PETCO Animal Supplies Inc. was becoming a victim of its own momentum.
It was 2004, and Jim Myers had just taken over as the CEO of the nationwide pet supply store chain. The company had achieved tremendous success, experiencing significant growth on sales and earnings in the 1990s and early years of this decade.
PETCO was in the right spot at the right time.
“People were really starting to humanize their pets, and our initial success came from being innovators and creating ideas around that,” he says. “I think we were the first to allow pets into the stores, the first to have adoptions of animals in the stores. Almost all the elements of what is now the pet superstore experience are things we initially tried ourselves.”
But as PETCO vaulted into the retail stratosphere, cementing itself as a giant in the pet supplies industry, a new problem sprouted: The spirit of innovation that had built PETCO had been choked off by a companywide desire to not mess with success.
“What developed in our organization was a fear of making change,” Myers says. “It was working so well, the message down through the organization became ‘Don’t change it, it’s working.’ That stifled innovation.”
While PETCO stayed on its treadmill, competitors closed the gap, expanding their retail arsenal to offer many of the same products and services PETCO offered.
If PETCO was to maintain its standing as a pacesetter in the pet supplies business, Myers knew he needed to rekindle the innovation fire within his employees and get his company back to the cutting-edge thinking that had set it apart from the competition to begin with.
“It was really time to shake up the thought process and bring some more risk-taking back into the organization,” Myers says. “We made it a personal challenge to come up with the next innovations.”
Build a message
To reawaken an innovative mindset in his employees, Myers needed to tweak their collective thought process.
Over time, the company had rested into a comfortable groove of going through the same motions each day. Employees had been coached to concentrate on their own tasks and leave the big-picture thinking to the administrators further up the ladder.
That type of thinking can make for an efficient organization but fails to stimulate ideas. With that in mind, Myers says he needed to build interest in innovation by showing employees how their ideas and their work could impact the company as a whole.
“We started really encouraging individuals to view their jobs as not just work but that they are each an integral part of what we do as an organization,” he says “They make it easier for our customers to take care of their pets.”
With a work force of approximately 22,000 in nearly 1,000 locations, communicating that message was more complicated than bringing everyone together for a company meeting. Myers and the company’s leadership team needed to cascade their messages across both geographic distance and administrative levels. And they needed to figure out a way to prevent the message from losing steam as it cascaded away from its corporate-management source.
The first step was to engage the company’s top managers. To get all of the primary decision-makers on the same page, Myers instituted a monthly conference call for the top 250 managers and executives at PETCO.
“Every month, we review how we did as a company and the near-term objectives for the upcoming period,” he says. “We consistently use this forum to talk about the dimension of each of our leadership principles and providing solutions for the customer.”
From that central meeting, communication needed to reach all the way down to the associates who work on the sales floor at each PETCO store — and the associates on the lowest rungs of the company needed to take the message of innovation and new ideas to heart.
The large-scale communication strategy focused on two principles: Keep it simple and grab employees’ attention.
“In today’s business world, sound bites are really important,” Myers says. “That is why we promote each of our basic organizational elements in a way that they can be easily remembered as concepts by themselves.
“We hold a leadership summit where we bring all the general managers in charge of every store together in one place, and spend a couple of days together. We go through some in-depth discussion on our basic principles, some tactics and training on how you bring these things to life for your associates. From there, they bring it back to their stores and have your own store huddle and relate the short-form version of what you worked on at the summit.”
Depending on the size of your company, it can take some time for a philosophy change to take root with every person. But if you can involve management at each level, you can help the message cascade more quickly and efficiently.
“If you can do it this way, the whole company feels like they’re touched at some level with the message,” Myers says. “There is no silver bullet, and no easy way to do it. The way to do it is to be consistent, be regular in your communication and ensure that you have a plan as for how that information will filter down through the organization.”
Innovate within a structure
Myers had to walk a fine line as he rekindled his company’s innovative spirit. While he didn’t want PETCO to maintain its status quo, he also didn’t want to drift so far into new territory that the company no longer focused on the products and services that had become its calling cards.
Innovating is good for a company, but innovating without a structure and set of goals can become a destructive force to your company’s vision and mission.
