Transcript

Rapid Response: Playing offense in adversity, w/Target’s Brian Cornell

The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure. And yet When it comes to their own wealth. Most are running a disconnected stack. A tax accountant here and a state attorney there, a wealth manager who doesn't talk to either one of them.

Creative planning was built to fix exactly that. One integrated team of tax professionals, state planners, investment specialists, all coordinated by a dedicated wealth manager who sees your full financial picture and keeps every piece working together. Proactive tax efficiency, state strategy, investments all under one roof. Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale.

Global hiring is such a headache when you're building fast, but companies like Eleven Labs are scaling effortlessly with deal. They quadrupled their workforce in twenty twenty five. Without hiring an HR team. Build your global team with deal. Visit deal.com slash MOS and start expanding your business today. That's D E L

dot com. Slash M O S. Hey, folks, Jeff Berman here. I am thrilled to share some of the new names who will be joining us at this year's Masters of Scale summit. This may be our biggest stage yet. Reed Hastings, Meredith Whitaker, Van Jones, Amjad Masad, and more.

Will be there with us October 20th through 22nd in San Francisco. If you're building something great, or you want to build something great, We want you there with us too. Join us at masters of scale dot com slash apply twenty six. That's mastersofscot com slash apply. twenty six.

In an environment like this Flexibility and adaptability and agility. is critically important. And even as a hundred billion dollar growing company.

We're gonna make sure that we continue to Focus on agility in our systems. We just started to see some significant changes in consumer behavior. And

We recognize that from an inventory standpoint. Lot of those pandemic winners. We're now slowing down. I remember waking up really early that morning. preparing to meet with my leadership team.

Seven eight hours later when we walked out of a conference room We were all aligned. And We said а we better do the right thing for our guest. the right thing for our brand, the right thing for our team.

It takes some action to clear up that inventory. We moved forward and made the announcement. That's Brian Cornell, CEO of Mega Retailer Target. As shopping habits have zigged and zagg over the past two years. Retailers have been forced to adapt over and over, managing bonky supply chains and reacting to new dynamics in store and online.

I'm Bob Safian. Former editor of Fast Company, founder of the Flux Group, and host of Masters of Scale Rapid Response. I wanted to talk to Brian because when inventory issues hit the industry this spring, he reacted more quickly and aggressively than most, choosing to clear stores of underperforming items immediately and restructure future orders despite the hit to earnings in a bid to better reposition target for later in the year. Ryan was on rapid response in the early days of the pandemic, when he talked about the struggle of operating without a playbook. That playbookless environment persists, Bryant says, and with it an imperative to keep playing offense, as he puts it, even in moments of adversity.

None of us is a crystal ball, he says, but we can lean into those areas where we have more clarity. Quoting the legendary UCLA basketball coach John Wooden, Brian says, You've got to be quick. But you don't want to hurry. I'm Bob Safian. I'm here with Brian Cornell, the CEO of

Target. Brian, thanks for joining us. Bob, it's great to be with you again. So you were one of the very first guests on this show back in the spring of twenty twenty, in the early pandemic days. Right. You talked about the uncertainty and the fear and dealing with this Dramatic shift in environment.

Helping your team and your customers cope. Through that period to now, you've guided Target through amazing growth. Thirty billion dollars bigger in sales. It's been quite a journey. And then recently you faced another shift. Just a few weeks back you announced what you called a rapid response.

Which you said was among the most difficult decisions in your years as CEO. I'm eager really to dig into that and hear about it. How it came about. What made it so hard. So Target had run into

A rough patch that was unexpected When did this shift this latest situation become apparent to you. Well

Bob, it's been Oh, over two years since you and I Been together. And you talked about Adding thirty billion dollars of growth.

And I think it all came down to Our team's being incredibly focused on taking care of our guests. The fact that we've continued to invest in our team and recognize how important Their role has been. And

We spent about Two years chasing inventory. Yeah, we saw unprecedented growth. And All of a sudden

You know, as we go into twenty twenty two. We did start to see a change in the way the consumer was behaving. During the pandemic We were selling lots of electronics. People were working from home.

Putting T V in every room because That was where they were working, they were educating their kids, they were living in their homes. And all of a sudden we notice consumers are back out to movie theaters. Yeah, when going out to watch Top Gun.

During the pandemic. We were building as many bikes as we could. Because people were Riding bikes and enjoying their neighborhoods. And all of a sudden we started to see a shift towards back to travel.

Our luggage business was up Over fifty percent. People were living differently. So we just started to see some significant changes in Consumer behavior.

And We recognize that from an inventory standpoint Lot of those pandemic winners We're now slowing down, and we had lots of big bulky inventory in our system. We made a very difficult decision to

Address the inventory situation. And we did it on behalf of our guests to make sure we protect the guest experience. We also did it. On behalf of our team.

