The giant course correction hitting retail now appears pointed squarely in one direction—toward technology. It was the sum and substance of presentations at the National Retail Federation’s (NRF) Big Show in New York in January. Walmart CEO Doug McMillon said the retailers that win the future will be those that realize they are tech firms as well as retail companies.
The NRF’s senior vice president for retail strategy painted a picture of the retail store to be—with augmented reality, artificial intelligence, robotics, big data, and other tech tools—then noted that the future was two years away. Morning-after headlines reinforced the foremost conference takeaway, like the New York Times‘ “At Retail’s Big Show, Technology Takes Center Stage.” And so did its coverage: “It was a conference about shopping that looked more like an expo for tech, as if the electronics trade show CES had decamped from Las Vegas and moved to the Javits Center in Manhattan.”
It seems increasingly clear what the great retail shakeout is boiling down to, but what impact does it have on asset protection? Retailers are on a mission to innovate. “Innovate or die,” they’re being told. So how can loss prevention participate? Or, better still, lead?
First, LP organizations will need to be as tech savvy as any organization within the company, according to Scott Roubic, vice president of internal audit, asset protection, and real estate at JOANN Stores. “Innovation and use of technology is an absolute must,” advised Roubic. “AP departments across the retail industry are under resource pressure. I think there are very few where it’s not an issue, where it’s not a case of having to do more with less. And because of that, technology and innovation become even more important.”
Second, the approach of LP toward innovation may need to change. Industry leaders who have shepherded successful technology projects aren’t saying that the rules of innovation have changed exactly, but they’ve certainly tweaked. Select strategic elements, which you may have been able to skirt in the past, are now mandatory. Select skills, ones that were nice-to-haves in the past, are now central to success. Should-haves become musts.
And it all starts with—and hinges upon—the LP innovation projects you push for.
Thinking Broadly
It may seem inconsonant advice, but to be a successful leader of LP innovation, you can’t focus on innovating LP. Your focus has to be on more-expansive opportunities, say industry leaders.
“For those of us who set policy and strategic direction, we’ve been forced into broader areas than just shrink and away from solutions focused on theft issues or other areas of narrow opportunity,” explained Scott Glenn, EJD, LPC, chief security officer at Sears. “Certainly the breadth of the role has changed. We don’t have the funding to buy narrowly tailored solutions. It’s a situation where any one solution has to be addressing multiple issues, and it’s why there are such gains in the area of analytics and predictive modeling and why firms like Agilence are getting a lot of traction-because those are solutions that solve multiple problems.”
At Macy’s, Brian Goddard has innovation built into his job description. He is the retailer’s AP innovation and implementation manager, and he views the LP innovation imperative similarly. “AP has to innovate to be relevant in today’s world, and that’s only possible if you maintain a holistic approach. If you are able to involve everyone, you’re more than likely going to be successful, much more so than if you’re going after something that is AP-specific. I believe that if it only benefits AP and there isn’t a wide scope of involvement, then your chances of sustained success are drastically reduced.”
For one new LP department, a series of innovation projects was necessary in order to bring asset protection up to speed. With a blank slate acting as a catalyst, one of the first technologies it pursued was the 20/20 Retail™ data analytics platform from Agilence. The technology would quickly provide the fledgling department a solid foundation, but that’s not why its veteran LP director chose it. “What I did when looking at investment in technology was to get with my company partners to make them aware of what we’re looking at and asking what they would be interested in seeing and caring about and considering in their world as we looked at technology,” he said. “The key is that the technology that you choose should be beneficial to your department but also to other departments. It has to have cross-functional value. You can look out for your own interest, but you have to have the interests of others in mind.”
The strategy is important for several reasons. Most obviously, advocating technology that also has value for audit, or sales, or operations ultimately yields greater value for the company overall—a critical consideration in today’s challenging retail environment. More selfishly, when you’re utilizing a technology that is used by others, you don’t face the same pressures to justify the technology down the road, explained the department’s director. Agilence’s technology serves the asset protection function, but it is also a companywide tool. “So I don’t even have to address it when working on budgets,” he noted.
