Becoming Consumer-Centric, with Jan Hilger

Hey everyone, welcome to another episode of Fashion Made. On this week's episode, we feature a discussion that we had with Jan Hilger a couple of weeks back in Hong Kong. Really overarching discussion about the whole industry and obviously how technology is changing all of that, but it gets quite specific into how do you manage cultures, what changes are happening in retail, how do you feed things back into the product development process as well. So quite an interesting one. Yann, obviously a very experienced individual, spent many years at Hugo Boss and then Triumph and now is a supply chain-specific consultant. And yeah, really, really knowledgeable guy. You can also see part 1 of this interview over on our YouTube channel, on the Product Innovation YouTube channel. So if you want to see this podcast in person, then you can go over there and see that. Look, hope you enjoy the podcast. As always, if you've got any questions, give me a shout, dw@pie.tv, and I'll catch up with you all soon. All the best. What do you think are the most dramatic changes that are happening today?

I think the gap between companies that use modern technology in a very efficient way and companies that haven't been able to jump on that train is getting significantly bigger. I've seen that in many projects that I've gone through, that very often people are afraid of using technology because also it's very often means to leaving the path of things how they have been done. And sometimes there's all kinds of fears. Is it about data security? What are we sharing? What are we not sharing? Do we get too transparent? Do we get too visible? But the thing is, as long as some companies are doing it, it actually leaves no other choice for the others to basically go in that road as well. And starting from the product development, digital tools, from materials, textures, colors, fabrics, sizing, to the technological possibilities along the whole value chain, you know, like order transparency, vendor management systems, a PLM system that is monitoring all the way through, supply chain tracking software, blockchain, whatever. So companies that use those technologies, they gain so much speed also in transparency and reliability of information versus their competitors. So actually, if companies have not started working with those technologies, I think there will be a point where they don't have to start anymore. Because we've seen that it's really the— some of the very successful companies at the moment are technological geeks, you know, they try different things and they are experimental.

Do you think much like Airbnb isn't a hotel company, it's a technology company, Uber isn't a taxi driving company, it's a technology company, do you feel like a power company is a making that same change?

Maybe in a different way, but I think in some, to some extent, yes. I mean, we are seeing a major disruption on the manufacturing side. I mean, not for the classical garment, this is a sewing product and will be a sewing product, but for example, we see that more and more products are, let's say, taped and glued, are not sewn anymore. We see the influence of 3D printing and fully fashioned knitting, And we see the phenomenon of the micro-factories that are basically producing where the stuff is sold. So I think it's maybe not ready to be rolled out in many cases, but I'm quite sure that also clothing companies will become more like technological companies or apparel companies. I mean, a few years back people were saying it's, for example, of the Inditex Group, people were saying it's a kind of about their supply chain model that they're operating, about their speed process, about the permanent deliveries, permanent new things. And who would have thought of a fashion company being a supply chain company in the end? So I think there were business cases in history where a disruptive technology and a new way of working has opened doors to new ways of doing business. I mean, in the '80s when Benetton started with their kind of dying to production, so dying to delivery. And they basically produced their ranges in grayish and then decided in the very last moment that this is blue, green, red, and shipped it. So they gained a lot of speed by dying in the last moment in the stage of the process. This was a radical concept that in the '80s was not known to other companies, so they revolutionized. And you always in every period have some companies that are doing these experiment things. I remember when Burberry started to selling fashion off the catwalk. They kind of disrupted the whole fashion systems as we knew it, where you show a catwalk and then the customers have to wait half a year until they can find the things in the store. Just selling off the catwalk was another disruption where basically people suddenly said, "This is never possible." Or I think when— I remember when I think it was 2003, 2004 or something in that area, when Karl Lagerfeld designed a collection for Hennes Mauritz I mean, in the very beginning, people were kind of shaking their heads and say, "How can he do that?" And now he's just opened the door for many other designers to follow. So I think it takes these disruptions, partly by technology, but partly also by breaking the frame, that people get creative and enter new areas. And I'm quite sure that the technology will enable and help first of all, offering a much wider range of possibilities, but also to directly also measure the success and the transparency of these initiatives.

Okay, you talked about microfactories. Do you feel like that will even further enable a fast fashion mindset among consumers?

Uh, yeah, I mean you cannot be much faster than directly at the cash desk. But I think it will just— maybe it will even help that the product gets a different value again because it allows people to use their creativity and to use their ideas also in customizing their product. So I think in matter of having the feeling of individualization or of having that very special service, might even raise the value of clothing again. So let's see, maybe it's too early to imagine if this would be a mass phenomenon or if this is more like a project. Let's see. I think it will just give a different paradigm of the way how we produce clothing, which for many people is still the usual: we order, we buy, we produce, we consolidate, we ship, we sell. So this kind of routine is kind of broken with the microfactory, but this is happening just there.