Because we recognize that Their time was being Placed against some unproductive. Initiatives. And we said all right, we better do the right thing for our guests.

the right thing for our brand, the right thing for our team. And take some action to clear up that inventory. So we were one of the first to make that announcement. Others have subsequently followed. But we wanted to be proactive. Clear up the inventory issues.

As quickly as we could. You know, our team rallied around that decision and I'm really glad that we made the decision as quickly as we did. Get back on our game and playing offense as we go into these important holiday seasons. Now as you describe this, it sounds

Very logical. And so a little bit in contrast with the idea that it was a really tough decision, so can you slow it down for me a little bit? Like what made it hard in that moment? We spent a lot of time as a leadership team looking at the overall retail industry, looking at consumer trends. And In between our earnings call and when we made this announcement in June a few weeks later.

You know, we had the benefit of watching most of our peers report their first quarter results. And there was a common theme. There was Lots of additional inventory in retail.

We looked at a lot of data from the U.S. N P D and IRI and assess the situation. And recognized that there were a couple of different approaches we had taken. We could try to

Manage through this for Two, three, or four quarters. Or We can take a bold step. And say all right, we're gonna address this up front.

We're gonna put it behind us and we're gonna get back on our front foot. So Well it was certainly a logical decision. We also recognize we're going to make a significant financial investment in

promotions and clearance and moving through that inventory. And it was gonna impact our results in Q two. But as opposed to letting it Impact our business for Two, three or four quarters, we said let's

Own up to it. Let's Take accountability. Let's take the right actions. And make sure we put this behind us.

I personally spent a lot of time Making sure My board. was supportive and aligned with that decision. Once we had full alignment across our team

We moved forward and made the announcement. So you see that there's pain that's gonna be taken and you're like Well I guess we just Better take it all at once. And nobody wants to take all that pain all at once, I guess, right?'Cause no one wants to really have it be real in that way.

That was the the option that was in front of us. And I'm really glad we went first. And got to the front of the line. And we're now gonna set ourselves up to really play offense in the third and fourth quarter. But importantly

We did the right thing for the target brand. For our guests and those thirty million guests who shop our stores. Every week. And we did the right thing for four hundred thousand team members. I've heard nothing but thanks from our organization since we made that decision.

You've talked about using this crisis you says as a way to play offense. Playing offense instead. Are you always looking for ways to turn bad news into good news? As we think about our business and from a leadership team. We're always trying to make sure we're balancing what's right in the short term. With what's right long term for the brand.

And for our business. So we've got a fairly simple framework. We always start by thinking about all right. What's right for our guest. What's right for our team.

How do we make sure we're doing the right thing in each community that we serve? And ultimately That's gonna be the right thing long term. For our business and our shareholders. I often think about

Folks like you who are running these. Big enterprises. There are always good things going on, and there always trouble spots going on. How do you know how to allocate your time or your energy between expanding on the good stuff? versus, you know, addressing those fires that are burning.

I think it's always gonna be a a balance. We've had to celebrate the things that are working. But own up and address some of the challenges that are in front of us. There's always opportunities to improve. Вона ласка каплів єр.

People have used the term unprecedented. We don't have a playbook. For how to operate in an environment where you have the confluence of Covid

Fourty year high inflation. Gas prices that are surging. The other challenges that we're all dealing with each and every day. So we've gotta be thoughtful, we've gotta make sure we're doing the right thing that Is consistent with our company purpose.

With our values and our culture. And I would tell you the one thing that stands out for me Over the last couple of years. has been the importance of culture. When we talk about target's culture

We talk about a culture of care. And growth and winning together. And I don't think our culture has ever been more important than it is right now. I think I've learned coming out of the last couple of years. That

While strategy is always gonna be important. And you better have the right operating tactics in place. What has really driven our performance and success. Has been the target culture. Given all these waves of challenges that you go through

All of us have some fatigue, right? It's sort of natural to have some fatigue. What about you personally? Like you you've mentioned in the past sort of energy management. How do you approach that for yourself? Was your energy tested in this particular decision? I am a big believer in the importance of energy management.

I've been somewhat of a sell it for the corporate athlete program. And I think For

Leaders today. You've gotta be finding that right balance. And how do you recharge? So the importance of nutrition

Of sleep. of екрсай Things that can allow me and other leaders To bring our best to work each and every day. I continue to make sure I'm in the gym and I'm working out.

I'm getting some sleep, I'm eating well. And I want to make sure I've got the energy and the focus. to continue to lead the organization. I think We've learned during the pandemic.

The importance of energy management. I think we've also Recognize how important it is. to lean in and address Some of the mental wellness challenges that people have been facing.

And whether it's a byproduct of that isolation'cause you've been at home. Or the concerns you've had because of Covid. The challenges that so many family's have faced. As a company, we've really leaned into mental wellness and providing the support our team members need.

