so much off. And driving customer value is very very different from bombarding them with feature. It’s only a matter of time before the customer will be turned off and put off.

(24:04)Our value is very different. We incentivize customers by things they buy often and usual not necessarily trying to cross and upset the customer. We have this really successful program called LCM Mailerswhich we send out to customers, which are actually coupons. So the goal is if the customer buys Huggies diaper, we go ahead and send them coupons for Huggie diapers. We to try to get then to switch a brand, to change that or have P&G marketing dollars in influence and change buying behavior.

(24:34)We are so focused on what our customers want and what they buy often. That we just want to go ahead and help them buy more of that or get what they want. Not necessarily brand switch or try to monetize on top of that.That’s one thing I believe that Kroger does really really well and we believe in the customer,which is why when you ask about competitors, we sort of keep track of what competitors are doing, but not obsessed with our competitors, because we’re very obsessed with our customers.

Vala:   

(25:02) So Shashank, let’s take an example where you know, Michael Krigsman is going to walk into one of your stores. Michael has got 25,000 followers on Twitter. He’s got a cred cloud score that’s in the 70’s. So when Michael says he enjoys his experience at one of your establishments. His word of mouth and his scale and his network is enormous and you’ve got this concept of showrooming that’s potentially hurting retailers where you go on premise and you price check something on the web, and you decide to buy it on the web. Now, how do retailers look at social influence and folks who could come on premise and how you can leverage their word of mouth and perhaps incentive to become advocates by maybe instead of just generic push notifications? Since you can identify Michael and be able to understand his digital footprint, perhaps give him a custom coupon or rebate and ask him to you know, share that amongst his network as part of a loyalty program. Are there ways to use mobile and social and app technology to mitigate the impact to me and at the same time build word of mouth marketing. Is that something that’s on the retailer’s radar or are their folks that are doing it?

Shashank:       

(26:29) Overall in terms of retail that’s actually a big problem when you look at categories like electronics and some of the other higher categories. Thankfully and predominantly a large portion of our business has been grocery retail and showrooming hasn’t really taken off in grocery retail. Also e-commerce hasn’t taken off to a large extent in terms of grocery retail.

(26:49)Now we’re doing e-commerce in terms of you order online and pick up in-store. Harris Teeter, who we merged with a year and a half ago I believe has a really really successful program around order online and pick-up in store. We call that the Harris Teeter Express Lane. That allows the customer and convenience to go online and order online, but overall in the grocery segment showrooming has not been a very dominant problem.

(27:13)Now the other piece that you touched right, in terms of the customer being a connected customer, and today the customer being a lot more informant in terms of what they are doing. We support that behavior and we start driving analytics and insights around customer behavior and customer purchases. We have this really famous saying, internally, which Mike was hosting a panel discussion and I happened to be on the panel. So Mike this will be a repetition for you but internally when we try to decide as to what to launch for the customer and what our customers are asking for, and what should go next on the product roadmap, the famous quote we have is, ‘In God we trust. Everyone else must bring data’, because we want to be a very data retailer and we try to leverage insights in terms of what the customer is asking for and what we should be catering next to the customer.

Michael:         

(28:02) Shashank, you have spent time talking about lean organizations. No, I’ve heard of lean start-ups, but when you talk about a company the size of Kroger you know which is just behind Walmart, what in the world does lean mean?

Shashank:       

(28:27) So the lean startup is a really interesting concept right, and there are multiple people in corporations, especially big companies and you’ll see they read the book, the Lean Startup, but they always confuse in terms of how they apply it. Now I’ve been fortunate where I’ve spoken about this in multiple other forums.

(28:46)The fundamental difference here is when a startup goes to market with a product, the customer doesn’t know much about the brand of the startup so the expectations are very different from when a big company that has a well-known brand goes to market with the product.

