Employees and customers 2030: What’s in store with John Hartmann, COO of Bed Bath & Beyond

EMPLOYEES AND CUSTOMERS 2030: WHAT’S IN STORE WITH JOHN HARTMANN, COO OF BED BATH & BEYOND — VIDEO TRANSCRIPT

Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, our strategic initiative where we look at big topics that will impact businesses worldwide over the next day and beyond. Today, we’re focused on the future of work. And we’re coming to you from the corporate headquarters of Bed Bath & Beyond in Union, New Jersey. The retailer operates for banners: its namesake Bed Bath & Beyond, Buybuy BABY, Harmon Face Values and Decorist. I’m thrilled to be able to welcome John Hartmann, chief operating officer of Bed Bath & Beyond and president of Buybuy BABY, to the VISION by Protiviti interview. Welcome, John. Thanks so much for joining us today.

John Hartmann: Thanks very much for having me.

Kornik: I’m also joined by my Protiviti colleague Managing Director Tom Andreesen, who leads our firm’s Chicago office. Tom and I will both be handling the interviewing today. So, Tom, I’ll turn it over to you to begin. Welcome to New Jersey!

Tom Andreesen: Thanks a lot, Joe. Great to see you, John.

Hartmann: Great to see you too.

Andreesen: Thanks for hosting us here today. You know, we’ve been through a lot the last few years — a lot of changes. But it’s given business leaders like yourself a chance, a rare opportunity, to rethink their business, rethink your market, rethink how you did work. So, we’re curious about your thoughts on those areas and how those have impacted you.

Hartmann: It’s an understatement for all of us to say the last few years have been crazy. In the context of COVID-19, this company, under the leadership of Mark Tritton, has been going through a massive transformation. Mark joined the company right before COVID-19 struck, and focused on a complete rethink of how we serve our customers, and in the context of COVID-19.

A number of things come to mind. One is the magnitude of a transformation of this company in the context of a global pandemic. And that has accelerated our focus on how we serve the customer. A few years ago, Bed Bath & Beyond was really behind the times — no real strength in the digital presence, in our absolute focus on accelerating our ability to serve our customer in that way. Two words coming to mind: innovation and investment. And they’ve really been the cornerstone not just for me in my role as the chief operating officer and the president of Baby but also across the entire organization. They’ve been the cornerstone to our thinking around investing in the customer experience and innovating to catch up and then get ahead.

Andreesen: So, as we continue to evolve and come out of the tumultuous times the last few years, what do you think are some of the key learnings?<>Hartmann: The interconnected world that we live in is obviously very clear now. A decade ago, we talked about globalization. We talked about how businesses could benefit — and, in some cases, not from the global economy. Clearly, the pandemic has taught us that there are massive implications for all of us if something happens, as we’ve seen with COVID-19. Those learnings I come back to — those cornerstones of our transformation — are to provide the customer with the experience that she expects, to provide the customer with that modern, for us, retail experience. Innovation and investment are things that can never stop.

And for us, historically, we’re a company that has been underinvested. We’ve not been on the cutting edge. Those are the three big lessons for us : the interconnected world — and I’m sure we’ll talk about the supply chain at some point — the importance of continuing to invest and the continuing innovation around how you serve your customer.

Andreesen: Obviously, retail was rapidly changing pre-COVID-19. And as you’re touching on, it’s been expedited during the past couple of years during the COVID-19 situation. Let’s think ahead, though — let’s think 10 years out, or 20 or 30. What does retail look like?

Hartmann: Who’s got a crystal ball? But we’ve been thinking about the future. And broadly speaking, for me, what comes to mind is, I can picture in my mind some overlapping circles, and one of those circles is the customer. And another circle is data — data about the customer, data about what they desire — and then in the third are the products and services that we provide. And I think about those connected, overlapping, integrated circles, and everything that goes with them: the customer and their desires, the products and services, and the product data — that content around the product. Where’s the product in the supply chain? All of the ancillary aspects of how retail comes together. And our focus is, in the context for our company, on how those overlapping circles come together in the next 10 years.

