Finding the courage to embrace risk
Joe Magnacca, CEO of Massage Envy
In the legendary words of the late, great radio broadcaster Paul Harvey, “And now, the rest of the story.”
(Click here to view the complete Future Leaders Summit report.)
Retail visionary Joe Magnacca, currently CEO of leading massage franchise operation Massage Envy, joined the inaugural Future Leaders Summit, jointly produced by Drug Store News and Mack Elevation Forum, to talk about a subject he knows a lot about — having the courage to take risk.
Indeed, Magnacca’s rather impressive body of work — from 17 years spent at Loblaws to online startup Grocery Gateway, to Shoppers Drug, and then onto the United States, first at Duane Reade and then Walgreens for five years, followed by four tough years at the helm at RadioShack and now leading Massage Envy — has been largely built on embracing risk. In a light, humorous and at times brutally honest discussion, Magnacca explained why he continues to roll the dice and embrace change, outlined his criteria for what defines risk-taking and walked attendees through his own thought processes for some of the biggest decisions he has made over his career.
“To me, risk is all about change. Having the courage to make change in a business, whether it’s an existing business, or a new business or redefining a category — it’s all about change,” Magnacca said.
Being a risk-taker comes down to three key factors, he explained: Having the courage to embrace change; taking that courage to redefine the space you operate in; and in the process of redefining that space, thinking in terms of a revolution rather than an evolution.
But change and taking risk aren’t always so easy to do in the merchant-driven world of retail, Magnacca admitted, where the inclination is to play it safe and to look back to try to replicate past successes rather than look ahead to try to “change the game.”
To help encourage his merchants to “take that second step,” Magnacca challenged his teams at Shoppers, and later at Duane Reade and Walgreens, to look forward to where their businesses were going in the years ahead. “I would use this very simple tactic, and I would encourage you all to view your own businesses this way. I would ask, ‘Where is this category going to be in five years?’”
When you ask a merchant what will happen to their category in five years, you release them from that backward-looking, risk-averse style of thinking, he explained. Once they are focused on the changes that are coming, the discussion shifts to how to get there. “And then I would back that up. So, to do that in five years what needs to happen in three years? And what’s going to happen in three years needs to begin next year, so we have to start on that journey,” he said. “You’ll never start that journey if you don’t know where it is that you’re going.”
Providing a first-hand look at what it means to be a risk-taker and a change agent, Magnacca spoke frankly about one of the most challenging chapters of his career, his decision to leave Walgreens in 2013 — just one week following his promotion to president of the company — to become the CEO of RadioShack.
Looking back on the move, anyone who really knew Magnacca couldn’t have been majorly surprised by the decision, he explained.
“RadioShack, although challenged, had a lot of things going for it,” he said — technology is a fast-growing category, and RadioShack had the potential to harness that growth across its 4,400 U.S.-owned and -operated stores, plus another 1,000 franchised locations. In addition, the company “had an amazing private-brand history,” Magnacca added, a major sweet spot for the career merchant, he confessed.
No doubt, the challenges were significant. For one thing, the company was faced with having to write-off almost 10% of inventory.
Still, despite the challenges — and there were many, from weekly cash meetings to determine things like if the company could afford to buy inventory, make payroll or pay for a promotion, to wrangling with bankers about making critically necessary changes to the business — Magnacca swears he would do it all over again.
A self-proclaimed “merchant first and a marketer second,” the experience at RadioShack forced him out of his comfort zone and made him have to refocus his attention on financials and P&L management. “I don’t regret it,” he said. “Because at the end of the day, what it taught me was that if you don’t take that risk, you’ll never really know what you can achieve.”
Doing well and doing good aren’t mutually exclusive
Altruism and sustainable profits aren’t always concepts you’ll find in the same sentence, but don’t tell that to Dave Simnick.
(Click here to view the complete Future Leaders Summit report.)
Simnick, founder and CEO of SoapBox Soaps, created the company in 2010 to do precisely that — to help people in need around the world while at the same time building a leading CPG brand, and attaching meaningful purpose to a commoditized category — soap.
“The biggest thing we’ve tried to do at SoapBox is change the emotional meaning of something so commoditized as a bar of soap,” Simnick told attendees of the inaugural Future Leaders Summit, jointly presented by Drug Store News and Mack Elevation Forum.
The crucial first step in creating such a business is to distinguish between “cause marketing” and a “purpose-driven” brand. “Cause marketing is an afterthought; purpose is intentional,” he said. Cause marketing is about taking a product that has already existed and “bolting on” a cause to it because the brand needs a new marketing strategy, whereas purpose is “in the DNA of that company,” he said.
As a best-in-class case study of what NOT to do, Simnick shared the example of a 2011 Kentucky Fried Chicken cause-marketing campaign that got blasted on social medial for trying to entice customers to buy a half-gallon fountain soda to help support the Juvenile Diabetes Research Foundation. “There’s a certain irony in trying to raise money for diabetes by potentially giving your customers Type 2 diabetes,” Simnick quipped. “When we look at authenticity and we look at how are we marketing toward millennials, purpose is essential.”
Millennials aside, consumer interest in purpose-driven companies and brands isn’t just a trend or some passing fad, Simnick noted. According to the 2012 Edelman Goodpurpose survey, 76% of consumers around the world believe it’s right for a company to support an important cause while making a profit at the same time. Fifty-three percent rank the social purpose of a company or brand as the No. 1 reason for making a purchase when all other factors, such as price and quality, are equal. In fact, 44% of consumers around the world would be willing to trade up and pay a premium for a brand associated with a strong purpose.