During a time of crisis. That combined with Good energy management. And a strong culture. Those have been important.

Lessons learned for us. Throughout the pandemic. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity.

When to diversify, how to manage tax risk, and how to protect what you've spent years building. Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale. Humans will never be more intelligent than AI. There can be two types of companies.

Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives.

Find pioneers of AI wherever you tune in. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there.

Before the break, we heard Target CEO Brian Cornell explain why he made the challenging decision to clear Target's extra inventory in one big sweep. Дитте ка In a bid to play offense going forward. Now he talks about how to deal with skepticism from naysayers, why courageous decisions need to be quick but not hurried, and the payoff from investing in your team. Plus

He shares lessons about agility, focus. And the long term dividends that he believes have been earned by brands that did the right thing during the pandemic. You sound like you don't mind the challenges. I mean, you'd rather maybe some of them not be there, obviously, but Having challenges is Part of the motivation for you.

It is and Retail is a challenging business. Now we're one of the largest retailers in America. Last year Delivered over a hundred billion dollars in sales.

And we operate almost two thousand stores. We've got a really large digital business with about twenty percent of our total revenue. We compete with so many others because У перво бизнес, ви на home business. We sell lots of household essentials.

We're a big toy retailer. Obviously food and beverage is a big part of what we do. Or a major beauty retailer. So You we have a very complex business.

We are are the second largest net importer in America. We've got a large supply chain organization. So Retail's a complex business. Ours is extremely complex, but I enjoy that challenge.

As a leader. You know, you made this decision recently, met With some Skepticism by some people always media investors, people ask questions. How does

Skepticism and knowing you're gonna be second guest. Impact your process. Or how you communicate. Or do you just like Except like that's always gonna happen. In my

Eight years. At Target. We've had to make some tough decisions in the past. And We're always

Thoughtful about it. our decisions. We always spend a lot of time making sure we're validating those big decisions. We exited the Canadian market um back in twenty fifteen. That was a tough decision to make, but it was the right thing for our business. In twenty seventeen

we talked to the financial community about a very different plan. Many of our peers at that point were Closing stores. And Exiting the market.

And we said In fact, we're gonna take a very different approach. We're gonna put billions of dollars to work to Remodel our stores. And provide a more inspiring in store environment.

We're gonna build new stores. And urban centers and on college campuses. Back then people were envisioning most of retail Moving online.

We said we're gonna take a different path. And We're gonna put stores at the center of our strategy. And use our stores as fulfillment hubs. And build drive up lanes.

In our parking lot, and use our stores as the center of our e commerce platform. That was not well received when I stood on stage in New York. Back in twenty seventeen.

But We knew it was the right thing for our brand, was the right thing for our business. So every once in a while when you're making a big decision You gotta kinda turn down the volume. And stay focused.

Every time we face the major decision we come together as a leadership team And We scenario plan, we look at different alternatives. We make sure we've validated our decisions with great financial rigor.

And guest feedback. And then we move forward and focus on execution. That model has served us well. For years now. I like to use a John Wooden quote.

You gotta be quick, but you don't wanna have to hurry. I think we make sure that when we Reach the decision, we move forward. But it's based on hours and hours and weeks and weeks of research. In cases of our recent twenty seventeen

So Well we didn't Receive a round of applause initially. Over time people realized this was the right thing strategically for our company.

And I think we've been recognized for making those bold and courageous decisions. This latest shift you made happened much faster. You didn't have quite as much time in the planning. Is part of the possible because Your organization has become more

Adaptable, you know, faster because you've had to through the last two years. I think we become much more agile Much more flexible. Adaptable.

And that Served us well when we recognize We had to take A very decisive action. With our inventory.

Again. Not an easy decision. And I remember waking up really early that morning. preparing to meet with my leadership team. But

Seven eight hours later, when we walked out of a conference room We were all aligned that this was the right thing to do. And I spent um quite a bit of time over the next couple of days. Talking individually to every one of our board members to make sure

They understood the direction. And the proposal we're gonna bring forward. Are there new lessons that you've learned through these last two years or maybe old lessons that have been reinforced. That you'd

highlight to other leaders. I think we've recognized that while In many cases, we all focus on kind of long term strategic planning. In an environment like this flexibility and adaptability and agility.

is critically important. And even as a hundred billion dollar growing company. We're gonna make sure that we continue to Focus on agility in our system and flexibility and make sure we can adapt to a changing environment.

We'll continue to make sure we stay focused on talent development. One of the decisions we made early on in the pandemic While many were talking about, you know Shutting down all training programs and development programs.

