Engaging Deeper & Scaling smarter with Michelle Pacynski

[Music] Well, hello there. Welcome to the Fujitsu Podcast series, "Engaging Deeper and Scaling Smarter." We'll explore how retailers are creating strategies for deeper, high-value relationship to their customers while scaling their operations with precision and practical intelligence. And today, we are joined by Michelle Pasinski, a recognized retail and technology leader whose career sits squarely at the intersection of innovation, scale, and measure of business impact for the beauty industry. Most recently, Michelle held a senior leadership roles at altabuty, including Vice President of Digital Innovation and Vice President of Consumer Technology, where she helped shape and scale one of the most sophisticated digital and omnichannel ecosystems in retail. And during her tenure there, Altus' business actually grew from about 125 million to more $2 billion in online sales, supported by a large-scale platform modernization across the commerce, mobile, loyalty, personalization, and customer data. Michelle was also deeply involved in advancing Altus' innovation agenda from enterprise AI strategy and governance, to building proprietary personalization capabilities that deliver hundreds of millions of highly relevant customer interactions every day. Earlier a career, Michelle served the CIO for room place, held leadership roles at several large retailers, consistently aligning technology investment with growth, customer experience, and operational excellence. And today, Michelle is a strategic advisor and board leader, working with founders, executors, and investors, to turn emerging technology into durable competitive advantage. Few leaders bring such a practical, operator-level understanding of how innovation actually scales, particularly in beauty and high engagement retail. And we are thrilled to have her with us today that was one heck of an intro, Michelle. I'm very excited to talk to you, but let's go ahead and welcome Michelle on the show. Brian, I am thrilled to be here, so I really appreciate the invite. Can't wait to chat more about the scaling innovation and all things, tech. Yeah, well, when you and I met originally about a year ago, I guess, I don't think we could stop talking about what was transforming our industry. So I'm very excited to do this in a little more structured way, maybe then we did then turn it into something that others can learn from. So you spent years leading digital innovation at all, and that's obviously a brand that operates an absolutely massive scale. When you think about this moniker here, about scaling smarter versus just scaling faster, what does that distinction really mean in the beauty context? Yeah, I think, and you're right, Brian, we did spend quite a bit of time chatting about a lot of these topics, but everyone says this, but I do think that in order to scale something particularly in beauty because the customer is so engaged in the category, you really have to keep the customer, and again, everyone says that you have to keep the customer at the center of everything that you do. So when you're implementing something and you know that it's going to resonate with the customer, it has to be something meaningful for the customer, something they're going to use, something that's going to solve a problem for them, and as long as it's relevant and something that can really make a meaningful difference, some improvement in whatever their experience that it is, then I think you've got something that can really scale. It's great. Yeah, and obviously, I think if there was ever a message this year at NRF, one of the core messages, obviously enhanced by AI, but one of the core messages really are that everybody is finally driving towards this customer first mentality around everything that they're doing. And I think the beauty industry has always been a little bit ahead from an innovation perspective around creating those high touch engagement kinds of experiences in their stores. It's a very personal thing. So I think that's great advice. Keep the customer, that customer's entrusted message. Keep the customer at the center of all things. And then just pushing on that just a little bit, when you think about it, I mean, I've said this for a long time. Digital experiences are really right for disruption, because they're so product forward. They're so merchandise, heavy and driven. I think that's good. Obviously, there has to be some inspiration about what's trending and not. But I really do think that if there's an opportunity for the digital experience really to put customer at the center and then kind of wrap the experience of products or the information around what the customer, what the customer's like, what the customer's interested in. And kind of think about it with the customer first, rather than you come at them with product. You know, something I've said for years was that we needed to shift from being an enterprise that really had a portfolio of products that we were looking for customers to buy to being more along the lines of thinking, hey, what if we were a portfolio of customers, consumers, and we try to really address their needs and ultimately products become the way that we fulfill that. And I think that's really what this shift is really all about, is putting going customer first and then really designing everything else around that. Agreed. Great. All right, now we're going to talk a little bit, some of the practical things that are out there. There are several questions that I have around all of that. Retailers run a lot of pilots, but I think I just saw the other day that less than 30% of pilots ever scale. From your experience, what's the hardest part of taking a promising innovation, operationalizing it across a real enterprise? Yeah, I think it's really all about prioritizing initiatives because one of the things that I found in leading innovation is that we had winning experiments. They