company profile
adidas - Levelling the playing field
adidas Launches Its LUMI Data-Mining Tool, Not Only as a Loss Saver, But as a Game Changer and Revenue Generator
So much of the modern lexicon of business communication relates to sporting or athletic prowess. Business is all about achievement, playing by the rules, and sportsmanlike behaviour, so in boardrooms all over the world, executives aspire to be the best and make sure that as their teams compete on the global stage, that they do so fairly as part of their corporate social responsibility mantra.
Conversely, the language of unfair or bad business behaviour also uses sporting analogies. We have “moved the goal posts,” “are not playing a straight bat,” or we have been “thrown a curve ball” on the often unlevel playing field that is modern commerce. This is all because business and sport have shared goals and objectives. They are rules-driven and often highly regulated. On the other hand, those who maliciously or unconsciously bend or break the rules enjoy the unregulated freedom of the unlevel playing field because it affords them anonymity and denies the opportunity of ever getting caught and receiving the ultimate “red card.”
One of the biggest sports brands in the world, adidas, has recently introduced new, bespoke data-mining technology to enable it to stay ahead of the game on managing both malicious and non-malicious staff behaviour as part of a strategy to tackle shrink across its vast retail estate. The LUMI solution it has introduced and branded is the culmination of a year-long search for a data-mining tool that is not only in a league of its own, but is also a significant game changer, according to Stuart Hughes, senior director of profit protection.
The adidas Journey
The iconic three stripes of adidas have adorned the feet and bodies of athletes, gymnasts, footballers, and tennis stars for ninety years. From the famous gold medal of Jesse Owen at the Berlin Olympics in 1936 to the poise and elegance of Romanian gymnast Nadia Comaneci receiving a perfect 10 in the 1976 Montreal games, all were powered by the vision of a humble shoemaker Adolf (Adi) Dassler who started the business in Bavaria in 1924.
Other adidas brand ambassadors read like a who’s who of sporting achievement. Dick Fosbury who developed the revolutionary “Fosbury flop” high jump took the sport to new heights wearing the adidas brand. And tennis stars Rod Laver, Stan Smith, and Ilie Nastaseall found Wimbledon Centre Court and Grand Slam fame wearing the famous sneakers.
Football is an international language and lies at the heart of the adidas brand. Indeed, it was football that truly established the three-stripes as an internationally-known symbol after Adi Dassler introduced the first screw-in studs, which catapulted his native German side to victory against an unbeatable Hungarian side in the World Cup final of 1954. Soon after Germany’s pride was restored on the football pitch and the world wanted to know more about adidas’s winning formula for what is still known as “The Miracle in Bern.”
Consequently, because of this innovation, many of Europe’s national teams are still kitted out top-to-toe in the famous three stripes, and it is still the main sponsor to international brand ambassadors, including style guru David Beckham, one of the beautiful games’ most enduring mentors and icons.
Back to Basics
But going back to basics, the three stripes remain synonymous with the three guiding and founding principles of adidas—to design the best equipment for the sport in question, to make the products durable, and to ensure that they protect the athlete from harm.
Interestingly, as the international sports marque has evolved into a retailer with 2,500 stores around the world, those principles could equally apply to the way it conducts business and protects its intellectual property to retain its position at the top table of the most famous global brands.
Staying ahead of the game as a High Street competitor rather than a spectator, adidas has learned that retail is a completely different game to being an inspirational and aspirational brand sold by other sports and fashion shops. It understands the rules of engagement in what is a real-estate game, a supply-chain scrum, an operational tour de force, as well as the potential HR and profit protection challenges arising from rapid expansion.
Being one of the most sought-after brands on the planet means that alongside the risk of industrial-scale counterfeiting and unavailable-for-sale stock, there is also the real prospect of process failure. When merchandise goes missing, it is easy to assume that it is the work of shoplifters, but, as many retailers that adopt the “Total Loss” model understand, unidentified shrink is just as likely to be linked to internal team issues, such as process failure or staff dishonesty. Team talks and training have an impact upon process issues, but internal fraud by staff who bend the rules, is the equivalent of learning that your star striker has suddenly started playing for the other side or scoring own goals.
With thousands of official adidas stores and franchise operations, the paper-based checks and store visits to identify anomalies have in the past been challenging for the global LP team headed up by Hughes, who recognised it needed to up its game.
“There was simply no visibility with the standard business intelligence tools we had,” he said. “We had no ability to automatically search for exceptions, and our job involved lots of manual work to analyse the data.”
Like many companies, before they set out on a data-mining journey, the business found that the loss landscape was not a level playing field, and successes were more down to luck than the result of basing investigations on business intelligence.
Measuring and Managing Loss
adidas felt that their lack of a solid data-mining technology solution was a vulnerable spot in their line of defence. All heads of LP know and understand the adage, “If you cannot measure your loss, you cannot manage it.” In the world of global retail, anecdotal evidence or guestimates were not enough. The team needed hard facts to tackle the so-called “unknown knowns.”
“We needed an intelligence-led solution that enabled us to base investigations on hard facts,” said senior manager investigative operations Ken Bohnert, who along with Tamara Boon, profit protection manager for process and communications, were instrumental in bringing LUMI to life after identifying vendor partner Micros.
Partnership Approach
Like all investments at adidas, finding the right strategic partner was a structured and considered approach. “We contacted a number of data-mining solutions providers and received information back to enable us to commence a scoring process that enabled us to draw up a shortlist of five vendors who would work with our IT and retail operations teams,” said Bohnert.
Each of the hopeful companies were then set a challenge as adidas sent them six months worth of EPOS data from a small sample of stores. This allowed them to navigate their solutions around the data before coming back to the business with their findings. This further fine-tuned the scoring system and eventually, a clear winner, Micros, was identified because its technology had successfully identified multiple areas of risk in the adidas estate.
