Top Ten Newsmakers 2003: John Slack-Smith

Top Ten Newsmakers 2003: John Slack-Smith

Harvey Norman's main IT-man, John Slack-Smith, is no stranger to technology, although things didn't start out that way for the self-proclaimed outback boy.

Growing up on a New South Wales wheat and sheep farm, the father of four never imagined sowing seeds in the tech sector. He was encouraged to jump into the game by Gerald Harvey (co-founder of the 21-year-old superstore), who asked him to operate a small franchise that housed computers and small appliances back in the 90s. The only problem was, Slack-Smith said, that he didn't know a thing about computers and was hesitant about taking the job.

"I told him I couldn't do it, but he said, 'Son, you are going to do this and we'll find out whether it was worthwhile employing you or not,'" Slack-Smith said.

Nonetheless, after this successful first "sink or swim" experience with technology (that lasted eight years), along with years of hard work in retail (including a few gigs at Coles as company cadet), and his strong work ethic honed on the farm, bashful Slack-Smith now finds himself running the whole tech show at Harvey Norman, one of the country's biggest retailers.

He recently helped the company morph into four independently-run business units: computer hardware; software (which covers business, education and entertainment); communications (connectivity, mobility, broadband, networking products); and printing and imaging division (cameras, printers, digital cameras, consumer products).

He said the move positioned the company away from a hardware model into a strong software, services, imaging and communications player.

"How the restructuring will convert to day-to-day growth is that it operate internally like we have four businesses and not one, so we'll be able to manage and facilitate the growth by running it like a small business," Slack-Smith said.

He also recently implemented inventory data and delivery logistics processes in a bid to improve the overall business.

And while Harvey Norman is a huge conglomerate (with Australia claiming to be the first to embrace the computer superstore concept), Slack- Smith said it operated like a small fish in the sea - a key factor that contributed to its success, and a main reason why consumers were drawn to the mass merchant's business model.

"You've got to run it like you're a small business - like you're a one-storefront operation - you've gotta watch your costs, be aware of all parts of the business, what stock works, what stock doesn't work, and customer service has to be of the highest priority," he said.

Heavyweights often tended to lose perspective, Slack-Smith said.

"What all businesses do is come in and compete with a bigger entity, whereas Harvey Norman does the opposite: while the big guy is too busy running around handling lots of different issues, the small guy focuses on the fact that if he doesn't sell his product, he doesn't eat," he said. "So the challenge to a big business like ours is to make sure we turn up five, six, seven days a week and run the business like the small guy."

The strategy wais paying off, Slack-Smith said.

The company posted a net profit of $151.05 million for the 12 months ending June 30, 2003, an increase of 17.8 per cent over the previous year. The total group revenue hit $3.17 billion during the period, which is a 14.4 per cent increase over the previous year.

And 28 per cent of the entire group tally came from the tech sector, he said.

Slack-Smith's road to the top of the tech ladder still makes him chuckle.

"I still to this day don't think of myself as a technology retailer, although I'm in the technology business," He said. "I'm a retailer. The approach I take to the business whether it be merchandising, people management or buying systems, the basic skills and the disciplines of retail form across any product category. So inside the IT business you have to have a specialised focus of where the technology is at and where you think the technology is going in the future."

And while many analysts are calling 2003 the year of the rise of the mass merchant, Slack-Smith said he hadn't considered it in those terms, but did see a retail renaissance starting to sweep the industry as people were now coming back to retail and considering lifelong employment in the wake of several slump years.

"We've got a situation inside the retail industry whereby there's not enough time spent by big companies to develop people and have lifelong retail careers," he said. "During the course of the '70s and '80s, there were terrific retail training courses for young people (whether in the food industry or the department store industry) but then with the demise of the department stores over the course of the 80s and 90s and then with the emergence of companies like Harvey Norman or the specialized retailer category killers, I don't think a lot of young people were able to develop their skills."

But Harvey Norman is helping rev up the retail space and make it more attractive, he said, in part because of the company's anti-hiearchical structure.