Myers met the challenge by communicating PETCO’s foundational principles of pet care and customer service as he was spurring an innovative mindset. In addition, he attached employee incentives to the company’s annual goals.
Myers didn’t want to hinder new ideas, but he wanted to create a culture in which employees and managers at every level of the organization are held accountable for setting personal goals that fall in line with the company’s overall goals. Within that structure, employees could innovate with the same targets in mind.
“We set specific goals for performance each year, and we have a program that acts as a repository for that,” Myers says. “It starts with me and our senior executive team. We sit down and lay out our financial plan for the upcoming year and all the various elements that will be required for us to be successful. We embed personal goals and company goals in each of our performance objectives.
“The system allows you to cascade that throughout the organization. My goals are cascaded down to the store level, so that everyone knows about them, and store-level goals are rolled up to organizational goals. By demonstrating personally that you start at the top by setting those goals and those goals are going to integrate with achieving the company goals, it sets a strong example for the rest of the organization.”
Personal goals at PETCO are linked to the company’s rewards plan, creating another connection between innovation and company goals. Half of an employee’s year-end bonus is based on the extent to which the company achieved its goals and half is based on the extent to which employees achieve their personal goals.
“In addition, halfway through the year, you have to meet with your manager as a kind of check-in,&#x
201D; Myers says. “At that meeting, you go over what progress has been made against the goals you’ve set for the year. It might also be a case where you have to adjust your goals if some external things happened that made the goals less likely. You don’t want to set goals that can’t be reached.”
Building innovation into your company’s collective mindset is a constant process of education, reaffirming, funding and gathering feedback. That’s why building a system for implementation is so critical to success.
“You can’t just say, ‘We need innovation,’ and just sort of hope that it bubbles up somehow,” Myers says. “You have to put money in your budget for trying new ideas and develop a process for submitting new ideas. You embed the process and then fund some of the ideas that match your overall goals. Then you have to share with the organization how it worked or didn’t work. After that, you have to solicit recommendations for future areas in which you can innovate.”
It also helps if you can maintain an open-minded approach when you’re soliciting and vetting ideas. You have to accept that there might be different ways to accomplish the same objective, and the way your company has always done it might not be the best way.
“As a leader, you need to have a personality that allows for innovation,” Myers says. “By that, I mean the idea that you can try different things at various levels of the organization. You need to realize that it’s OK to do things a little differently in an effort to find a better way to accomplish the same things. You’re not setting new objectives, you’re setting new approaches and new ways to better satisfy those objectives.
“With that, it’s OK to have some failures as you try new ideas, because you have to find out if they can be proven or not. You do your best to make sure each idea is properly vetted, but sometimes ideas fall short of expectations.”
Test new ideas
PETCO’s renewed focus on innovation has helped keep the company thriving (it generated more than $2 billion in 2008 revenue) in spite of the economic downturn of the past two years.
PETCO’s success has much to do with its ability to keep producing fresh ideas for employees and customers. But there is one more wrinkle that Myers and his staff have to deal with: how to get those ideas from the drawing board to the sales floor.
Once you give the thumbs-up to a new idea and green light it for rollout, it’s usually better if you can get a sample-sized result before you implement it throughout your company’s entire footprint. That way, if miscalculations are made, the effects won’t hurt the entire company.
Myers has set aside regions of stores for new product, service and policy testing. If the reception and results are positive, PETCO will roll out the new idea to larger regions until it takes effect across the entire chain.
Throughout the rollout process, Myers and his leadership team are frequently checking the new idea’s progress and gauging how well it is being received via feedback.
“You don’t just roll a new concept out to 1,000 stores and see how it turns out,” Myers says. “You take some small samples, learn what the outcome is there, what the challenges might be in implementing that new direction, and be sure you keep communicating with everyone on how to overcome them and how to avoid the pitfalls.”
If an idea is a success, it will begin to sell itself as people throughout the company start to buy in.
“More often than not, you find someone who has been a success with what you’ve just tested, and you let them be a promoter of change with the people they work alongside,” he says. “That one-to-one communication makes the new idea more personalized, and the more personalized you can make the experience, the more receptive people will be to the idea, and the more they will believe that it can be successful.”
How to reach: PETCO Animal Supplies Inc., (888) 824-7257 or www.petco.com