(29:02)From a big company the expectations are different right because the brand promise says something. Even if you look at every big company was small at one point when it started. So essentially every big corporation was a startup at some point, and that point could have been 100 years ago but it was a startup. So for this small company, which was once a startup, which today we say I a fortune 50, fortune 100 company, the way it became big was with repeatable executable processes that scale.

(29:36)Now closing the circle full round is these repeatable executable processes are very counter intuitive to innovation. Because think about it right, at Starbucks for example. I go to Starbucks every morning; I want my coffee a certain way. I don’t want the barista trying to go ahead and experiment with my coffee saying, I was really innovative in how I made your coffee today. I don’t want you to try innovation with my coffee. Just give me my coffee, I come to Starbucks every day, every morning for a particular reason because you are very consistent. And when I go to Chipotle, I want my Burrito a certain way, very very consistent no matter which Chipotle I go to throughout the country, my burrito tastes exactly the same.

(30:17)So that is the expectation that people have from big companies. Now the second thing is the brand promise around brand companiesWhen a person choses to buy a brand, what you really need to understand from a customer mindset is they are opting for security over the unknown. There may be a product offering on the same shelf right next to your preferred brand for half the price. But when you are willing to pay the price premium, what you’re opting for is security. You’re trying to mitigate the risk of the unknown.

(30:46)So if you’re trying to experiment with your core brand, that may or may not be productive. I mean it could work then great, but if it doesn’t you’ve lost a valuable customer.

(30:56)So how you innovate, and how you chose to innovate, and where you chose to experiment becomes really really critical factors when you talk about big companies.

(31:06) Now the other thing where I was talking about in terms of internal processes in big companies, to create that culture around innovation and brainstorming, it has to be done in a very controlled environment, right. You can run experiments, but you need to go ahead and run experiments in a controlled fashion and I actually got done reading the book of how Google works. And it talks a lot about tech innovation in that, Eric Schmidt and Jon Rosenberg wrote that boot and I would recommend that as a great read.

(31:35) And what they talk about is how the core products built the revenue base for Google for them to then go ahead and experiment and innovate elsewhere. Of course they do experiment on the core products to so like speaking the words in the search engine, adwords and all of these at one point which were experiments which actually became successful.

(31:51) But how do you run controlled experiments, set a hypothesis, track and monitor results and then go ahead and roll it out mainstream. The art lies in that piece and mastering that process, which is very different from going ahead and experimenting with your core brand values.

Vala:   

(32:10) Would you consider a hackathon a controlled experiment.

Shashank:       

(32:14) Yeah, actually we support that a lot. So locally in Cincinnati they’re involved in the hackathon community and internally we have hackathons too. Those are  great ways to go ahead and prototype ideas and see how it works. Now the other thing about hackathons is company’s needs to set up an environment, where every single day the whole team works like they’re working on a hackathon. And great companies are one who really really differentiate and have built and created transformational business, are the ones who operate in that way on a daily basis.

Vala:   

(32:46) And what is that specifically just before we move to another question, when you say everyday work like it’s a hackathon. Do you mean sense of urgency, a high degree of collaboration, gamified, competitive nature, I mean what are the element do you think that should come into play on a daily basis.

Shashank:       

(33:04) All of the above plus level, because here’s the thing right, when people – no one wakes up in the morning, and comes to work saying I’m really going to suck today or I’m really going to screw this up today.

(33:02) Everyone wakes up and comes to work saying I’m really going to try to do a great job today. And a lot of the times, misaligned goals, misaligned interests, conflicting priorities prevent people from doing a great job. And it becomes very very critical within big companies to set up an environment, where a lot of those are hashed out at the senior leadership level and the theme is not impacted by two senior leaders having misaligned priorities.

(33:47) So that becomes really really critical  to create that environment, because I see the same on LinkedIn in my feed off right where the culture eats strategy for breakfast, and that’s actually true as much as I hate quoting a cliché. It’s actually very true, right so how do you create that culture where it’s safe to fail and safe to innovate and experiment, at the same time, not going ahead and screwing up the dynamic experience for the customer.