Yeah.

And especially the knitting machines, the fully fashioned knitting machines, as more and more products get knitted. I mean, we've seen that years back every jacket was woven, and let's say in recent years you have knitted jackets, jersey jackets, all kinds of different blended materials, glown. I've even seen a suit that is made out of a kind of B-stretch bra fabric. So, the borders and the areas of, let's say, going beyond the traditional border is much more open now than it used to be.

People talk a lot about digital transformation today, much like innovation. It's a very overly used buzzword. It is real though. It is a thing that a lot of companies are trying to achieve, and rather than just digital overlaying, adding a digital overlay of an old practice, truly achieving digital transformation, like would you do this same thing in the same way if you were just starting a new company today? What are the common missteps and mistakes that companies have when they are trying to achieve digital transformation today?

I would say there are different, um, wrong perceptions of this that are sometimes disabling companies to really go this journey. Part of it is, and I just used the quote downstairs in the presentation, but it's a quote from Dee Hock, the founder of Visa. It was basically saying, "The problem in change is not to get new ideas in, the problem is to get the old ones out." And this is, in my opinion, the biggest challenge to be really able to reinvent yourself, to really think, as you said it, if I would start this business today with this market out there, would I do it exactly the same way how I'm set up, or would I do many things different? And this is something where I think people, companies are very often not consequent enough to really free the mind from the ideas of the past and really think, if we really start today, how would we do it? That's one thing. Second is that, like in the past, it's declared a project, and this project has to happen in 2 years, in 3 years. There's an endpoint, and there's a project manager that's tracking this success alongside the organization. And this is also going to fail because digitization is not a project. It doesn't have an end date. So while you're in the process of rolling out that project, there might be new technologies which force you maybe to change the route of your project plan. So I think that the biggest challenge is to accept the fact that the moment you enter a required agile culture and the moment you enter this digital era, this is a journey that will basically never end. There will always be new innovations. There will always be new technologies, there will always be new possibilities. So you might have to rethink your status maybe several times per year. This is, I think, something where many traditional companies are struggling with.

Those companies that are struggling with it, where should they begin?

In my opinion, the ideal start is really getting out of the daily routines, taking some time, get yourself out somewhere in the green and really rethink, forgetting all what you have today, just as an orientation maybe, but really mapping out an end-to-end plan that is generating a business model. How should this business model look like going forward? And, um, I think having this blueprint, having this idea, not in all detail, because as soon as you start detailing, you will go to this old kind of, how have we done this, how have we done that? But first of all, and this in my opinion has to be not only done by the top management, but by the right people in the organization that have the right brain to bring such an abstract idea forward and to really map it down to something understandable. And then you have to cascade it down in the organization because then you will need more and more players to fill this blueprint with life. But I think without this blueprint, understanding where you're going and what's the way for the future, it's difficult to run any kind of project or to even enter that journey. So that really has to be the homework that has to be done. Of course, first of all, once, but then this paper should be the basis of an annual, biannual, depending on your product, depending on your market approach, let's say on a regular review. I think without this blueprint and the joint understanding, it's like, let's say, Leonardo da Vinci said it, the one who's not fixed to a star cannot do the first step. So first the direction must be defined.

You talked about people in there as well. Companies can often fail because of cultural challenges, or at least they can make it slower, as you were saying, unlearning is a big thing when you're trying to change. In some of the organizations you've worked for, or should we say in your experience, how do you manage the cultural issues or the people issues?

Let's say as a leader of an organization, you have to have a mindset that's embracing change, and you have to have a certain set of values. And I think if you don't live this culture and spirit as a role model, the culture will never work. So I've seen cases where you have nice PowerPoint posters on the wall about culture, but the leadership behavior is the opposite. And this will just not work because employees don't look at the posters on the wall, they look to their leaders. It's like children look to their parents. If the parents say, "Please tidy your room," but they're living in a mess, the kids will never tidy their room. So in the end, the living by example is a very, very important thing that this cultural change will happen. And living by example means that you have the right example, meaning if you are totally convinced of a digital lifestyle, of basically enabling the company to work empowered, self-decision-making, agile. And let's say without empowerment and without trust, you will never get agility. But if you live this spirit, then you have to live it as a role model, even, let's say, the double amount important than every of your employees. So if you block decisions, if you block people from achieving their best, then this will cascade down, and then let's say, in my opinion, success will not happen. So the living by example, the creating a hungry culture that is really hungry for success, and let's say having the customer in mind and putting the customer in the center of all activities, that will not work. So my opinion, it's Customer centricity, it's a living, agile, empowered culture, and let's say it's the focus on the products and putting the products in the priority. Without these three elements, it's going to be very difficult.

What do you think the future of retail looks like in Asia?