"Whereas most organisations you'll have a hierachical structure with line management, state management and national mangement ... we invert that classic triangle and put the responsibility back into the hands of the people in our stores. The most important job I have at this company is finding and developing good people," Slack-Smith said.

And while he admits to the polyannish feel to the concept, he said the philosophy was working and a reason for the company's growth path.

Reflecting on the company's 10-year anniversary as a computer superstore, Slack-Smith said the hardware, printing and imaging and communications division all recorded strong growth.

The company maintained marketshare inside the software division.

Despite a second interest rate rise in a relatively short time, he said consumer confidence was good at the moment.

The retailing powerhouse - which has 139 stores across Australia - saw a host of developments this year including the launch of new products, the opening of new retail outlets (nine in Australia) and a management shake-up.

The rollout of the express store concept (which focuses on areas around mobility, software and DVD offerings) is paying dividends; and the focus on SME sales and services (via Avante IT) is on track. As part of the deal, Avante is offering services around networking infrastructure, communications, security and back office applications.

The move to strike up third-party deals was hatched in response to consumer demand, he said.

"Customers, in general, inside the Australian marketplace are becoming more discerning, particularly in the technology area," Slack-Smith said. "The level of knowledge and their access to information is rapidly improving so with that there's a need for retailers to provide information, pricing and comparisons and services. As a channel, we've got a challenge as a direct organisation to give people a reason to keep walking into our stores."

This year, consumers' interest peaked, he said, particularly in key categories.

"The computer business is growing through 2003 at greater than 20 per cent over last year," Slack-Smith said. "We've had very strong growth in the computer category [with notebooks], in the printing and imaging division [with cameras], growth in the communications side thanks to our relationship with Telstra [with the BigPond team]."

There would be explosive growth in 2004/2005 on the communications side, he said, as broadband became more dominant with small businesses, in particular.

"On top of that, we aggressively back ourselves in parts of the business where we believe we are going to get strong incremental growth over and above the marketplace," Slack-Smith said. "And during the course of 2003, I would point towards digital cameras, and also towards the preparation of the explosion of the home networking category, which will occur in 2004."

Indeed, convergence and home entertainment were going to be big crowd pleasers going forward, he said, pointing to the increased sales in 2003 of plasma television. DVD laptops, digital cameras, laptop computers and general home entertainment products.

Advancements in digital technology would enhance the growth opportunities for the company, he said.

"The exciting thing about retail is it's always changing," Slack-Smith said. "I don't know what the next 10 years will hold, but I'm convinced the pace of change will be faster and more broad than what they were in the previous. With that, I think our computer superstores are in for an exciting and consistent time of growth over the next period."

Tech-man gets down to business

In running the Harvey Norman tech ship, Slack-Smith faces many challenges.

Dealing with stock management, keeping a constant eye on costs, and scrutiniding all aspects of the business took constant attention, he said.

While stock management woes tripped up a lot of players, he said Harvey Norman took "a positive paranoia" approach to the issue.

"Stock management can be the area that sets you apart (protects your profits) or the area that causes the greatest damage to your profits ongoing," Slack-Smith said.

The company took stock four times a year (checking in excess of 60,000 different items), he said.

"Most retailers stock take once every six months or every 12 months," Slack-Smith said.

The marketing hype pumped out by several vendors was another unhealthy, distrubing trend emerging for the retail sector, particularly in the entertainment software business with companies like Microsoft and Sony, he said.

"With retailers, whether large or small, there's an ongoing need to drive the business that benefits consumers," Slack-Smith said. Some companies were losing sight of that goal, he said, pointing to the ill-effects of the Microsoft/Sony game console wars.

"The marketing that's going on with these two companies is making it particularly challenging to see the sustainable business model going forward,' he said. "There's no money in it. The problem is when retailers like us are not motivated to go out and advertise, market the product and put bundles together, the consumer ends up losing."

Despite the ups and downs in the retail space, Slack-Smith said he was in it for the long haul.

"Like anything in life, if you have the right work ethic, you can tackle anything -- any challenge that comes your way," he said.

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