worked. And one, if they work, you really do need to sell it. So it needs to be quantifiable. You need to justify why this is going to take priority over something that, frankly, this is unplanned work because innovation is typically, we were always working on things that were not a part of the annual business plan. We were looking a few years out. Right. So things that we were experimenting wasn't what rest of the company was doing. So once you have a winning experiment, now you come and you want to scale it, operationalize it, roll it out, but there's all sorts of planned activities and priorities that are ahead of it. And so then it's how do you really get that in line, get it into the queue so that you can get it into the enterprise and get it in front of more than just a very small subset of your customers. And I think the way to do it right is, as I mentioned, you've got to have a business case. Fundamentally, there has to be some business value as to why this initiative is going to take precedent over the other ones that are already underway. Yeah. One of the things that I always tell retailers that I'm working with them is how do we create a business impact model that really looks at the value of this initiative? And then let's measure whatever transformation is being done with this vendor community that is doing it for you. Let's measure all of that against the business impact model assumptions. So we built these assumptions in it. If it works this way, it should give us this kind of value. That should be our ROI, your IRR on the back end of it. Are we addressing it that way? Because at the end of the day, science fair experiments don't win anything. You've got to have a big business in, right? You do. It's interesting too. I think we were talking about it. We always looked at the initiatives in innovation eventually, right? We matured our process once we got it up and running. And for sure, business value is nothing quite like business value and having tangible revenue growth, operational expense reduction. But there's also something to be said for talk value. There is something to be said for the public recognition that you are an innovator and that you're looking for ways to create a competitive advantage through having some real IP. So I think when you are thinking about these experiments, for sure, business value is that's numero uno. However, I think talk value is important. And then some while we impact creates that talk, that honestly, I think in fashion and beauty and probably in health-related retailing, that having those narratives kind of amplify the brand in a way that in some other more mundane categories, you probably can't look at it. So I get what you're saying and I think that's a great call out. All right, well, let's talk a little bit now about unified commerce. Beauty puts unique pressure on Omnichamp, inventory accuracy fulfillment, in-store experience, digital discovery, all those things, everybody's always talking about the unified perspective. How do we get it right? Where do you think retailers are really struggling most and trying to unify all these different kinds of experiences and workflows? Well, I'll tell you, I think from a unified commerce perspective and I know this is a topic that you're really a very well-versed in and have been talking a lot about modifying the commerce experience. But I think it's just in Saro and it's not a new topic. I do think that really bridging, physical and digital, bridging those together and making it be one seamless, some of these words, I mean, we're just overusing them. I think that's important and what does that mean? What does that look like? I think the thing, one of the things that it looks like is if you're thinking about a physical store, in general, in a physical store, You do not know the browse behavior of your customer that walks in the store. You could put cameras up, you could really monitor and then get signals which I think people should start thinking a lot about because it's becoming more cost-effective, but in general, you don't know that browse behavior. On the other hand, in the digital channel, you do. You know what they've looked at. You know what they've put in their cart. And so I think the challenge is, it's more than just having someone look at something digitally, walk into the physical store and then provide access to what they placed in their cart. I think it is understanding more than just what they've looked at, but what were they browsing? And then I think the thing that's really essential is how do you bring that into the physical world? If the guest is in your store, ultimately, someone's not going to tap on the shoulder and say, "I know you need to rock the right side." "Hey, you were looking at this great care care product." So somehow you have to really think about what is the right moment and what points can you use? Maybe it's the handheld device, right? Up to really help them and take things from the digital world, poor vice versa, physical world. And think about the right moment and how do you deliver that into the experience. I think that's something to really be cracked in the world of unified commerce. Right, that's great. What a great response. Now what I really wanted to talk about is prioritizing various sorts of technology, particularly today in this AI heavy world that we're living in. Every retailer that I'm talking to and I'm sure everybody that we know out there really is being pitched AI or augmented reality personalization ought to be. I mean, just a range of things, right? There's so many different topics, but much of it is obviously underpinned by AI. But how do you really decide? I mean, we have to look at this, I think, much more practically, right now there's a lot of hype going on. So looking at it more practically, how do you decide what was worth investing in now, let's say, versus what belongs on a future roadmap? The tough question, I'm sure that