Andreesen: You touched on this already, but retailers are going to face risks and barriers that they do try to evolve 10 years out plus. What do you think some of some of those risks and barriers are, and what are retailers going to have to do to overcome some of those?

Hartmann: Resiliency comes to mind immediately. There isn’t a product, in many cases, and a services organization that hasn’t been in some way impacted by the issues around the global supply chain. The products around us are very important to our customers, are very important to the business, and they come from various places in the United States and around the world. Thinking through the risks of getting your products and services to your customer has never been more important. How you fortify your plans, how you diversify your risk — the importance of supporting your clients with thinking through the risk.

A related point is the third parties that we work with — yes, manufacturers and suppliers — but in the data realm, we have massive relationships with third parties that are an integral part of the way we run the business and, ultimately, how we serve the customer. And there’s a lot of inherent risk, and growing risk, in how we need to connect ourselves with trusted third parties. But from a technology perspective, from a data security perspective, there are very significant risks there as well.

Kornik: Considering where we’re sitting, we should talk about stores and the consumer and the future of retail. As you look forward to, say, 2030, what can we expect?

Hartmann: As digital business expanded massively and quickly here and abroad, there was a thought that stores are a thing of the past. And the philosophy about that is, the pendulum has swung back in the other direction. The data shows us, and the data is a great place to start, that stores are an integral part of a customer’s expectation for most businesses — not all, but for most, and for us. Stores are a foundational element of our omni approach to how we serve our customers.

How is that going to change? The expectations that customers have in stores has been elevated. We’re coming out of the pandemic, people have returned to the stores in large numbers and the experience they want is evolving. When I was a kid, there was no digital. It was just a store. Now, we have this great diversity in how we can serve our customers, and our customers expect to have a great experience however they choose to interact with us, whether it’s on the app, whether it’s on the website, whether it’s in the store or a combination thereof. From a store perspective, we believe we need to elevate our game. We are renovating hundreds of stores across our fleet. We are designing new components of our store. This will continue to elevate our presentation of our products and services to our customers to meet their expectations.

Kornik: What if we go a little further out? What if we talk about a decade out? Customers are evolving. The whole process, from a consumer standpoint, is obviously a natural evolution. Where do you think that the customer will be in 2030 and beyond? And how do you meet them there?

Hartmann: It goes without saying, the customer today is different than the customer a decade ago, and for a lot of reasons — COVID-19, but the upcoming generation of consumers, they’re digitally native. They’ve grown up with a phone or a tablet or device in their hand. That’s one of their principal ways of interacting, and as they evolve, that’s how they enter the shopping experience. So, where we meet our customers is important, and that’s how they want to interact with us.

But they’re looking for more than just a transaction. It’s not just about a product. Customers today want to know about the companies that they’re doing business with: They want to know what their stance on the environment is, what their ESG strategy is, what their commitment to the community is and how they interact with not just them as an individual customer but also with the community that is all of our customers. And that’s an important part of our focus. The one additional thing is that looking 10 or 20 years out, we need to be able, based on what we know today, to allow our customers a very fluid relationship with us.

In other words, whether it’s in a store, whether it’s online, whether it’s on the app, they want to be able to have a very seamless experience with us, because they’ve grown up digitally. If they choose to step into a store, that digital presence, that content that we can deliver, the personalized information that’s geared and curated directly to their needs, that’s what their expectation is.

Andreesen: John, as COO of Bed Bath & Beyond and president of buybuy Baby, you have teams — and you’ve touched on this — that are transforming and improving the business through some efforts focused on supply chain, procurement, technology, and those are ever changing. You hear about in the news, they’ve been hot button issues — you touched on the supply chain. How do you look at those challenges now, and how do those how those areas evolve in the future?

Hartmann: My home base is going to be the customer, so I’ll start there. Everything we’re doing — the innovation that we’re bringing, the investments we’re making — is geared on two things: One is the direct customer experience, and the second is, how do we empower our associates to give the customer a better experience?

