August 7, 2007
Magazine Names Target’s Ulrich ‘CEO of the Year’
Chief Executive magazine has named Bob Ulrich of Target as its "2007 CEO of the Year."
While gracious in accepting the award (the 2006 honoree was A.G. Lafley of P&G), Mr. Ulrich is quick to point out that Target’s success is not about his abilities as much as it’s about the performance of the entire organization from top to bottom.
"You’ll hear the word ‘team’ a lot around here," Gregg Steinhafel, president of Target, told Chief Executive. "Bob is the kind of leader who challenges appropriately, but gives you the rope to do what you need to do to be successful."
"He has a subtle way of training you and getting you to think creatively," said John Griffith, property development EVP at Target. "Part of it is having clear expectations. Also, he has an uncanny ability to know when to encourage you when you’re down and when to challenge you aggressively when you’re up."
One challenge that Ulrich keeps in front of his team is the need to differentiate. Many believe that his career moving up through the ranks of the Dayton Hudson department store chain (he began as a merchandising trainee after graduating from the University of Minnesota) has played a critical role in the hip factor that differentiates Target from other discount store competitors, primarily Wal-Mart.
"We are so relentlessly focused on differentiation and the need to innovate," said marketing EVP Michael Francis, "that it’s part of our DNA. That is what he’s been able to create in his time here as CEO."
In an interview with Chief Executive, Mr. Ulrich discussed the Target approach including his position that the chain is not focused on competing for the low-price position with Wal-Mart.
"With our ‘expect more, pay less’ slogan, we price ourselves close to the competition on identical merchandise. But that’s not where we’re going to win overall. We want our guest to have a choice of something a little better in quality, a little more forward in fashion. That’s where we win," he said.
"We push innovation and design very strongly–sometimes we even go a little too far. But that’s fine. We learn. We pull back and rebalance. That’s the key–don’t overreact! Don’t retrench. That’s the worst reaction."
Target, according to its CEO, has also closed the logistics gap it once had with Wal-Mart.
"We were a little slow in terms of getting our manufacturers, like Procter & Gamble and Johnson & Johnson, to help us manage categories by SKU for different demographic groups across the country. They have huge expertise and can tell you, for example, that one particular hair color sells more in one area and a particular shampoo sells more in another. For a while, Wal-Mart did a better job of that, but we’ve caught up," he said.
Mr. Ulrich is bullish on Target’s future because he believes the corporate culture will keep the company small no matter how big it gets.
"Flexibility is key," he told Chief Executive. "Despite our size, we can adapt to trends, unlike a specialty store that’s under a cyclical threat…As long as we don’t get complacent, as long as we’re exploring, benchmarking and looking for new ideas, we’ll be around for a heck of a long time to come."
Discussion Question: What, in your mind, qualifies Bob Ulrich for CEO of the Year consideration? What do you think his legacy will be when he eventually steps down as CEO of Target?
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Three things stand out about Mr. Ulrich’s tenure at Target. (And some full disclosure…my retail career began at Dayton’s in 1978 working in Bob’s GMM area.) First, he and his team have done a superb, consistent job of branding Target as the headquarters for “affordable design and fashion for the masses.” Second, the content in the store generally lives up to this branding promise with its roots in department store trend merchandising. Third, Ulrich and his managers are rarely complacent when it comes to operating improvement: Target pays a lot of attention to “front of the store” issues, and Ulrich’s point about logistics is well-taken since Target suffered a few years ago from chronic out-of-stocks that have been mostly corrected.
Let me play my usual role by asking us to examine our assumptions. It looks to me that we are quite fond of the idea of the business hero–the person at the top that gently guides and molds the organization and that “makes” the organization very successful. For that matter, we seem to be fond of the idea of the hero everywhere in our society–the firefighter, the soldier, the rags-to-riches man, the single mom raising 20 children by herself.
I am not putting down these people, their accomplishments, or those who love the hero. I call into question, though, the idea that one person “controls” the organization in such a way. The “omnipotent business executive” is a concept that gained popularity in the 1920s (according to our research), and may be based not so much on data on how organizations actually function, but may be based more on our deep psychological needs.
Laugh if you like, but let us note that particularly in the US culture (again, according to our data), there are very prominent elements of controlling individuals, punishment, violence, anxiety over the dangerous world we live in, protection and defense, and rage over small matters. The hero is perhaps so beloved because we desperately need stories (accurate ones or not) of the person who conquers adversity, who rises above their petty inferiors, who brings wealth to themselves and others, who cares about more than just themselves, who shows the dangerous world that they shall not be stopped. And above all, one who is, in the end, just like us.
Retailing is knowing and engaging the target audience and marketing the ‘right’ products and services. With that said, Ulrich has done a magnificent job in 1) positioning Target in a crowded competitive landscape; and 2) fortifying its product categories with branded Target signature and designer lines. Add to this a perceived positive service level to its consumers, the good financial results and the brand loyalty…they continue to prosper, year after year–as other retailers struggle! What a positive Consumer shopping experience!.
