A Tale of Two Philosophies: American Apparel and Halston on the Role of IT

3/29/2013
Contrast American Apparel, which caters to the young, hipster market, with the iconic Halston brand and its decades-old heritage of luxury, and you couldn't find two more different apparel companies. You might say the same when it comes to their cultures of IT.

There is not one correct answer to where IT should sit and the role it should play in the growth and success of an apparel business. That was the clear take-home message after hearing from both Halston's COO Bryan Timm and American Apparel's CIO Stacey Shulman, whose dynamic keynote presentations bookended Apparel's Tech Conference West, which took place March 19 in Los Angeles, and also featured a full day of educational sessions and technology exhibits.

That's not to say there aren't similarities between the two. For both Shulman and Timm, customization is a dirty word, and each would rather reengineer a company's internal processes than make a custom tweak to software. Both executives are also extremely focused on the evolving role of the consumer as a disrupting force to business, and the need for IT to serve her changing expectations. Finally, both Shulman and Timm are advocates of sweeping old and ineffective practices out of the business to make room for systems that are as integrated as possible, relying on one version of real-time data to maximize accuracy, efficiency, innovation — and profit.

But that may be where the similarities end. Because when it comes to the role of IT, for Timm, it's more about supporting the creativity of the Halston brand. His view is that, relative to IT, what an apparel company requires is not unique from what other apparel companies require. "We make clothes," he says, "not IT solutions." Timm's philosophy is to focus internal resources on what the company does best, and outsource the rest. This not only addresses company needs, but employee needs as well, he says.

Today's IT departments are expected to have in-depth knowledge about how the company operates and the necessary technical skill sets to support all implemented infrastructure. "IT is often the only department that is literate about the entire company's business processes," said Timm. "They are expected to be experts at everything — including the latest mobile device and iPhone app!" His mantra is to go with what's simple, because "simple is good, and simple is flexible," and overworked and stressed out IT departments need to be able to simplify wherever possible.

At American Apparel, Shulman has found that for her environment innovation has as much place in IT as in design. When she joined the company two years ago, Shulman said her team felt "beaten up, misunderstood and underappreciated." At an overall low point for the company — at the time (2011), American Apparel made the list of "brands that would disappear" along with Reader's Digest and BlackBerry — her suggestion that her team should be more innovative was met with "looks of burning rage," from a staff that wasn't even able to "get basic stuff done." Nevertheless, rather than decrease the workload, the team took on a wide range of industry-leading projects in areas ranging from RFID to mobile, some of it implemented — at little or no cost to the cash-strapped retailer — in pilot projects in partnership with technology providers.

The projects enabled the company to get to the sources of their stream of IT problems, in the process shifting from a "fix-it" mentality to a proactive approach to the company's entire supply chain. Today, Shulman's vision for the team to be one of the most technology-forward in the apparel industry has contributed to a turnaround at the company — both in profits and staff morale.

Here's more on what Shulman and Timm had to say.

Halston: Entering the age of the empowered consumer
Today's seemingly infinite amount of data — available to both consumers and apparel businesses — is upending traditional retail, says Timm, with access to information responsible for shifting consumer price and value expectations as manufacturers, brands and retailers all now compete globally for the consumer. "Today, my wife pulls out her iPhone, scans the QR code on a product and receives unlimited information about the brand, the pricing, and everything else, and she can share what she thinks immediately via social media with the entire world."

Apparel companies today are faced with three major challenges, says Timm. First, the newly empowered consumer has changed the rules, and apparel companies must challenge old practices that don't address today's realities of fast-fashion dominance, the commoditization of basics, the evolving relationship between e-commerce and brick-and-mortar, and rising commodity prices.

Second, apparel companies are faced with the unique challenges of the fashion industry itself, which is characterized by a constant stream of new product offerings that have a short life and multiple style-color-size combinations — and are developed by creative designers who sometimes have large egos but very little understanding of IT, says Timm. In this fast-paced environment, IT needs to facilitate the process, not hinder it, by using smaller, apparel-focused systems that can handle unique style-color-size requirements, but that require just enough data to execute the product accurately without overloading the system with unnecessary information.

Third, IT departments are expected to have broad skill sets to support all business processes but must do this in an industry that, he says, struggles to attract top IT talent, in part because it rarely invests in IT personnel and also because it tends to be system maintenance-focused vs. project-focused.

Enter Halston. The iconic designer brand re-launched 18 months ago to an environment far different from its earlier heyday in the ‘70s and ‘80s. With so many competing demands, says Timm, "what differentiates your brand are the designs created and how well you execute them."

He suggests a top-down approach to IT strategy that starts with the business decision process and advises that an IT team have a clear understanding of the goals of its executives before embarking on a project (would they rather improve inventory management, reduce costs or meet regulatory requirements?).

Timm also recommends a simple approach that employs the following eight rules: 1) email is the most important application; 2) ensure the network infrastructure is stable, as it touches everyone; 3) do not customize applications as it takes you off the upgrade path; 4) maintain a consistent data model, and protect it, as it is the glue connecting all applications and serves as the common language spanning departments; 5) assume and plan that the business will evolve; 6) don't be afraid of audits, instead leverage them to improve IT and to educate executives; 7) don't make the easy fixes, make the correct ones, as a request for a fix is often a symptom of a bigger problem; and 8) embrace Excel, because people like it, but don't use it as a data repository.