We leaned into it. And said it's gonna be more important than ever. That we're continuing to invest in our teams. I go back to the decision we made in twenty seventeen. One of the decisions was we were committing

to a starting minimum wage of fifteen dollars. Well, we built on that. Over the years. And We've announced recently that

No, in many markets That starting wage could be as much as twenty four dollars. We've invested in benefits. During this pandemic period. We made an announcement a few months back.

that we're putting together a debt free educational program. To give. thousands and thousands of team members a chance to go back to school. and work on degrees. And we've had over fifty thousand team members take advantage of that. So

Making sure we lead by Setting great examples. Taking care of our teams. Making the right investments. No, those are things we'll continue to do for years to come.

I'm curious, there's an expression we sometimes use at masters of scale, particularly for startups, where we say you need to let some fires burn, right? You have limited resources, so you have to prioritize. Once you're at scale, does that continue as long as it feels like it's a controlled burn? Or or do you feel like you have to address sort of every red flag immediately as a matter of culture or safety or brand? Bob I think As a scale company. Focus is critically important.

We know we can't do everything. So One of the things that Our leadership team does exceptionally well. Is

Set clear priorities. And decide what we're gonna lean into. And also what we're going to say, you know what? We'll pause. Or stop

Or push that down the agenda for another year. So priorisation I think is critically important whether you're a startup Or up. Hundred and six billion dollar growth company.

So What's at stake for Target right now? As I sit here today, I've never been more excited about the future of this company. And the momentum that we built throughout the pandemic. And the way we've just deepened our relationship

with millions and millions of Americans during the pandemic. We made a decision early on. I'll go back to When You and I last Smoke.

We said at the start of the pandemic If we're gonna serve America We gotta start by taking care of our team. And invest in safety. And we invested

Over a billion dollars in the health and wellness of our team. Making sure that They were safe. And Those investments I think are gonna pay dividends for years because we created

A safe environment for our team to work in. And a safe environment for our guests to shop in. And That commitment to safety throughout the pandemic. Макішор да вияс по стандард.

It allowed us to deepen The relationship we have with guests. Many were Staying home to stay safe. But they were very comfortable coming to our stores.

Because we had Very Clear focus on Cleaning and sanitation. Or

They fell in love with our drive up service. Where they could pull in the parking lot and just pop their trunk. in their trunk and let them drive away. At the start of the pandemic.

We talked and you talked a very man about sort of the different phases of crisis. And how you react differently at different phases. Where we are now Are you thinking in phases about what's going forward? We had so much change that it's like I'm planning a little less and reacting a little more. Sitting here today.

We don't have that crystal ball. I can't tell you. where the economy's gonna be in six months or twelve months. But I can tell you You know, we're gonna plan

To win and grow. And We'll lean into categories where we know we've got greater certainty. We'll continue to lean into food and beverage and household essentials in our beauty category. We'll probably be

More Cautious in some of the discretionary spaces. Like apparel in home. But we also know That

No matter what happens from an economic standpoint We know Our consumer and our guest. They're gonna celebrate seasons. They're gonna look forward to

Their kids going back to school and back to college. They're looking forward to Halloween and being out there and watching their kids. out there trick or treating. And we know they're gonna celebrate the holiday season. So

We'll lean into areas where we've got greater clarity and certainty. We'll be more cautious in other spaces. But we'll continue to make sure we're doing the right thing for our guests. The right thing for our team. And making sure we're focused on

Being a growth company. And continue to take market share by delighting The guests that we serve. With the right assortment and the right services. throughout the balance of this year and into twenty twenty three.

But we'll have to be agile and we'll have to be adaptable and we'll have to flex based on the Changing environment. Well, Brian, I always enjoy talking with you and and hearing how you think about these things. Bob, we've covered a lot. And um I always enjoy these conversations.

I appreciate the time and I look forward to seeing you again. Thank you so much for doing this. Uh really appreciate it. Take care now. Masters of Scale Rapid Response is a wait what original. It's hosted by me, Bob Safian, Masters of Scales editor at large.

Masters of Scale host is Reed Hoffman. Our executive producers are June Cohen, Darren Triff, and Jordan McLeod. Our head of content and production is Lori Hoffman. Our producer is Marie McCoy Thompson. Scripts by Alex Morris and Tucker Legers. Our music director is Ryan Holiday, original music and sound design by Eduardo Rivera, audio editing by Keith J. Nelson, Steven Davies, Andrew Naub, and Mike Gallagher.

Mixing and mastering by Aaron Bastanelli. Special thanks to Adam Skuse, Katherine Clark Gray, Emily McManus, Adam Heiner, Colin Howard, Tim Cronin, Kelsey Capitano, Samia Puta, Anna Pizzino, Sarah Tartar, Leah Sarah Medis. Charlie Menessis, Chinemias Iquena, Aria Finger, and Saida Sapieva. Visit masters of scale.com slash rapid response to find the transcript for this episode, and please subscribe to our email newsletter. Become a member of Masters of Scale to get access to a year's worth of courses and content.

on the Masters of Scale courses app Find out more at masters of scale dot com slash membership.