Hmmmmmmm…MAD MARKETING…what consumer marketing practices provide but many retailers discount!
I wholeheartedly agree with Rich Seesel, above. Target has really excelled in bringing “good stuff cheap” to the masses by straddling the line between good prices and good quality. They miss out on the often negative connotations of ultra-cheap merchandise, and ultra-expensive department store brand name material.
Most importantly, however, is that they are not complacent. They have not forgotten that we live in a world where the consumer has more choices than ever, and as such can go elsewhere in a flash. Kudos–the award is well deserved.
I believe Mr. Ulrich’s legacy–despite Macy’s best efforts–fifty years from now in marketing textbooks will be his re-inventing the department store…indeed, to have saved it as a form of retailing. In terms of the merchandise mix, price points, and amenities, Target is getting steadily closer to the popularly-priced department stores that lined our Main Streets up until the 1960s, all that is really different is the point of sale process. Good for them, and three cheers for Mr. Ulrich.
Target shows again and again that there’s more to retailing than low price. They use innovation and wit, along with solid business practices (great systems, focus on margins) to give low price shoppers a place to go where they don’t have to feel humiliated. Where they can be proud to shop. They use supply chain innovation to deliver better products, not just less-expensive products.
Target stock sells for 19 times earnings. Wal-Mart sells for 17 times earnings. Five years ago Wal-Mart stock was the same price as today. Target stock doubled in 5 years.
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Three things stand out about Mr. Ulrich’s tenure at Target. (And some full disclosure…my retail career began at Dayton’s in 1978 working in Bob’s GMM area.) First, he and his team have done a superb, consistent job of branding Target as the headquarters for “affordable design and fashion for the masses.” Second, the content in the store generally lives up to this branding promise with its roots in department store trend merchandising. Third, Ulrich and his managers are rarely complacent when it comes to operating improvement: Target pays a lot of attention to “front of the store” issues, and Ulrich’s point about logistics is well-taken since Target suffered a few years ago from chronic out-of-stocks that have been mostly corrected.
Let me play my usual role by asking us to examine our assumptions. It looks to me that we are quite fond of the idea of the business hero–the person at the top that gently guides and molds the organization and that “makes” the organization very successful. For that matter, we seem to be fond of the idea of the hero everywhere in our society–the firefighter, the soldier, the rags-to-riches man, the single mom raising 20 children by herself.
I am not putting down these people, their accomplishments, or those who love the hero. I call into question, though, the idea that one person “controls” the organization in such a way. The “omnipotent business executive” is a concept that gained popularity in the 1920s (according to our research), and may be based not so much on data on how organizations actually function, but may be based more on our deep psychological needs.
Laugh if you like, but let us note that particularly in the US culture (again, according to our data), there are very prominent elements of controlling individuals, punishment, violence, anxiety over the dangerous world we live in, protection and defense, and rage over small matters. The hero is perhaps so beloved because we desperately need stories (accurate ones or not) of the person who conquers adversity, who rises above their petty inferiors, who brings wealth to themselves and others, who cares about more than just themselves, who shows the dangerous world that they shall not be stopped. And above all, one who is, in the end, just like us.
Retailing is knowing and engaging the target audience and marketing the ‘right’ products and services. With that said, Ulrich has done a magnificent job in 1) positioning Target in a crowded competitive landscape; and 2) fortifying its product categories with branded Target signature and designer lines. Add to this a perceived positive service level to its consumers, the good financial results and the brand loyalty…they continue to prosper, year after year–as other retailers struggle! What a positive Consumer shopping experience!.
Hmmmmmmm…MAD MARKETING…what consumer marketing practices provide but many retailers discount!
I wholeheartedly agree with Rich Seesel, above. Target has really excelled in bringing “good stuff cheap” to the masses by straddling the line between good prices and good quality. They miss out on the often negative connotations of ultra-cheap merchandise, and ultra-expensive department store brand name material.
Most importantly, however, is that they are not complacent. They have not forgotten that we live in a world where the consumer has more choices than ever, and as such can go elsewhere in a flash. Kudos–the award is well deserved.
I believe Mr. Ulrich’s legacy–despite Macy’s best efforts–fifty years from now in marketing textbooks will be his re-inventing the department store…indeed, to have saved it as a form of retailing. In terms of the merchandise mix, price points, and amenities, Target is getting steadily closer to the popularly-priced department stores that lined our Main Streets up until the 1960s, all that is really different is the point of sale process. Good for them, and three cheers for Mr. Ulrich.
Target shows again and again that there’s more to retailing than low price. They use innovation and wit, along with solid business practices (great systems, focus on margins) to give low price shoppers a place to go where they don’t have to feel humiliated. Where they can be proud to shop. They use supply chain innovation to deliver better products, not just less-expensive products.
Target stock sells for 19 times earnings. Wal-Mart sells for 17 times earnings. Five years ago Wal-Mart stock was the same price as today. Target stock doubled in 5 years.