The opportunities are out there, say LP innovators: cross-functional tools that can enable opportunities for asset protection and improve sales forecasting, planogram compliance, in-store execution of marketing strategy, the efficiency of field managers, stock assurance, and labor scheduling to reduce employee turnover—to identify just a sampling.
For Scott Roubic, taking a broad approach to innovation comes naturally. It derives from his experience on the finance side of the retail business and is facilitated by his diverse portfolio of responsibilities at JOANN, which includes all fraud-related programs, including point-of-sale, ecommerce, and corporate fraud programs, as well as the internal audit and asset protection functions. Roubic echoed the opinion that LP innovation today must look beyond the LP function, and he added that doing so will indicate when a good investment for LP might be a bad investment for the company.
“Not all technology makes sense, or it may be cost-prohibitive,” said Roubic. “It would be nice to have it all, but we have to act within the framework of our companies. We need to understand our business model and that a technology that might fit a company like Best Buy may not fit our business model.”
At times, a retailer’s business model may restrict LP innovation, but bending to that reality is part of being a successful company business leader and not just an advocate for a narrow function of the business. For example, JOANN doesn’t employ EAS technology, something that Roubic suspects might come as a surprise to new additions to his team, but he says it’s never made good business sense for their particular operations. “You need to understand your business model and accept it and innovate with it in mind,” he advised.
Sears Holdings’ Scott Glenn has similar advice. AP/LP leaders need to propose real solutions to real problems that fit a retailer’s broader strategic plan. “You have to understand how the system you’re proposing fits in the grand scheme. You can’t come in and suggest something that works for you but not the larger organization, or it’s going to be a non-starter.”
Being committed to cross-functional collaboration is important in developing and implementing technology projects, just as it is in choosing which technologies to go after. “Well before we deploy, we get everyone board. We include our business partners in meetings, so they can interact with the top three vendors,” explained the director of asset protection for a discount retailer. Securing support up front greases the implementation process, he suggested. For example, they went from contract to deployment of a retail analytics platform, which typically takes months, in less than six weeks. “One of the main reasons that happened was my partnership with IT because they recognized that after we got this on board it was going to save them a ton of time by being able to get reports from the field. Since it was in their best interest, they were eager to support the roll out.”
While the objective is a collective approach to retail innovation, data suggests that IT, LP, and other departments have a ways to go before they are on the same page. In a 2015 retail survey by IHL Group, a global research and advisory firm, the differences in perspectives on technology among retail department heads was stark. In the survey, 50 percent of LP executives said their exception-based reporting technology was up to date, while only 19 percent of IT executives and 29 percent of executives in other departments held the same opinion. And when asked if they’d be using CCTV cameras for traffic counting in the next eighteen months, 60 percent of LP executives said yes, compared to 37 percent of IT professionals in IT and just 14 percent of executives in other retail departments. In a survey by LP Magazine and Security Director’s Report, loss prevention executives suggested that some internal strategic relationships are strong, but others are not (see table).
A Two-Way Street
To successfully innovate today, LP leaders repeatedly emphasized the importance of reciprocity in relationships—forging a two-way bridge between LP and its business partners, between corporate planners and field operators, and between the future and the past.
At our discount retailer, for example, loss prevention software from ThinkLP was brought in for case management, but it also helped the company to expand the investment’s value by utilizing the LP tool to manage reporting companywide. Distribution centers use it to report accidents and thefts, stores to report pricing discrepancies, and promotions to track and report sales performance. LP also worked with the operations team to build a routine audit tool into the LP software for its use.
“Oftentimes, leaders in AP don’t involve their peers until after the fact, and then you’re looking at modifications,” the director observed. “And that’s when you can upset some of your business partners, especially when the failure to involve others costs them time and effort.” He believes it’s mandatory for asset protection leaders today to transform LP innovation into companywide initiatives and that it’s something that should drive projects from the start.