“The point is purpose matters, and after 10 years of research, the data says … you will outperform your competitors 12-fold if you have [a strong] purpose,” noted Future Leaders Summit moderator Dan Mack, managing director of Mack Elevation Forum. Purpose does more than activate your consumer base, it galvanizes your employee base, too. “A purpose mobilizes people in a way that pursuing profits never can; … purpose is bigger; it’s transformative.”
Simnick provided three additional learnings for how to make purposeful marketing work for a brand:
1. Quality matters: Crunching the numbers on a one-for-one, purpose-driven deal — Soap-Box Soaps promises to donate one bar of soap to a community in need for every bar purchased — can be a challenge. But sacrificing quality in an effort to drive more dollars to the bottom line may lead your promotion to bottom out. “The giveback — that purpose — is the cherry on top. That consumer still wants the best thing; that’s the reason they’re buying it,” Simnick said. “The reason she buys us the first time is because of the mission. The reason she continues to buy [us] is because of the efficacy of the product.”
2. Keep the message simple: Another lesson Simnick learned was to keep the offer simple — consumers don’t buy into an offer they can’t understand. “When [consumers are] looking at purpose, cents and percentages don’t make sense to them,” he said. “If someone here told me that they gave 5% of gross to this one charity, that [would be] an amazing financial commitment. The problem is consumers don’t get that. They look at that and think, ‘Where’s the other 95% going?’”
3. Authenticity and transparency seal the deal: Finally, with a smartphone literally at everyone’s fingertips — about 198.9 million consumers in the United States own a smartphone according to the latest comScore figures — verifying the authenticity of a deal has become easier than ever. To prove that SoapBox is delivering on its brand promise, each SoapBox package has a unique tracking code, branded the “Hope Code,” that can pinpoint where in the world the donated bar will be heading. “We have to prove to [the consumer] how they are part of the narrative that we are co-writing,” Simnick explained.
The 10 commandments of effective leadership
Dan Mack, Executive Director, Mack Elevation Forum
There are more than 58,000 books sold on Amazon with the word “leadership” in the title. With so much literature available, why is the concept of leadership so misunderstood?
(Click here to view the complete Future Leaders Summit report.)
In a world where “higher value” normally refers to the shareholder and not the consumer, it’s easy to view the topic of leadership — a topic whose “answer” remains largely unsolved — with skepticism.
The first-ever Future Leaders Summit, co-produced by Mack Elevation Forum and Drug Store News in May, saw the industry speak honestly and openly about leadership with a special group of innovators, transformers and disruptors in the world of consumer brands, retailers and entrepreneurs. What they said matters. Leadership has very little to do with certified techniques and everything to do with individuality, transparency and originality.
The most effective leaders are multipliers who develop other new leaders. They embrace mentorship, and they develop talent diligently. They grow emotional intelligence. They practice deep listening.
The following 10 key takeaways from the event suggest that’s what it’s all about.
1. Story: According to Bill George, Harvard professor and former Medtronic CEO, “leadership is not about traits, it is about your life story.” Leadership is about understanding other’s stories, so you can help them thrive.
As Walmart’s Michelle Gloeckler shared, “Everything I ever learned about leadership, I initially learned as a young waitress.” It’s about serving others.
2. Share of heart: The quality of your overall leadership impact is dependent on your success in earning a high share of heart with your team and practicing deep listening. The ability to stay present with others demonstrates your commitment and allows you the vantage point to call out other people’s unique attributes. Connecting on a heart level creates trust.
3. Emotional intelligence: One’s EQ, or emotional intelligence, matters more than IQ. There is a direct relationship between how you show up and your ability to manage your own emotions and positively influence others. The best leaders are very self-aware and encourage honest assessment.
4. Purpose driven: Leaders that are led by a compelling purpose attract and retain the best talent. SoapBox CEO David Simnick noted that today’s consumer mantra is, “Don’t tell me, show me — and prove to me how much you care.” All of us — both in our professional careers, as well our personal lives — want to be involved with something bigger than ourselves.
5. Courage: Throughout his career, Massage Envy CEO Joe Magnacca has embraced risk. “In the end, we only regret the chances we didn’t take,” Magnacca advised. Be willing to fail and pick yourself up quickly. Or, according to Mark Zuckerberg, “in a world that is changing quickly, the only strategy that is guaranteed to fail is not taking risks.”
6. Diversity of thought: Ideas don’t care where they came from. Leaders who embrace broad diversity outperform teams that are monolithic. Embrace a culture that encourages the discovery of new ideas and recruits diverse-thinking — and acting — associates.
7. Transformational mindset: All of us occasionally struggle with stagnation. Transformational mindset demands that leaders are present, show empathy and give and accept “real-time” feedback. Transformational leaders are hyper-focused on vision and are skilled at recovering from failure.
8. Embrace paradox: There is no blueprint. Leaders must balance casting vision, driving results, developing talent and protecting culture. They must also be able to hold opposing views simultaneously. They are agile learners and swift agents of change.
9. Mentoring: McKesson’s Chris Dimos reminded us that being a mentor is an open invitation for leadership to flourish. The best leaders are capable of mentoring others, and are, themselves, coachable. And the best mentors have mastered non-directive questioning and coaching.
10. What is your why?: What do you stand for and who do you stand with? Fifty-nine percent of Americans say a company’s corporate social responsibility activities impact their purchase decisions. And it certainly influences whether employees choose to join a company. What you stand for as an organization — and as a leader — is as essential as the job description and the potential for long-term growth.
In closing, former Family Dollar chief merchant Jason Reiser — who last month accepted the job as COO of Vitamin Shoppe — offered 10 characteristics of today’s purpose-driven leader, including one rule borrowed from the late great Gen. George Patton: To effectively lead others, you must be comfortable walking behind them.
In this special report, Drug Store News highlights key discussion from the May 24 Future Leaders Summit and examines the best practices a host of leading companies are employing to attract, develop and retain the next generation of great business leaders.