(34:13) And that is a very very hard dynamic to manage because that’s a very fine line that they’re walking on, and that’s what we have to do daily on a daily basis.

Michael:         

(34:22) And how do you manage with that, because especially in grocery retailing where the margins are razor thin and that means that the culture of the organization is orientated around predictabilities, stability, and consistency and yet at the same time you’re involved with the digital future of the company. So that means that you need to adopt a culture of change and doing thing differently right. Innovation the foundation, the fundamentals of innovation are all about change. So how do you manage retention between the stability of traditional grocery retailing and the need to shift and make changes based on data and these macroeconomic trends and so forth?

Shashank:       

(35:18) What become really critical is to identify areas where you can experiment versus areas where you don’t want to run experiments on. So for example, systems handling money or Healthcare data are probably not going to be your first (move? 25:31) in terms of where you run your first experiments. Of course we are not going to try to put out an agile release and points of sale where we are just trying to find out something right.

(35:41) Code that goes into production on that front has to be hard, safe, and secure. But same thing in the banking environment, anything that manages your real time account balances or your transaction processing systems, they are the ones that really need to be managed with a lot of diligence.

(35:56) On the other hand, there are other systems in other areas where on the front end for example, application front end not touching the backend experience and you go ahead and innovate on that front, absolutely.

(36:08) In fact most innovations again fall into the categories that I mentioned earlier in terms of evolutionary innovations. So how do you go ahead and innovate quickly on top of that while not going ahead and not touching the backend processes. And that dynamic again becomes product learning is very very critical in there.

Vala:   

(36:25) Shashank, we have startups, CEO’s and founders that have been guests and watched the show, one, if you work with startups and two, if you do what advice do you have to a CEO or founder of startup when they are comping to pitch to you, their innovation and their solution so that they can be more successful

Shashank:       

(36:47)We actually do work with startups. Especially locally and they are very involved in the innovation community and we’re part of Cintrifuse. We work with the Brandery (unclear 36:54) league. I personally have a mentor at the Brandery. So we go ahead and talk to startups very often.

(37:02) The key thing that startups needs to realize is scale and think about scale, because no matter how much you’ve tested your system, if we start working with you just on sheer scale and volume, there’ll be issues right.

(37:15) We’ve again acquired this company called NewTechnology, which sells digital coupons out in Silicon Valley. The number one issue we had during the whole integration process was scale, because once we opened the floodgates and started redirecting traffic to your system, it’s going to be a really hard dynamic to keep up in terms of 100X, 200X of volume that you’re traditionally used to. So you need to start thinking scale and think big

(37:38) Again, coming back to the book that I just complete, which was How Does Google Work, and the number one thing that they discuss about and things that (unclear 37:46) were very very keen on initially was, think big. You need to think big in order to make it happen and this is where startups and big corporations have a disconnect, where startups need to start thinking a lot bigger in terms of size, scale, volume and impact if you want to try to find it with a larger corporation.

Michael:         

(38:07) But it’s also very difficult for a start-up because in order to have the technical infrastructure you also have to have the right people and competences and processes in place, because it’s not just about the technology infrastructure but it’s how they work with the larger organizations. Having a easy user interface from an organizational standpoint, and that’s hard for a start-up.

Shashank:       

(38:38)It is and that’s a very tough dynamic to manage, but which is also why you see start-ups running experiments with big companies we’ve seen occasional successes, but no one has figured out a template or model around that. As to here is a check list of 10 things to do, and if you follow these 10 things you’ll find the success story. I mean there is none, so it becomes really really hard in terms of dynamic and managing that.

(39:04) Good product planning is a key towards helping solving that dynamic, because you need to start running and thinking AB tests, right. So you cannot just go ahead and redirect all your load to a start-up because first they’re going to fail, setting them up a failure, and how do you run good AB tests and start marginally increasing your load and capacity over. That actually helps out in the long run, but you are absolutely right in your point where managing that dynamic is really really tricky.