LP innovation also hinges on being able to leverage asset protection value from partners’ technologies. “You can’t afford to miss it if there is some sort of innovation that is being used by store operations that can be of use to AP,” said Roubic. “You want to put yourself in a position so that you’ll be exposed to that idea, so you can think, ‘Is there an AP use here?'” At JOANN, for example, AP has taken a system typically used by other retailers to alert store associates to long dwell times at changing rooms and deployed it in high-shrink areas of high-shrink stores. So potential thieves who linger in aisles before stealing are instead greeted by staff asking to help them. “It’s been a great tool for us. It relates to the basic point that the best shrink deterrent is good customer service,” said Roubic. “The point is that it started as an operations tool, and we’ve turned it into a successful tool for theft prevention, and that’s because we got involved at the forefront. And as it continues to develop, it has the potential to be leveraged by marketing and other business partners.”
Although it can be a challenge to initiate, cross-functional collaboration—once established—will typically reinforce itself. “The more you’re seen as taking a holistic approach, the more others are likely to connect with you on their initiatives and for you to be involved in their projects from a shrink perspective,” explained one LP director. “Because I involve my peers in our initiatives, they all involve me in theirs.'”
AP has a large degree of responsibility for innovation at Macy’s, and innovation shouldn’t only be the focus of top AP executives, according to Brian Goddard. He has more than two decades in AP, many at the store level, and thinks store personnel are valuable assets in a corporate AP department’s pursuit of innovation. “[Innovation] doesn’t have to start at the highest level and trickle down. I personally came up with ideas at the store level, innovations involving expense reduction and better information sharing, and had the mindset that I wanted to see those tools trickle up.”
So it makes sense that a significant focus of Goddard’s corporate position now is to go out in the field to collect those store-level ideas to help drive strategic AP innovation companywide. “I ask merchants and operations managers what they want to see, what we can do to make it happen, and how different tools relate to customer service,” he said. “It’s important to stay in close touch with our AP partners in the field-and also our non-AP partners in the field. Some of our best ideas and achievements have come to fruition from non-AP partners. The more partnerships you secure and the more they embrace the technology and understand what it can do for them, the more likely your projects are to be successful.”
Store-level training is another part of Goddard’s field outreach, which he sees as a critical, final piece in AP innovation projects. “You have to coach on what these innovations are,” said Goddard. His outreach to stores includes going to marketing and sales managers and piquing their interest with use-case scenarios: What if I could tell you the average time the last ten customers had to wait in line was six minutes? What if I told you that you that you can get a text the next time that waits exceed three minutes? What if you knew which was your busiest door during the busiest time of day? “And it’s much the same with the operations piece, where we’ll go to them and say, ‘What if you could see what’s going on in all your stores and provide you a live view of loading docks?'” This is incredibly powerful information, and the better you can paint that picture, the better position AP is going to be in when being considered in projects from other functions, according to Goddard.
To Goddard, innovation isn’t limited to finding and implementing new technology tools—it’s about getting stores to use them. “A lot of our technology we haven’t been using for very long, so [stores] are still evolving in their understanding of the value of it,” he explained. “We can roll out something fantastic, and it is crucial we ensure our success by continuously training to these new technologies while soliciting ideas from our end users. It must be user friendly, and we must overcome challenges along the way and push the envelope with our end users and solutions providers alike.”
Outreach can also help reduce duplication of effort or reduce store costs. For example, one vendor said it’s not uncommon for store merchandising managers to hire an outside company to test the effectiveness of an endcap or a display, even though they already have a camera that could do it for them.
Finally, Roubic suggested a third way in which LP innovation needs to be a two-way street—by looking not just at the future, but also at the past. “A couple of years ago, one of our field AP pros asked, ‘Why aren’t we looking at patterns in discounts and coupons?’ We use them a lot, so we started using our exception-based reporting system to dig into trends,” explained Roubic. By doing so, the AP department had a “significant and immediate impact” by rooting out team member abuse of coupons and, more significantly, by identifying and addressing training and systemic gaps that were contributing to lost revenue.
