Big Think

Topic: How Technology Is Impacting Business

Stemberg:  I’m Tom Stemberg.  I’m the Managing General Partner of the Highland Consumer Fund. 

Question: What is your philosophy regarding technology investing?

Stemberg:    Our philosophy at Staples and philosophy in most companies we’re involved with is that you have to stay ahead of the curve, both in your people infrastructure and your systems infrastructure.  So if [IB] company today, you better be thinking ahead as to when you’re going to be a $500,000,000 company or a billion dollar company.  And make sure that whatever path you go down can accommodate that level of growth or you never get there.  Having said that, I think the most positive thing in technology today is back when we started Staples, you would’ve buy IBM and deck many computers at several hundred thousand dollars a piece to run even a relatively small business.  Today, you run a PC for a fraction of the cost.  The old days, you had to buy software applications and upgrade them and maintain them, that will resonate on your box.  Today, you can buy these things, the services, software… software as a service download them off the Internet for a fracture of the cost.  So the cost of having great systems today has come down dramatically.  And that’s, I think, a tremendous enhancement to productivity amongst small businesses.  

Question: How has technology changed marketing and advertising?

Stemberg:    Clearly, we’ve gone through a revolution in marketing, where, historically, the way to reach the consumer was to blast the message as broadly as possible and as cost effectively as possible and hopefully in a creatively engaging way to send your message across.  Today, thanks… in part to the Internet and other targeting techniques, you can tailor your message the exact segment you hope to appeal to, with a message tailored, if not the segment to the individual even.  So there’s a dramatic, dramatic shift in how marketing works.  Having said that, I don’t think there’s anything more important or more viral than word of mouth.  And with Internet and everything else going on… And word of mouth includes e-mail messages and blogs and everything else.  The fact of the matter is that the first reason most people try… give a retail outlet is they happen to drive by.  And the second most important reason is a friend told me about it.  It’s never advertising. 

Question: Is technology improving education and training?

Stemberg:    Think about how training use to happen and how it can happen today.  Stage 1 of training was you had to get the manufacturer’s representative in front of all the store managers in the region or have him travel… travel around the region to go see all of them.  And whoever you trained, if they turned over, and retail employees do turn over, the successor wasn’t trained at all.  Then, it evolve to video tape or satellite training, where you could have smaller groups, have less travel, and communicate uniformly, and more caused effect in a travel perspective, whatever message you had.  And video conferencing would’ve been part of that.  Today, you’re evolving to a world where you going to load your contact up on to an Internet or even to a cloud and the associate will download it on his or her schedule to get trained and then tested.  And if the employee turn over… turns over, the new employee can go in and take the very same training the other one had, with no incremental cost to the organization.  So, I think technology is having a very persuasive impact on how effective training can work.     

Question: What is a common technology mistake?

Stemberg:    Many companies see technology as an end to itself.  And they buy a new ERP system or a new human resources system or some fancy technology that does something else.  But they don’t stop and first identify the true needs of either their customers were being served or their frontline associates are trying to serve the customers.  Have you ever watched an airline… for the Legacy Airlines particularly?  An airline clerk at the checking counter worked their computers.  I mean, to me, I, once, went over to one of them and said, you know, “How do you guys do this and not screw up all the time?”  Is this [IB] else I call for help, this is really, really difficult to operate.  The system clearly weren’t designed to make it simple for either the user or that reservations clerk.  And frankly, now you look at the next generation, which is sort of the JetBlue and the Southwest Airlines who are handling bookings online, it’s so much simpler.  And the checking process is so much simpler.  And the systems don’t seem nearly as conversant.  Why is that?     

Question: What is your e-commerce legacy?

Stemberg:    What I most proud about… Staples and e-commerce… Addition to the fact, that Staples are now the second largest e-tailer in the world.  But I’m really most proud about is how well we integrate it in the retail business.  Staples today… If you’re out of stock in a sale item, they’ll ship it next day based on the in-store kiosk.  If there’s… They stock 5, 6,000 [in every] store, there’s another 30, 40,000 available via the Internet in the store.  So that all cross [IB] don’t carry anymore, they can still get it to the next day.  If you want to order 50 or something that [they are] on stock, they’ll ship it to you free the next day.  That kind of capability and be able to service the customer in store better… And, in fact, make the Internet an ally of the retail store as opposed to competitive of it.  That’s probably the thing I’m most proud of.