Sustaining a Culture of Optimization
Process, Process, Process
In this article series, I share excerpts and stories from my recently published book, The Optimizer, Building and Leading a Team of Serial Innovators.
This week we’ll explore the final section of the book. Part 3, Building and Leading a Culture of Optimization. We’ll specifically share thoughts from Chapter 11, Sustaining a Culture of Optimization.
Ever heard of serial optimizer, Amancio Ortega? He is one of the top 10 wealthiest people in the world and the least well known. This excerpt will be through the lens of the extraordinary approach the company he founded, Zara, has taken on their journey from making a few articles of clothing in the early days to the becoming the second largest fashion company in the world. I’ll share details of the exceptional culture of humble leaders with a relentless focus on engaging every team member to embrace the journey of optimization.
What Are the Benefits of Well-Defined Process?
Amancio Ortega is the son of a railroad worker and a maid with no formal higher education. Today, he is the sixth wealthiest person in the world, with a net worth over seventy billion dollars. Mr. Ortega doesn’t compete with Warren Buffet in business, create software, or own a social media company. He owns about 60 percent of Zara, the largest fashion retailer on the planet, and avoids the spotlight.
He began his career delivering and manufacturing textiles through a small family business in 1963, in a quiet northwest corner of Spain, and he started Zara in 1975. Early on, he observed the various stages of the textile business and learned value in controlling each step of making clothing. Controlling more of the supply chain allows for greater cost management and speed of delivery.
In the early 1960s, Ortega became the manager of a luxury clothing store that few could afford. He recognized a broader market for these clothing styles. Soon, he began to make similar products with lower-cost goods. Affordability in fashion was a problem for most people, and Ortega solved it.
Zara’s strategy for success is clear, as CEO Pablo Isla shared, “Find out what our customers want, and design, produce, and distribute it quickly.” This works when roles and responsibilities are well-articulated, the mission is understood by all, and leaders are not afraid of letting their team members lead.
According to Mr. Isla, the management system is simple: “We empower our people at all levels to make thousands of decisions every day.” This culture requires “vulnerable leaders who are willing to give up control and grant decision-ownership to their teams to flourish.
They are not afraid to hire young people and give them lots of responsibility. The finance director, Miguel Diaz, explains, “You don’t have to be a star to work here, but you must be competent and have an entrepreneurial spirit.” In fact, 60 percent of the workforce is thirty or younger.
They don’t hire based on age and experience to run this empire; they bring in motivated people who want to build something excellent. This is in stark contrast to competitors like H&M and Gap that have a chief designer from whom new ideas flow. With a sole decision maker, team members are not empowered and must wait to take action.
Zara has developed a super-agile supply chain that requires innovation end-to-end and distributed decision making. The decisions must be shared for speed. Zara can put the latest fashion in customers’ hands within four to six weeks. Most competitors take months to do the same. This speed takes constant focus on optimization, and to deliver, you need guardrails that the systems furnish. “These systems provide clarity of the mission and drive efficiency, effectiveness, and engagement for 176,000 employees.
Similar to The Motley Fool, Zara believes they can always improve. They saw the benefit in continuous interactions with designers, buyers (sourcing and production), and country managers, and they reorganized their headquarters to physically put each of these groups in the same room, encouraging impromptu meetings. This allows designers to create new ideas, buyers to quickly approve or disapprove them, and country managers to ship them to the right stores. They know where to ship because they’re in constant contact with store managers.
This system is predicated on paying close attention to customers and their needs. They have evolved from a product focus to the four Es: Experience, Exchange, Evangelism, and Every Place. This strategy puts the customer at the center of every decision. They’ve created a variety of digital interactions in-store with augmented-reality-enabled shop windows and an app to virtually try-on clothing. “Zara excels by pulling customers into the brand, rather than pushing products.”
Pull all this optimization of processes together, and what do you have? A company that operates so efficiently that they generate “negative operating working capital.” Zara collects cash faster than they have to pay it out, which is highly unusual in any industry, much less the fashion industry. They have over seven thousand stores worldwide. Those stores have shoppers visit two- to three-times more often than top competitors, and they’ve amassed over forty million followers on Instagram, a leading social media platform.
This is all made possible by building a strong leadership culture — one that is not afraid to fail and that learns along every step of the journey. The leadership team exhibits constant vulnerability, as evidenced by Mr. Isla. “We are far from perfect. Whatever we analyze, we see lots of room for improvement. Continuous improvement is in the heart of the company.” Leadership styles are contagious, good or bad. This is a culture of serial optimizers that leads to sustain excellence.
Building and leading a team of serial innovators takes great focus and intent, but can deliver immensely for your organization as we see with Zara. It does not happen without establishing systems and processes to enable, empower and sustain the optimizer mindset. And, this strategy will not succeed if leaders choose to focus on problems rather than processes.
I hope you enjoyed this post. We have now shared excerpts from each section of my book, THE OPTIMIZER. Next week we’ll finish with conclusions from my two plus decades on Wall Street, dozens of interviews across industries and months of research and writing.
If you enjoyed this article, you could find further information on my book and leadership lessons here: www.johncsaunders.com along with information about my coaching and consulting business, Forward Advisory Solutions.
Join my 2-part deep dive book sessions with Jessie Jacob on our NEW DATES, 5/18 and 5/20 to learn the roadmap for enabling, empowering and sustaining a culture of optimizers within your team by clicking here:
https://optimizer-book-club-2021-04.voicehive.com/v2/page/WelcomePage
A special thanks to Professor Kasra Ferdows from the Georgetown University McDonough School of Business for the paper he co-authored, Zara: The World’s Largest Fashion Retailer, that offered many details for this blog and my book.