Hearing the Outside Voice to Reimagine Fashion
Is there a Tesla in fashion’s future?
Where are we on the road to fashion transformation? After this year’s disruption of near Biblical proportions, what are the chances for redemption in this era of lost growth?
Theories of disruptive innovation and creative destruction give us an understanding of economic loss and gain, but what explains why corporate change is so slow, and so costly, even in a crisis? For insight into the process of change, consider these four very human stages and where we might be as individuals and as companies.
Firstly, in a pandemic, we naturally fear forces that threaten us. Indeed, we double down, until forced to acknowledge that what once worked now does not. Secondly, when blind-sided, it is now us who become blind, unable to see what comes next. Thirdly, when at the limits of our experience and resources, we begin to search beyond previous knowledge. The outside voice is heard. And, lastly, in renewal, we do not abandon the old. We bridge the gap to the unknown by integrating fresh insight to achieve something new.
Is this a picture of fashion, the famously insular industry, in the storm of reinvention? Where are we right now? Personally, I think we are at the stage of seeking and hearing the outside voice. We have loosened our grip on convenient explanations for a managed return to security: new calendars, reinventing shopping, automation, near-shoring, see now/buy now online, right-sizing inventory, store closures, and widespread digitalisation. The glut of stuff and promotion mocks all these narrow prescriptions to revive the business of fashion.
Fashion now realises that it cannot save itself on its own, as if a fresh wave of new looks, silhouettes and colours could correct a downcycle. If you are a close reader of fashion media, you know the opinions of CEOs, designers, activists, and celebrities for an industry fix. United in distress, there is no consensus for a fallen ecosystem that must be reimagined for relevance and prosperity. Fashion, in short, must adapt the learnings from other industries and individuals, especially in electronics, automotive and entertainment.
While there are endless amounts of initiatives to select, there are few that directly link to market value and capital generation. Process – or architectural – innovation is how puzzle pieces fit together in a new way. Fashion is highly fragmented globally and is largely organised around its components and tiers of supply. The result is deeply embedded rigidity for lowest cost sourcing that is the main obstacle to achieving greater speed, agility, and risk reduction. The benefits of being fast, lean, and flexible are a severe cultural challenge, and have not yet been overcome or demonstrated at any scale.
Fortunately, as the fashion industry confronts its limits, there is inspiration to replace the old arbitrage based on cost. Dependence on low-cost labour, factories, subcontracts, and countries is now a vulnerability. In Stanford-based research and cases of the last decade, Prof (Emeritus) Warren H. Hausman and I have shown that location does not matter in the adoption of postponement strategies. Even at modest levels, supply flexibility projects an improvement in market capitalisation of 30 to nearly 40%. This upstream economic advantage is the new arbitrage, superseding lowest cost, high volumes and long Lead Times.
Lastly, sustainability deserves a careful definition. Like quality in the auto industry in the 1980s, the challenge of our times is to achieve it at less cost and risk. Today, it is Tesla that produces electrical vehicles at a volume that is driving down the cost of batteries and electric power. Fashion must do the same with sustainable products and practices that drive demand at lower costs and prices. Our Stanford experience affirms a process that is also more profitable, deploying less inventory and zero waste. Indeed, to eliminate excess production, new tools of 3D virtual design will link to factories with algorithms to manage (postpone) inventory risk. As Elon Musk exemplifies, individuals matter, and leaders of these manufacturing and data ventures are leading the way.
Sustainability is what links fashion to other industries, shared purpose and financial capital. All industries are ultimately competitors for capital, and that standard is changing. Finance, in fact, is a significant force and incentive for change. Emerging investor criteria by the world’s largest fund managers to mandate new non-financial measures known as ESG (Environmental, Social & Governance) metrics or pension funds to shift from risk and return evaluation to equal weight for risk, return and impact, are examples of this incentives. These firm, market and social measures affect every fashion brand and retailer if they wish to have access to capital for sustainability and growth.
On 22 October 2020, the Reset Fashion Event will be held with the aim of gathering together experts on the fashion industry, supply chain and AI to discuss the topic of disruption. Moving from dead stock to mass customisation is the journey to more profitable and sustainable supply chains. Join our expert panel Ahmed Zaidi, Gonçalo Cruz, James Stewart, John Thorbeck and José Pires. Free registration at kaizen-insights.com/reset-fashion
Fashion – the very first globalised industry – can mobilise a new generation that is already committed to values to improve our planet. With collective action, brands can evolve from “do no harm” compliance to positive social impact in supplier communities and human lives. The formula for both market and social capital is process innovation + data science. It is, in fact, social technology for both values and value. Textiles, our School for Globalisation, can reimagine capitalism once again.
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