Vala:   

(39:31) Can you give us a sense of the relationship between technology and you know customer engagement. I mean we’re reading a lot about you know Internet of things, and beacons and you mentioned at the beginning of the show, wearables and it seems like contextual intelligence delivered both to the consumer and the business allows for more precision sales and marketing models to exist. And again, you know targeted value to right person, right person, right channel and right value, but you know tying this technology and engagement together so our audience can get a better sense of appreciation of how it’s a folding in retail.

Shashank:       

(40:14) So a lot of the innovation that you are starting to see right now right they are tech innovations that are taking off today is a very small subset of innovations that sit on top of the core layer. And the reason I say that right, so actually I should take a step back.

(40:36) If you see the history of Silicon Valley, which is the mecca of tech innovation and start-ups, and it’s been that way for three or four decades now. And if you see why that took off someone built silicon chips, then they built the microprocessor. Building on the microprocessor and someone took that and build a personal computer. Someone took the personal computer and then went ahead and started building network infrastructure to connect personal computers. Someone took that and then went ahead and connected all that to build the Internet.

(41:03)Someone took the Internet to optimize data search on the Internet to start creating more connected environments. So all of these innovations layered on top of each other which created this whole ecosystem. So remember when I say talked about the explosion of data, there were multiple steps that happened working towards this.

(41:21) If you see the key foundation platforms that were built right, and again two of my favorite heroes, Steve jobs and Bill Gates and if you see a lot of the work that they have done, their innovative ideas were not I’m going to launch an app on the App Store that does this and from the customer I get 10,000 downloads and I’m going to monetize it in this way.

(41:43)They did the real real hard work of building platforms, and frameworks, and operating systems. Not just an app that runs on something. Today, we see a lot of start-ups not doing that hard work of building and ecosystem or operating system. The ones that do the payoffs are huge, right. So the examples we discussed earlier, Uber, Airbnb, if you’re building an ecosystem around something you’re going to see the payoff.

(42:07) But a lot of start-ups are just, hey I’m going to let you analyze marketing site or data mines. I cannot tell you how many invites I get a day for cold calls actually in terms of, I’m going to allow you to do marketing analytics. Well how many products do I need in the market today to do marketing analytics? So people really need to start acting on the hard problems of the kind of things that Steve jobs and Bill Gates took on as challenges. Simplifying the user interface and buildings something that 100 million or 1 billion people around the world are going to use.

(42:40)So again, talk about thinking big. The hard work that’s where the payoffs are and not necessarily writing an app on the App Store that people download as a fad and that changes. In fact if you see the Store, the top 10 list of apps on their, do you see how often that circulates? I mean it’s very very rare to see the same app in the top 10 for weeks and weeks or even months and I mean that really ever happens. Now the ones that actually do are the ones that emerge as truly successful businesses, but for example, Facebook.

(43:09) So, someone needs to write platforms and they need to start thinking between what’s truly transformative, for example the Apple watch, was just a fad that is going to be an app that lets you do something on the watch right. Slap the cat and it’s going to make a funny sound.

Vala:

(43:29) Michael, your start-up idea just got crushed!

Michael:         

(43:31) I know it always happens that way but you know, it’s pretty interesting….Vala, you and I are going to talk later. But Shashank it’s interesting what you were saying about this because it also goes to the previous point that we were discussing that for a start-up to be appealing to the enterprise, it’s not just about having a piece of technology, or even having a product but it’s rather understanding how your product and you as a start-up and your processes fit easily with the large well established bigger company. Because if you can’t fit easily into their process, then they’re not going to buy from them.

Shashank:       

(44:20) True. Again, he is the other thing, right. When we look to partner, most big companies are generally very very strategic – and again and just being very generic here. But they need to identify the strategic value as to what are they going to get out of the start-up. Is it the technology, is it the people? Is it the ability to build something quick that internal it would have taken them a much longer time to build? So identifying the value and reasoning of partnering becomes really really critical. Then you can get into the whole lot of other constraints in and around how do you share data? What are the security terms? Is the start-up going to be able to host my data securely?