But there are some fundamentals we’re in the middle of. It’s not an overstatement to say we’re doing a complete redo on our supply chain. We’re going from a historical supply chain that was geared toward cost — which isn’t a bad thing; you want to have an efficient, cost-effective supply chain. But for modern retailing, speed is important. We are migrating from what is an antiquated supply chain model domestically to be able to replenish our stores and our fulfillment centers and get product directly in front of our customers in the store or to their front door through our direct-to-consumer fulfillment in a much faster way. The introduction of same-day delivery, the introduction of buy online, pick up at store, the introduction of curbside — all of those things have rapidly evolved for us over the last couple of years.

But now we’re thinking about, how do we further cut time out of our supply chain, going from an average of 30 days or more for domestic replenishment to a store to under 10 days for key items by moving the products into a supply chain that’s closer, that brings the critical products closer to the customer.

Technology is another great example. It’s like a heart and lung transplant. We’re going from an older, antiquated data center–grounded technology footprint to a cloud-based, cutting-edge, modern computing-capacity model, and it’s everything — new ERP, new end-to-end merchandising systems, new supply chain and control tower visibility across our supply chain, to name a few. It’s, between supply chain and technology, a massive redo, and in some ways, probably 50% of it is bringing us to where we need to be, and then a good portion of it is preparing us for serving the customer in the future.

Andreesen: It’s an amazing amount of change. And you’ve touched on employees and associates. As a leader, you’re also helping transform through cultural change. And with everything we’re hearing about talent shortage, retaining talent, transitioning to this new work environment, and how multi generations react to that, that adds another element to your very full plate as a leader. How concerned are you about retaining and attracting talent, employee engagement, and that culture change that’s occurring?

Hartmann: I’ll start with the last part of your question around the culture, because it has been an intense focus for us. Mark brought to this organization a plan not just to transform the company from a customer-focused perspective but also to transform how we, as an associate population, serve our customers. It has been a journey from day one, and it’s been founded on transparency and authenticity.

The entire leadership team is committed to this approach, and when we talk to our associates, it’s a dramatic change from the previous culture of the company. And then, of course, COVID-19 hit in the early days, and we were super proud as a leadership team to see that we’ve not dropped the ball in terms of the cultural transformation of the company. And this isn’t my feedback — this isn’t me saying this. It’s the feedback that our associates and our teams are providing to us that have helped mold our approach to how we work with and guide our organizations.

Let me give some specific examples. I do want to come back to risk, because we are definitely concerned about talent retention — about the availability of talent and so forth. But culturally, we’ve embraced a very inclusive organization. And these are not just words for us. This is how we show up in the workplace. This is how we show up as leaders — we set the example for our associates, participating in committing to diversity, equity, inclusion, helping to create and craft associate resource groups focused on particular parts of our organization where our associates are telling us we need to put more attention. These are a couple of examples of our real commitment to the transformation of a culture that’s as important, because it’s supporting the actual transformation and driving transformation in business.

Back to the other part of your question, talent is a daily discussion. Even pre-pandemic, the strength of the economy in the U.S., in many parts abroad — a very difficult battle for talent is upon us, and COVID-19 has accelerated that. One of the things that I just saw last night was a terrific new program that our people and cultural leaders have put in place for our associates around self-guided development.

We have, as many companies do, a great process around personal development and an annual performance review, which provides associates with feedback and guidance on how they grow, and share the responsibility for their own career. But we’ve taken it to the next level around providing the tools for different modes of self-guided education and different modes of self-guided development to complement our existing process around talent development.

We think that today’s associate is, like our customers, interested in more than just a job. They want to feel that emotional connection, they want to feel that they belong, and it’s a place that they feel like they fit, where they not only contribute, but it’s also like home, and we call this corporate headquarters our home. That’s just one example of doubling down on building the connective tissue with our associates so that they feel like they’re part of something bigger than just showing up to work.

Andreesen: Very important as part of the overall strategy. Continuing on with the people topic, fast-forward, being looking out to 2030 and beyond, what are some of the main high-demand skills and experience that you see retailers needing? And then, you’ve touched on what you’re all doing around self-development and giving them the opportunity to do that, but how do you see development and training supporting this evolution in 2030 and beyond, where there’s a hot demand for skills and experience?