Maybe the face of the retail will change, that will be more like an experience and then really as point of sales. But in the end, I think it's very, very visible also here in Hong Kong. You need those stores to promote and create the brand DNA. So without having that store where people can experience and see, and maybe in the future they cannot even buy things, there can be like a showroom and they can order online via this mirror or whatever kind of. But I think without having a certain retail space where the brand is represented, the brand building itself is going to be very difficult. So I think maybe the, I'll say, the face of retail will change, but in my opinion, we will always have some kind of retail because people just don't want to sit at home the whole day. And I mean, sometimes you see that even when you go to the end here to the Harbour City Mall, there's tons of people just walking around, looking, absorbing. So in a way, this is important, and I think for people it will be in a certain extent. So I'm not worried about the future of retail that much.

In McKinsey's The State of Fashion 2019, they forecast the end of ownership as sustainability comes to the forefront of the consumer's mind. Is this a fantasy or is it genuinely realistic?

I think it's realistic. The question is the percentage. I mean, to take that to the extreme, we can't imagine people sharing underwear. So, but I think we've already seen that, and I've read that already years back when I was at Escada. If you produce very expensive gowns and people wear them only once, Why do you buy that? Why don't you share that?

Like a wedding dress?

Yeah, for example. For example, if there's— if it's— and it's most— it will be a kind of urban thing because out in the country people don't have these occasions. But if you're living in Hong Kong and there's one event here, one event there, Oprah premiere here, this award there, maybe you need many different dresses because you will meet the same people that will— that you will not be able to wear that dress twice. But then why not having a platform where you can basically select something, have it kind of fitted, and then return it again, and you just pay for the usage? I think the same is already happening. I've seen and read an article about handbags that people can borrow handbags and just give them back. I mean, we've seen that with cars, that people, especially in urban areas, they don't really need a car, so they don't own a car. But in the moment they need one, they take one. And it's a kind of car sharing system or city car or a rental car system, whatever. But then for people, it doesn't make sense to own a car if the car is just standing around the whole day. I think in every European capital you see that with those rental bikes all over the place. So people come from the underground, They insert the coin or they have their kind of electronic passport, they release a bike, they use it, they put it on a rack somewhere else, get their kind of checkout, and just use the bike for when they need it. So I think the openness to share is much bigger. So I don't think, to finish that, that it will really replace everything in every angle, that people will not buy anything anymore. It's not a black and white discussion. So I think to a certain, in some areas, in some, let's say, categories, that kind of sharing mentality, not owning anything, is in my opinion pretty realistic. And also in my opinion makes sense.

Yeah, it does for sure. Where in the world do you think there is the most enthusiasm for technological innovation? And what do you think this says about the future fashion world order?

I would clearly say that the readiness to use technology and innovation is much higher in Asia than it is in Europe. Because in Europe, many people are very skeptical, and the skeptics' skepticism is blocking innovation because people are afraid just in this whole digitization Discussion. People are so afraid who gets the data, who has access to the data, who can use the data. I think in Asia, in some countries, people just don't care. They anyway share anything on their social media. So, and it's that this kind of fear is then also blocking technology from moving forward because people, if they're not willing to give their identity to do online shop with a fingerprint or something, they will also not give further information. So it's, I think the openness to use that technology is very much distributed in Asia where people are just trying things. I wouldn't say they're not thinking that much, but I think in Europe we have the tendency to overthink things and this is slowing down the speed of innovation.

When we overthink things, does it mean we're more afraid, we're more fearful of change, or we're more afraid of failure perhaps?

Or consequences.

Yeah, you just overthink things.

Yeah, think of all the bad things that can happen rather than the good things it can bring. So maybe also typical German phenomenon, people are afraid of all the bad things that can happen and they block the one option that can be.

A little bit about sustainability, please. Um, so it's obviously now a huge consumer priority as well, or we like to say it is. Um, we don't act like it.

Yeah, it's a bit contradicting.

Yeah, uh, on one side, is sustainability a big consumer priority, or are we just telling ourselves that while still being— I think it's very unsustainable.