(44:58) So, these are constraints that always come up in between, and yes as you said the start-up needs to be more mindful – not necessarily adopt the processes and practices of the big company, because then that is just going to make them part of a big company which is then going to slow them down drastically.

(45:11) So I wouldn’t say that they need to adopt the processes and practices, but they need to start understanding around what are the things that are going to help me be successful in the long run, because again a data breach whether you’re a start-up or a big company it’s not going to help you either way right. So data security and how you manage that, and how you integrate with API’s, to then go ahead and manage data. So those kinds of things are really really helpful.

(45:35)So if you are a start-up and you have no clue how to secure an API, the odds are you are not going to go too far.

Vala:   

(45:42) So Shashank the final question from me, you’re driving digital business transformation at Kroger. Do you work more with the CIO or CMO or is it equal partnership?

Shashank:        (45:52)It is a pretty integrated experience. So we have a head of digital and e-commerce, who is one of the 11 senior officers of the company. So we work closely with him, with the CIO, with the head of marketing. So we have an executive team which is pretty tightly aligned with those.

Michael:         

(46:12) Well wonderful, this has been an interesting and insightful conversation about the way retail is changing and kind of an inside view Vala of what’s driving the change and how retail is going about in responding to this new environment.

Vala:   

(46:28) It’s an incredibly important insight from Shashank, and you know I think ultimately it’s as I said, you’re a digital business or dead business. So hopefully our audience including folks that are running IT marketing, and other lines of important business can learn from our show today. And Michael I apologize, I think the slap the Cat app is actually a pretty cool idea you had.

Michael:         

(46:54) You know I was thinking about a pet rock app actually Vala. What do you think? Shashank, I made a pet rock app, would you guys by my company.

Shashank:       

(47:04) I would have if you talks about my friendship with you for sure!

Michael:         

(47:09) Well said. so you have been watching episode number 105 of CXO-Talk. I’m Michael Krigsman with my gloriously brilliant co-host, Vala Afshar. And our gloriously brilliant guest, Shashank Sexena, who is responsible for e-commerce digital and e-commerce technology at Kroger. Shashank, thank you so much for taking the time and joining us today.

Shashank:       

(47:36) Thanks for having me on the show, this has been a great experience. Thank you.

Vala:   

(47:41) Thank you sir, great show.

Michael:         

(47:42) And next week, we are going to be joined by Brian Civic, who is the chief technology officer for the Department of health and human services, and he’ll be our guest next time. Vala, I hope you have an excellent week.

Vala:   

(48:02) You as well. Thank you Michael, great show.

Michael:         

(48:04) Thank you everybody, bye-bye.

Companies mentioned in the show:

Airbnb                                       www.airbnb.com

Atari                                          www.atari.com

Book: How Google works by Eric Schmidt and Jon Rosenberg: www.amazon.com/How-Google-Works-Eric-Schmidt/dp/1455582344

Brandery                                   www.brandery.org

Chipotle                                    www.chipotle.com

Cintrifuse                                 www.cintrifuse.com

EA Sports                                 www.easports.com

Facebook                                 www.facebook.com

Fred Meyer jewelers              www.fredmeyerjewelers.com

Fred Meyer                              www.fredmeyer.com

Google                                     www.google.com

Harris Teeter                          www.harristeeter.com

King Soopers                          www.kingsoopers.com

Kroger                                     www.kroger.com       

Littman Jewelers                   www.littmanjewelers.com

Nintendo                                www.nintendo.com    

Procter and Gamble             www.pg.com

QFC Foods                              www.qfc.com

Ralphs                                     www.ralphs.com

Sega                                         www.sega.com

Starbuck                                  www.starbucks.com

Uber                                         www.uber.com

Walmart                                  www.walmart.com

You Tech                                 www.youtechnology.com

Zynga                                       www.zyngagames.com