Saks Fifth Avenue: Project Evolution

Abstract

This case is used in Darden's first-year strategy course and is appropriate for MBA, Executive MBA, GEMBA, and executive education programs. The head of strategy for a well-known fashion retailer, Saks Fifth Avenue, and her general management colleagues face critical decisions required to address evolving buying patterns as online retailing becomes an important part of consumer behavior. How should a successful firm organize itself when market shifts require existing and emerging processes to coexist in one organizational structure?

Excerpt

UVA-S-0244

Rev. Jul. 14, 2020

Saks Fifth Avenue: Project Evolution

The Project Evolution status meeting couldn't have been more troubling. As an experienced general merchandise manager (GMM) at Saks Fifth Avenue (Saks), Cody Kondo was used to dealing with conflicting market information and crafting a path forward that didn't require clear signals. It was March 2013, and the update meeting with the external consultants hired to review the firm's channel strategy had provided some promising results from the prior year's pilot in Women's Footwear. But the consultants' broader findings left Kondo concerned about how the pilot could be implemented and scaled for his whole division, let alone all of Saks. He wondered what his partner in shepherding the Project Evolution initiative, Michael Burgess, was thinking. Burgess was an experienced internet retailer who had only recently joined the company to head up Saks Direct (the company's online channel). How would Burgess and Kondo, together with the corporate strategy division, lead the omni-channel implementation—the merging of Saks Fifth Avenue stores and Saks Direct into one business? See Exhibit 1 for graphical representation of the internal vision and strategy.

At least one of the challenges was clarity about the vision within the organization. Saks' CEO, Steve Sadove, believed in driving consensus. He was convinced that the right strategy, organization, and implementation speed for omni-channel (see Exhibit 1—“Saks 2015 Omni-Channel Vision”) would emerge at the completion of the footwear pilot. He believed that reasonable executives would agree that collaboration was needed across Saks' functions and disparate business units would then fall into line accordingly. That, Sadove felt, was the Saks way. Sadove placed Project Evolution stewardship in the hands of Shirley Romig—the VP of corporate strategy—and Ashley Wiland, director of corporate strategy. Overall sponsorship for Project Evolution was put under the care of two experienced general managers: Burgess and Kondo. Burgess joined Saks in 2012 from the consumer division of FTD Companies, Inc., where he led all North American merchandising and marketing and was responsible for the FTD.com profit and loss statement. Burgess's business unit at FTD was a highly profitable division boasting more than $ 300 million in annual revenues. Kondo, his unlikely partner, was a pedigreed retailer with past experience at Ralph Lauren, Nordstrom, and now the GMM for the accessories categories (including fashion and fine jewelry, watches, women's shoes, and handbags and soft accessories) for all Saks Fifth Avenue stores. He had also founded his own internet company. Kondo was well known to Saks rank and file, having been with the company since 2000 and having worked in the menswear division for several years. Kondo had the legitimacy of being a retailer with “fashion in the veins,” who had also d

Keywords: capabilities, strategic change, organization structure, change management, process change, online strategy, consumer behavior, retailing, fashion