330: Overcoming Uncontrollable Variation

Retail is full of natural variations—some predictable, some unexpected. Yet too often, businesses rely on averages, smoothing out the detail and missing critical insights. Successful retailers don’t just react to change; they anticipate it, refine their operating models and processes, and create systems that allow for fast, flexible decision-making. In this episode, we explore how to spot and manage variations in demand, operations, and customer behaviour—and why those who understand these patterns gain a competitive edge. If you want to take more control over your retail performance and make smarter, faster decisions, this episode is for you.

Listen to this podcast episode to hear:

• Why averaging data is a dangerous approach to variation and how it hides the critical insights.
• Why systems thinking can help understand retail variation.
• How delaying decision points can help retailers optimise resources and respond faster.
• Approaches for making operating models and making processes more flexible to variation and noise.

 

 

Summary: understanding variation and responding rapidly

In the world of retail, natural variations like weather can significantly impact performance, yet some retailers thrive while others falter under the same conditions. Successful retailers anticipate these variations, using data and statistics to align their operating models accordingly. They recognise and understand the patterns in consumer sentiment, store formats, and geographic influences, adjusting their strategies to minimise volatility.

To overcome this volatility, there are two important stages:

1. Recognising and understanding the variation

This involves identifying the inherent unpredictability and statistical patterns present in different aspects of a business or industry. In retail, for example, it is crucial to acknowledge that factors like customer sentiment, process speed, and conversion rates exhibit variability that cannot be fully controlled.

We must recognise that successful businesses don’t just get lucky. They predict and anticipate the variations present in the market by analysing data patterns and executing operations accordingly. A common pitfall is relying too heavily on averages, which can obscure important details and outliers within the data. Instead, businesses should focus on the nuances present within data distributions to uncover valuable insights and opportunities for improvement. By understanding the statistical nature of variation, companies can better prepare and design strategies that accommodate fluctuations rather than being caught off guard by them.

2. Reacting quickly and appropriately

Once variation is recognised, the next step is to determine how to respond effectively. This involves designing an operating model capable of quickly adapting to potential outcomes caused by these variations. Businesses must consider the impacts of different variations and develop a responsive strategy that allows for quick decision-making. For instance, understanding the weather’s impact on sales can help retailers adjust their inventory and staffing levels accordingly.

The key is to detect future variations early and accelerate processes to minimize the impact of variations that are beyond control. By focusing on the most impactful variations, companies can optimise their operations and enhance their ability to navigate unpredictability, ultimately improving overall performance and customer satisfaction.

By recognising which variations have the most significant impact and implementing processes to detect and respond swiftly, retailers can effectively navigate the complexities of their environment. Understanding and managing variation thus becomes a critical skill for achieving success in the increasingly competitive retail landscape.

Connecting with Oliver to continue the conversation

If you want to discuss the variation in and around your operating model or business, reach out to Oliver. You can connect with Oliver Banks on LinkedIn, or email via oliver.banks@obandco.uk.

Additional episodes to listen to next

Experienced retail leader Ian Shepherd joined in episode 120: Understanding Data and Data Science In Retail, where he discussed his book, The Average Is Always Wrong.

Another element to help overcome the variation in retail is by building in slack by design. Jeff Roberts joins us in episode 180: Building Slack Into Your Operating Model, and discusses how to set up processes and procedures to have the bandwidth to cope with noise in the day-to-day operations.