Despite improved utilization, Roubic thinks they still have a ways to go before they’re extracting full value from the capabilities of their exception-based reporting system. “My point is that when you’re looking forward and thinking about innovation, you also need to look back at what you have and to be sure that you leverage your existing tools as best you can,” said Roubic. “This is increasingly important in an environment where resources may be at a minimum and capital investment may not be at the level you need, yet you are still expected to drive improvement.”
At Sears Holdings, that has resulted in new missions for asset protection. Its team is taking its investigative mindset and problem-solving skills and applying it to loyalty programs and other areas of sales-reducing activity. “It may not show up as shrink, but it’s just as impactful to the profitability of the company,” said Scott Glenn. “We were highlighting this with our loyalty team and across the enterprise, so they said, ‘Okay, you have the visibility. You have the skills. Go ahead and knock out $50 million a year for us.'” Glenn’s team readily accepted the challenge. “It was a natural transition for us. At the end of the day, we are here to stop profit drain. In the past it was just more narrowly focused around other metrics, but it’s the same approach. So we just embraced the opportunity to codify it and make it part of our accountability. Margin loss and other profit drains are now more of a mantra for us compared to traditional shrink, fraud, and safety.”
Positioning for Success
In a recent study, Profit Protection: New Ways to Combat Shrinkage by the IE Foundation and Ernst & Young, researchers noted that opportunity can fall into the gap between functional silos. “We found that in many firms neither IT managers nor shrinkage managers were aware of the latest developments in software for pattern recognition that can identify potential sources of shrinkage,” the report concluded.
Scott Roubic said his team at JOANN avoids any such problem by accepting full responsibility for keeping abreast of the latest technology opportunities. “I have always maintained that we need to understand what’s available. We need to own that. I don’t necessarily expect an IT partner to throw new things across my desk,” he said. “And while you need to know your business model and to limit your recommendations to technology that fits it, you still need to know everything. Something that might not be the right fit for your business today may fit your business model tomorrow. Businesses change rapidly. If you don’t take on the responsibility, to me, you’re putting yourself in a tough position.”
But how do you stay on the cutting edge of technology? Although organizational structures and other intractable issues can restrict an LP executive’s options in this regard, it’s worthwhile to consider what successful LP innovators are saying keeps them poised to exploit advances in technology.
Scott Glenn gives credit to the addition of technology expertise to the AP team. “I’ve tried to structure our team differently. We’ve hired statisticians, data modelers, and systems people, so we can look for different opportunities,” said Glenn. He also thinks that the LP industry could better utilize technology departments as a point of intersection for innovation. “If we talked more often with our IT partners and forged more cohesion in that relationship, we would more easily see that many of our solutions have applications across the larger business.”
As a member of JOANN’s IT steering committee, Scott Roubic is particularly well positioned to take advantage. “I’m hearing about all the projects that are going forward, so I can think about those projects and about how my organization might be able to leverage them.” Similarly, his position on the audit team, which has a hand in controlling shrink in distribution centers, helped him secure tools for his team from the company’s upcoming new warehouse management system. Finally, his role on a company committee focused on store operations ensures that no new technology goes into stores without his team knowing about it. “Everything has to get approval through operations, and through that partnership, we’re sure that we don’t miss anything in terms of leveraging it for AP.”
Macy’s Goddard also credits greater collaboration with IT as helping to drive AP’s accelerating technology innovation. “We have worked closely with IT for many years. With the greater use of innovation involving networked devices, IT and AP are continuing to grow together, and our partnership has never been more important,” he said. “Both teams have worked to obtain a greater understanding of everyone’s needs. As a result, the relationship has really blossomed and is a big reason for our innovation.”