Halston, which relocated its operations from New York to Los Angeles as part of its re-launch, is targeting 50-plus percent growth per year, and launches its own retail store this week, has honed its strategy to use capital to grow the business rather than to invest in IT. The IT department is focused on its core strengths, letting technology providers do what they do best.

For Halston, that means providing the most up-to-date tools for its technology and collaborative infrastructure (networking, data storage, email, laptops) and outsourcing support. For point solutions, the company selected tools that its team was already familiar with. "We don't have time to train on patternmaking software," says Timm. For business applications such as HR and financials it initially maintained its acquired systems, but then transitioned to more robust, vendor supported systems, while a 100 percent vendor-hosted system on a pay-as-you-go model took care of inventory control, order processing and WMS. Planning and decision support tools are on the agenda for 2014. As a relatively small company, Halston currently relies on Excel spreadsheets for these functions.

Results of its approach, says Timm, have been a minimal capital investment, seven-day a week help-desk support and system maintenance and upgrades performed by vendors. "We maintain only one primary skill set in house — project management. … [By outsourcing], my IT department is bigger than I could ever afford [otherwise], and I can pick their brains about how other companies have handled the same problems," he says.

IT at American Apparel: Driving the company forward
Two years ago, the landscape at American Apparel was very different from today's. Against the backdrop of an economy at its lowest and cotton prices at their highest, the stability of the retailer was in question, its finances were a concern and it was also confronting a number of lawsuits.

From a technology standpoint, the company was dealing with five separate IT teams, and "all of them fought with each other all the time," says Shulman. From a culture perspective, some of the teams were more innovation-focused, while others possessed a more "break-fix" mentality. Uniquely, she adds, the CEO was driving most of the innovation in the company.

Shulman re-envisioned the department as a seat of innovation rather than just support. "Everyone was going to want to work for us. We were not going to complain, we were going to be the team that drove the company forward," said Shulman of her vision for IT at American Apparel. "We had to communicate that vision, and shake everyone out of their comfort zone," she says. The company started by aligning everyone horizontally instead of vertically, which extended even to its workspace: "We broke down walls, literally. If people were going to complain about each other, I wanted everyone to hear it. That's how you resolve problems. If you want to change the culture, you have to change surroundings — what people look at and who they're around." Old-style wood desks were removed and replaced with modern furniture from IKEA. The space was open, fostering collaboration.

Beyond the physical workspace, Shulman said, she realized the department needed to be offered compelling challenges, as well as multiple projects to work on simultaneously. "It wasn't enough to tell them to be innovative. We wanted to give them specific problems to solve."

Shulman insisted on speed and agility. "For us speed is everything. We would rather run really fast and make a lot of mistakes but get there first, than go methodically. We want to be agile, take diversions. We're not process purists. Results come first. [The rules were that] a person kept [from moving forward on his or her project] was responsible for any block. They had to overcome the problem, and we enabled people to do that," said Shulman.

In this innovative environment, American Apparel set about solving some of its business challenges, and, two years later, the company has successfully re-platformed its web site, ERP, workforce management, mobile solutions and customer loyalty. Along the way it has made headlines for its innovative use of RFID, not only for inventory management but for loss prevention.

"We credit RFID with our business turnaround," says Shulman, who calls the technology "transformational." Currently, the company is developing a map-based solution that will use RFID to locate merchandise that is on the sales floor, but in the wrong spot, which, "from a customer's perspective, is still out of stock," she says. It is also performing A-B testing in stores to determine conversion of various "zones" of the store, which can be as narrow as a fixture.

As part and parcel of its technology overhaul, American Apparel has also transformed itself into a paper-free company. Shulman says, "Where you have paper, you typically have bad process." Although the "green" factor of becoming paper-free is a huge bonus, the real benefit to a paperless environment is the efficiency wrought by data and processes that are well integrated.

Remarkably, American Apparel did much of its restructuring on a shoestring budget. "We had no money. We had to get creative," said Shulman. The company decided to reach out to technology companies to create partnerships that would be mutually beneficial. The pitch was pretty basic: "We have no money, please give us free services," jokes Shulman. Still, the approach was effective. In one particularly interesting example, American Apparel partnered with Qualcomm, where, says Shulman, "a bunch of engineers engineer things and then figure out what to do with what they built." American Apparel offered a real project — the development of a mobile app —with real problems to solve.

On the tech side, the application needed web services to hold content. "The project put Qualcomm's engineers and product managers side by side with American Apparel's engineers and project managers. … Working with groups like [Qualcomm's engineers] gives you a different perspective on where things are going. We thought we understood mobile, and we underestimated it. When you talk to a company really investing in mobile, they're thinking 10 years from now. That's their framework, and that's what they brought to the table."

"We got groups of people working together. … And in the end we got a great application as well." The new mobile app allows the company to turn every sign in its stores into an informational or sales channel via image recognition.

The innovation continues. American Apparel is now exploring Gimbal's geo-fencing product, which, for customers who opt-in, will "wake up" the app when a customer passes a blue-tooth enrobed manikin to tell them more about the apparel it is dressed in. The company is also working on a "plastic-free" checkout experience, as well as a big data project with Intel to understand the impact of social media on the manufacturing facility and on demand planning.

Today, American Apparel is doing "better than ever," with 21 months of same-store sales increases. The company ended 2012 up 13 percent overall (with online sales up by 30 percent) and plans to grow the web business to be 25 percent of retail.

"Part of our philosophy is, if you're going to give [your IT staff] something boring, you have to give them something fun to work on as well," Shulman concludes.

Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].



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