I think it's a mix. On one side, we, we We all wish it would be, but on the other side, cheap mass market retailers are gaining speed. So it's a contradiction in the end. If it's really so important, why do low-price companies have such a big success? And I mean, if I just remember that presentation from Lee Edelkort, which was— I don't know if you remember that, but she was rallying a campaign that governments should have minimum prices for certain product categories in order to protect cheap labor, so to say. If people are not allowed to bring a denim into the market that costs €12, then also the interest of squeezing producers will shrink. But the question is, how can it be regulated? And as soon as one brand is offering something cheaper, the others are under pressure to either go to the same price or have a very specific product that they can ask this higher price. So I think the openness maybe would be there, but the constraints and the fears are holding it back. And then I think the sustainability in itself is is something that, because as we would like to be more sustainable, to have reasons behind everything, we assume that the global mass market thinks the same way. I think that's just not the case. We just look at the success stories of some of the low-end, then there must be something wrong, because if really everybody thinks of sustainability, those things would not be sold. But they do. And I think some years back there was a test from Cologne University, and they tested with big pictures on a booth in the main pedestrian zone. They said, okay, we're not really producing with morale. We might not even be able to show you the factories we work with. We don't give too much on working with prisons or with prisoners or with having long working hours and not paying the minimum salary. We don't bother. But on the other side, we are able to offer you this denim for $9.95. And there were actually people that were, despite the pictures hanging there of bad factory conditions, of workers being exploited, this and that, the stuff was selling. Because then it seems to be in two different areas of the brains. So the responsibility is here, but the purchasing decision to buy something because potentially we can save something It's maybe somewhere else. So sometimes that side is winning, and as it looks on the market, clearly the price is winning, especially in Germany. It's a very price-sensitive country. Somebody tried to, I know, try to increase the cost by little and basically failed because the readiness to, let's say, if they would ask customer to to pay a bit more but then to get it sustainable. In many cases people say, "No, I don't care. I want it cheaper and I don't really want to know where it's coming from." Okay.

Well, I guess on that point, if you had to identify one thing that the fashion industry could be doing better or the apparel industry needs to be doing better, what would that one thing be?

Okay, that one thing. I think that one thing is definitely transparency. It's still not possible to have a full transparency of the whole supply chain, at least not for everybody. Maybe there's the one or the other company that can do that very good. I know that Kering is already very advanced in having carbon footprint calculation, all that, to have their whole value chain calculated. I think transparency is still in many companies not there, especially smaller companies where vendor management is done by Excel. People just have not seen the factory, the place, and cannot really do the right replies. Yeah, perfect.

Last question.

Okay.

I know you've been very generous with your time, so thank you. Would you be willing to share any personal predictions about macro trends in the fashion industry in the next 10 years, let's say? It says 5 or 10 years, but I think we've already talked about micro factories and color dyeing, you know.

As it looks today, we will have a kind of split market. We will have a few big companies that deliver the basic outfits and we will have very small design companies that deliver highlights in a niche. You see that already today, like Berlin or in Antwerp, you still have many small designer brands that are just producing in their niche. And maybe this, what we already see today, this whole middle segment will kind of die out. So you have the kind of, I don't know, the Uniqlos of the world that will basically deliver the basic chino, the t-shirts, everything. And then you have maybe designer brands, luxury brands, that based on their massive campaigning will deliver the signature jacket or special items, but it will be a combination of both. And just think that complexity is so expensive that just many companies can't afford the complex structure they have today anymore. Offering. That's why I think many multinational groups like today will buy more and more of the small brands and will maybe not deliver a whole collection from, let's say, head to toe, but maybe say this brand is delivering the jackets, this brand is delivering, let's say, focus on— doesn't mean that they'd only produce jackets, but I think it will be way more concentrated and focused because just producing everything to put it in the store and wait until somebody comes and buy I think the networking capital just doesn't allow that kind of business model anymore.

Final question from me personally. Do you think the digital overlay of fashion is going to affect or change the industry at all, where people aren't actually making, designing physical garments, they're just designing digital garments that people then share on Instagram and their social networks?

I mean, where can digitalization bring us? If artificial intelligence is able to predict color trends, then they can also do the dyeing and do the coloring. So when we know that a jacket is always in one color and we know that the sweatshirt— an AI-enabled computer might be able to develop the products with the color concept that he calculated. So that might be possible one day. That we will not have a factory where there's a few number of robots or special machines in that, but that it's intertwined with the human interface, that it's hand in hand between the electronic and the real people design team. I just think that as technology is moving forward, we will still see a decline in jobs because many people will not be needed anymore when fully controlled electronic system is running.

Yeah, and we can retrain though for other digital skills that will be required, hopefully. Yeah, hopefully.

Otherwise, so, but I think this, this kind of, I wouldn't say big eats small but fast eats slow, and the radical progression of technology will also in the next 10 years change our ways of working. And if you look in the high street today and we will look in 10 years, I'm sure that it will be a way less diversity, or it's a felt diversity that we just have some brands that will deliver some products, but not every of the small brands will deliver the whole concept anymore. So I think that's something that's already visible now. Because all the single standalone womenswear companies are in financial trouble or getting out of the market. So there must be some— because the brand name is still there, so what you can take the brand name and plug it onto a kind of artificial intelligence design machine.

It's exciting.

Yeah, so I think there's especially in this kind of development, color concept, uh, optimization of design processes, I think there's a lot of opportunities.

Jan, thank you so much for your time today and sharing some amazing insights to the world of apparel.

Yeah, thank you.

Cheers.

Have a great conference.

Will do.

Everybody get up!