Circa 2015, Target, one of the largest retailers in the US, was struggling with multiple priorities on which they were making very little progress. Their delivery model was based on third parties, so they retained very little IP, which presented morale and stability challenges, especially since the organization was rooted in legacy ways of working.
Target needed to address issues of what the company was prioritizing, update the skill-set and makeup of the workforce, anchor more to architecture, and move from project to product using Agile principles.
At the 2021 DevOps Enterprise Summit, Brett Craig, Senior Vice President of Digital, and Luke Rettig, Senior Director of Product Management, Merchandising Capabilities, described how Target used a DevOps mindset to influence the organization’s culture, highlighting two key examples: the revamping of the Fresh Food Merchandising division and the company’s response to the COVID-19 pandemic.
In late 2018, the Fresh Food division was underperforming based on all of Target’s core metrics—they were unable to keep high-quality perishables in stock, which was calling into question whether or not they would still be in the business of fresh food at all in five years’ time.
Their first instinct was to add more management reporting, meaning Target would bring in a large group from a consulting organization to fix the issues they were experiencing. However, Brett Craig, who had recently moved into the merchandising space from technology, deduced through conversations with coworkers that fewer people were needed to fix this problem. Instead, he suggested standing up a small group of functional experts composed of business, technology, operations, and product people—designed to build sustainable, repeatable capabilities—led by Luke Rettig.
This small group was given the guardrail of driving profits without sacrificing sales in Fresh Food businesses and worked in a shared common space to empower them to communicate in person to figure out what handful of measures actually mattered. This enabled the team to leverage short sprints, kanban boards, and fast feedback loops.
This group determined how to segment out approximately two thousand stores and utilized analytic capabilities that allowed them to go into those segments and decide how much space was needed to maintain sales. Space is the most constrained asset in brick-and-mortar stores, and using data and intelligence to optimize how much space each category was allotted before they saw diminishing returns on profit represented a significant shift in thinking.
This small team built a unique assortment of space-informed segments that each had localized decision-making, introducing base metrics such as mechanical shrink and putting data and sustainable tools in the hands of the people making decisions.
As a result, Target saw an increased gross margin of 32% in fresh-food categories while only sacrificing +/- 2% in sales, decreased square footage allocated to fresh-food categories by 15%, and built Version 1 of the Assortment Planning Product toolkit (a toolkit the rest of Target’s businesses are able to iterate off of).
Culturally, it was liberating to not automatically default to the standard way of doing things, and it built trust between team members to see positive results from adopting a more communication-oriented method for addressing the issues in Fresh Food. This trust in new methods also helped team members in the organization stay healthy, safe, and thriving in the beginning of the COVID-19 pandemic.
Before March of 2020, the decision-making and operations of Target’s merchandising structure were siloed. Target was merchant-driven, less thoughtful of what was best for end-to-end operations or guests, and rarely considered how to come together as a team of teams. There were weekly, merchandising-focused action meetings that were separate from weekly operations meetings. These routines were neither enterprise thinking nor all-inclusive, and although product and technology teams were operating more in the spirit of DevOps, they were viewed as a separate tech arm.
When the pandemic began, Target was in crisis, starting with the essentials and food and beverages businesses. Shelves in these categories were empty, while in the meantime, there were overages in apparel and accessories, with stockpiles of inventory in stores and distribution centers. As the pandemic progressed, Target saw a shift to increased sales in electronics (to support home offices) and leisure activities (such as board games and other things families could enjoy in isolation). Additionally, Target had to deal with the chaos introduced by guests needing a clean and safe place to show and field team members who had their own safety and processes to maintain.
The Merchandising Capabilities team was uniquely positioned to see the total value chain and orient to a critical path by setting strategy and allocating space. They did so by pivoting to daily action meetings in which they reviewed progress and identified roadblocks and the correct people to make cross-enterprise decisions. Luke Rettig refers to this as “standup at a scale,” in which business owners from across the value chain come together in decision-making.
During these daily action meetings, the team considered how to protect field team members, shifted decision-making into what was best for guests and those team members, and started looking at metrics that weren’t quarterly, such as longer term win-wins with vendor partnerships and looking ahead to two-year results.
This allowed them to “get rid of the noise” and work collaboratively with trust in leadership and each other while also breaking down silos. They were able to save significantly on team member labor in the early days of the pandemic by pausing a large number of clearance programs and pausing and reconfiguring the introduction of newness into the stores that ordinarily occurred with every seasonal change—decisions that were made in these daily action meetings and fueled a broader enterprise mindset.
More recently, Target has rolled out a refreshed culture framework, which reminds the entire organization of what it takes to reinvest in the business and each other as they “care, grow, and win together.” This framework promotes connection, inclusivity, and drive, and encourages team members to “choose progress over perfection.”
Moving forward, Target sees room to grow in maturing product thinking, investing in technology talent to help drive development, and continuing to emphasize the principles of DevOps in the organization.