Hartmann: For us, there are three buckets of different talented human beings that we need in our organization: We have a whole group of people that work within our supply chain, we have a whole group of people that work within our stores and then we have a whole group of people that work in the supporting functions on both of those organizations — supply chain and stores. So, the talent and the skills necessary are very diverse. There’s a need for diversity in all senses of the word, but diversity across the skill set. Retail is a people business, and individuals bring that passion every day to our stores. They bring the passion to supporting our customers. The ability to communicate, face-to-face interactions with customers, is a very unique skill. Some people really love it and excel at that, and we need a lot of those people, with pushing 1,000 stores in the country.<>From a supply chain perspective, we need a very diverse set of skill sets, from individuals that look after direct-to-consumer orders to individuals who manage teams of individuals who are working within the warehouse organization, and then other skills around material-handling equipment and moving products within a facility and across the country and across the globe.

Then, in the corporate setting, data and analytics are coming number one to the top of my mind — the extreme need in modern business, in modern retailing, to understand consumer behavior, be able to analyze it and then adjust your products, adjust your services, adjust the location of your inventory to meet the needs of the customer is an extreme need. Data and analytics will certainly be in the top three or four for a very long time.

Another area of importance is in the technology area. We’ve heard a lot about machine learning, we’ve heard a lot about artificial intelligence, but these things are real. From implementation we’re doing right now around a supply chain control tower, which for the first time in our company’s history will give us absolute visibility into where our products are located across the entire supply chain, from order placement to the time that it shows up at a customer’s front door or goes to a store. The visibility is one thing, but the ability for the system to guide you and provide options around how you best place your products in the supply chain, how you measure them, is super critical. And that’s just one example. Individuals that have talent in data analytics technology to complement our supply chain and our store needs, that’s a focus for us.

Kornik: John, you’ve been very forthcoming in your answers, and we’ve talked a lot about the future here, and this has been fantastic. We appreciate you taking the time to do this with us. But we’re not going to let you out of here without a bold prediction or two. We call this VISION by Protiviti because we like to bring smart people together and have them give us their vision of the future. You’ve done that quite a bit, but we’d like you to go out a little further — 2030, 2035, as far out as you want to go. Talk to me about what’s possible. What haven’t we thought of when we think about the future of work and the future of retail? What do you think is possible?

Hartmann: It’s a tough one because, as I said earlier, no one has a crystal ball, but I’ll give it a shot. If we went back I don’t know exactly how long, but let’s call it 20 years, there’s a business concept that was grounded originally in strategic planning called ecosystem. And I’m not an expert on what that meant then, but I’m reflecting on your question and thinking about what’s in my head today, and how that might impact the future.

What we’re seeing today, which I think will evolve rapidly — even more rapidly in the next decade — is how individual companies and how unrelated companies come together in an ecosystem to build a basket of products and services that better support and serve their customers — and they can be shared customers, or they could be new customers. But the evolution of how companies partner and how companies work together or acquire new businesses or build new capabilities, all with the focus on filling different components of an overall approach to serving the customer’s needs, that is really good. That’s going to accelerate, and we’re going to see a lot more of it.

An example is, we’ve recently publicly announced our collaboration with the Kroger organization, and so now you’re seeing, in Kroger’s digital marketplace, Bed Bath & Beyond products, buybuy BABY products, available now to the multitude of Kroger customers. You take the largest grocer in the United States, you combine it with the brand authority of Bed Bath & Beyond and buybuy BABY, and collectively, we think that collaboration will be great for both companies. That is one example of what could be many types of examples of companies working together to apply their collective force to an ecosystem focused on a particular customer.

Kornik: Fascinating. John — thanks for doing this! We really appreciate it.

Hartmann: It’s great, guys. Great to have you here. Good to see you both.

Kornik: Thank you. And Tom, thanks for the questions. Thanks for helping me do this, John. And thank you for watching the VISION by Protiviti interview. For John and Tom, I’m Joe Kornik. We’ll see you next time.