LP leaders were unanimous in recommending a range of other actions: reading industry publications, sending team members to industry conferences, collaborating creatively with vendor partners, and cultivating industry relationships to stay current on technology use cases, including leadership positions on industry advisory councils and conference committees. LP innovators also offered the following pieces of wisdom:
- It’s important to remember that you can’t get anything if you don’t ask for it.
- Don’t be afraid to experiment.
- Be able to recite the priorities of other departments.
- Appreciate that the best projects don’t always start out that way. You may need to make adjustments, improvements. Innovation projects require nurturing.
- Areas of innovation that are particularly valuable to the company are ones that improve its agility, enhance customer experience, and help it to better understand data.
- Get ideas from industry counterparts, but carefully calibrate their success to fit your operations.
- If you put customers at the center of your strategic innovation thinking, then you’re never going to lose-and it drives synergy and closer partnerships with those outside the asset protection silo that you need.
- Spend time up front to customize new technology to best fit your wide range of business needs; vendors are more than willing these days to work with you.
- Focus on “pain points” for innovation that works.
- Innovation should take aim at both dynamic capabilities (which are generally forward-looking) and ordinary capabilities (which are oriented toward the execution of current operations).
- Be willing to give up ownership of a technology or a project. Don’t let the fear of giving up ownership dissuade you from collaboration.
Reshaping the LP Professional?
Soon after assuming responsibility for asset protection, Scott Roubic started to wonder if he had sized up the industry wrong. “I was a numbers guy and accustomed to leveraging technology. And I was thrown by the approach in LP that seemed very boots-on-the-ground focused. More than anything, I was struggling because we didn’t make good use of the data that was out there, and we were lacking the tools and systems to do it. So I started to wonder, ‘Is this not the right place for these tools and approaches?'” His view changed after a conference keynote where an industry leader pushed his peers to attack innovation in just the way Roubic had thought it should be—by thinking more broadly than the store floor—and to make full use of technology and data at its fingertips. “That’s when I realized that I was thinking along the right lines, and our innovation at JOANN since has followed that path.”
It’s logical, as retail reinvents itself, for the role of LP—and the skills of the practitioners who lead it—to change. Uniformly, today’s industry leaders in innovation think technology will take center stage in that transformation. “It’s already underway and is only going to intensify,” said one. “To be honest, if you’re not staying on top of the latest and greatest, I don’t know how you can survive in the industry.” More broadly, he suggested that the industry should cultivate a slightly different perception of LP executives. “I think the important thing is to be seen as a member of business leadership who happens to be in AP, as an effective leader and not just the person leading AP.”
Scott Glenn thinks it’s not yet clear how retailers will organize themselves to avoid the disconnects that still exist around technology innovation but believes the path forward for LP leader is clear. “Today’s AP/LP executive has to be much more data-driven and analytical,” he said, “and exploit that knowledge and their curiosity to pursue things that are going to provide ROI across the enterprise.”
Glenn suspects that we may see continued transformation in retail organization structures as companies try to maximize strategic cooperation, for example by having more department heads reporting into the chief information officer function and greater use of task forces to formalize collaboration. Roubic wonders, several years from now, if LP departments won’t look substantially different than they do today. “I might be taking it too far, but I’m someone with a finance background that is now leading AP, and I could see someone with a technical background stepping into the leading role in certain companies,” he said. “I don’t want to minimize the AP field, but if you’ve got a good team beneath you that knows the day to day, then it may behoove some companies to bring in someone with a tech background to move them forward, especially companies that are higher tech and need to leverage big data.”
Whichever way retailers evolve their structures to encourage innovation—or if they don’t—LP leaders have the ability to help lead the effort. “I think there is more onus on them today to stay aware of the market, and most of them do a good job of that in LP, better than some other functions,” said Hedgie Bartol, business development manager for retail at Axis Communications. “They allocate time to go to trade shows to learn and take the time to learn from vendors and from their industry counterparts. Some of the other functions don’t. A lot of them will say they’re not tech savvy. But many are way more tech savvy than they let on.”