The next stage was for Micros to work with adidas to scope the project, which had to include global reach and roll-out and an exhaustive support and training programme.
The Micros Store21 solution was already in use and adidas had already been working with Micros with its XBR solution, primarily in the US, so there was history and a good track record in terms of the successful candidates.
Micros XBRi Ingenium—latterly to be branded internally as LUMI—is an intuitive and intelligent global analytical reporting tool that quickly identifies suspicious trends, transactions, and other data anomalies that has the added benefit of being simple to use. Its forensic analysis helps drive more informed and timely decisions based upon data-driven facts rather than opinions. Using exception reporting, the POS irregularities identified are managed from inception to resolution and details can be extracted in seconds rather than hours.
Because it is an intuitive tool, the marketing material informs the prospective customer that “the technology’s reporting capability will answer most of your questions before you even ask!” This presented a winning combination for adidas, but the deal clincher was the technology’s return on investment (ROI), as most retailers using it had seen payback in less than one year, some as early as three months. With adidas, the ROI was very fast.
“The technology identified a substantial case in its proof-of-concept stage before we even turned it on in December last year. This meant that it gave us almost immediate return on investment. This was the wow factor that we were looking for,” said Hughes.
The technology is being rolled-out in phases across the 2,500 stores with the US and Europe forming part of phase one. The second tranche will take in the 900 stores that sit in Latin America and the emerging markets, including South Africa, Egypt, Lebanon, Jordon, Israel, Bulgaria, Romania and Dubai, before it extends into Asia and the Chinese market.
2015 will see the roll-out hit another 900 stores across Russia and Ukraine by which time it is expected to have been delivering hundreds of thousands of euros worth of savings back to the business from the first phase locations it has been operating in across the globe.
As a central function it could have happily remained a fairly anonymous tool, albeit a powerful behind-the-scenes enforcer of good behaviour. But the decision was taken to disclose its roll-out to staff, partly as a preventative measure to discourage bad behaviours and partly because of data protection and compliance requirements.
The opportunity was therefore identified to do what adidas does best—develop it as a powerful and instantly recognisable brand that both discourages dishonest behaviour and highlights its formidable forensic capabilities.
Like a new pair of football boots or sportswear item, a branding agency was engaged to come up with a visual image and powerful name that best described and captured the essence of XBRi Ingenium when presented to staff and other stakeholders. It had to be instantly recognisable in whichever country and language it was seen in, so a short descriptor was arrived at—LUMI. The profit protection and brand teams had run through several international language filters to make sure that it did not have a negative meaning in another tongue.
“So many catchy brand names work in specific countries, but mean something different elsewhere; they simply do not travel. It almost had to transcend language,” said Tamara Boon. “LUMI sounds like a shortened version of ‘luminous’ or infers the shining of a light in the dark and spotlighting fraud and error.”
Shaped rather like the symbol used in the film Transformers, the image has a futuristic protective shape. As Boon explained, “It is also presented like a shield, so it looks the business in terms of providing protection and what adidas is all about in terms of being ‘cool.’ It is a strong image, but not aggressive, which communicates intelligence.”
Hughes also wanted to make it clear that this was not simply an exercise in identifying the bad guys. “This is not about shoplifting and catching external thieves,” he explained. “In common with most retailers, the bulk of our challenges are internal, so we had to get the messaging right. It is about dishonest staff, but the non-malicious, the process failure are at least as significant, if not more so, as they are something we are in control of. From that perspective, it is great internal PR as well. It is also about focusing a finite resource to deliver the maximum return in the territories that we cover.”
As LUMI rolls-out across the world, there are challenges and opportunities for the technology. The challenges are obvious—there are territories where retail is less sophisticated than other parts of the world and capturing the data may present some interesting challenges. The opportunities on the other hand are exciting for Hughes and his team as he is also considering the 9,000-plus adidas franchise stores worldwide, where the team could add value and potentially deliver a revenue stream back to the business.
“There are small businesses out there that could benefit from the expertise here, and the profit protection team could one day move from a cost centre to a profit centre as we sell the capabilities of LUMI and the profit protection function to save them and the broader business hundreds of thousands of euros,” said Hughes.
It is so much more than loss or crime; ultimately it is about on-shelf availability of stock and satisfying the consumer at all times.
Like in the cases of Jesse Owen and Nadia Comaneci, adidas seems once again to have struck gold in terms of an instantly recognisable branded solution that has fast-tracked its way into the psyche of the thousands of employees. They now understand LUMI’s strong-arm proposition and their role as retail associates in supporting global compliance.
adidas has enjoyed almost a century of unparalleled sporting prowess, and it looks forward to the next 100 years of innovation and bringing on the athletes and sports stars of tomorrow. It also has its eyes on the prize of losing less and selling more merchandise through the global adoption and roll-out of LUMI and the true levelling of the playing field.
Bio:
Stuart Hughes is senior director of profit protection for adidas where he leads a team of experts in the fields of investigation, health and safety, business continuity, event security, and loss prevention. The team is responsible for 2,500 global retail stores, as well as major global sporting events, corporate investigations, and health and safety. Hughes has been responsible for developing and establishing the function as trusted internal independent consultants, providing a new source of competitive advantage in risk management, and a key component in “Winning the consumer,” enabling true implementation of a “sell more, lose less” culture.
Hughes holds a PGd in security and risk management and is a qualified CPP. He is an active member of the Security Institute, ECR Shrinkage Committee, CSO Round Table, and ASIS International. Starting his career aged 19, he subsequently held roles at store, regional, national, European, EMEA, and global levels. Joining the adidas Group in 2004, Hughes was appointed global director in 2010.