you've had a lot of, you had that come up a lot. This is very cool, but is it what we invest in now or is that something we think about further down the road? Yeah, a couple of things. One, having a dedicated digital innovation team as we did at Altar, there always was this trying to figure out the balance between work that we were doing that really actually some of it could be applied near term. Winning experiments that then we could actually deliver business value really in the near term pretty quickly and experimentation. So there has to be a good balance between what some might think of as project work, more kind of these tangible outcomes and true experimentation. There has to be good balance, and sometimes you'll find that you'll alternate, like in what some years we might have had more experimentation, then we had initiatives that were delivering near term value but with modern technologies. I mentioned it earlier that even in deciding which experiment to do, which initiative to run with what kind of cool technology, we definitely went through a process where we would evaluate each of the initiatives across three different categories, business value. What could we drive from a financial perspective? Creating just a really solid pipeline, a pipeline, great ideas, and ones that were really something that we felt were going to make a meaningful impact to the guest or customer, I should say, and building like a solid pipeline of ideas that they may not be appropriate now, but you actually want to build up that pipeline because you could just be ahead and you may tap back into the pipeline later on. So it's build a solid pipeline, are we just maybe doing it to learn, to get ahead to learn for when the time is right, build up the pipeline. That could be one of the key reasons that you want to do something. And then last is some of the PR and the visibility that is provided by you basically being a thought leader and being a talk value, is that kind of the talk value talked about before? Yeah, I think that that's true, particularly in your industry and particularly with larger companies where they want to be seen as pushing the envelope a little bit and obviously a fair number of those things ultimately come back and get absorbed by the organization to deliver real value over time. It's a funny thing about technology and I've used this expression both with retailers and with technology vendors and that's being early feels a lot like being wrong. Yeah, there is a lot of truth. There is a lot and people push back on it in the whole bit, but I think that it's fascinating to me how thought leading the companies you've worked for were around wanting to try new things and wanting to really prove business value and then picking the best of that really to continue to grow against their business objectives, I guess, would be the best way to put it really making it happen. When they do say, right, the more people push back, the more really tension you get on some of these ideas and initiatives that actually you're really on to something. And I think that is true. I think you can feel when the amount of change that you're going to have both customer and company undergo. And that's a bit of a fine balance. I think you have to figure out, is it pushing back because it's just unrealistic or is it pushing back because it is going to take a lot to get there? Yeah, I got it. Let's talk about the other side of that. I call this knowing when to stop, but innovation means knowing when not to continue ultimately. Sometimes you have to be in this place where you go, okay, can you talk a little bit about maybe how you evaluated pilots that felt really exciting, but ultimately they weren't going to deliver enough value to really be invested in at least in the short term. In the beginning, we really were this fledgling team that then we had to mature the team, get the team stood up, grow the team, do a lot of education and learning. We did pretty quickly within about a year, probably little over 12 months. We established an experimentation process. And then we actually formed an innovation success team. And the innovation success team, their mission was to make sure that every initiative had an objective, it had defined outcomes. It was, what's your hypothesis? What's the experiment? Why are you doing this? What are you proving? Both qualitatively, quantitatively. And then we really did try to stick to that. We applied the experimentation process. We would time box the experimentation and then we'd step back and say, okay, against what we wrote up, was it a success? And oftentimes it's, and what did you learn? Because I think what's important is that success may actually just be learning. You've learned something and what you may have learned is not to do it. You know, that ultimately it didn't work, it didn't resonate. But you have to stop and say, but you'll always learn something. You're always going to learn something. That reminds me a lot of, what was the Thomas Edison that said we didn't fail, we just figured out thousands of ways not to do it. Exactly. That's paraphrasing, but it was something like that. Believe me, it reminds me of like one of the experiments that we did very early on was working with, believe it or not, Panasonic and Asophia provider, actually building digital mirrors. And very quickly, one of the things we learned is we could have been there faster. We didn't need to build the digital mirror. There were digital mirrors that were available. They were just focused on the experience rather than tinkering with putting cameras into a mirror and the quality of the reflective surface and so. So yeah, I learned that a beauty, beauty retail, I just don't need to build the digital mirror. I got to say, anybody that decides that they need to do it. They need to do hardware to do their initiative, it's a retailer. I would tell them to consider. But in any event, yeah. You folks were at Ulta, we're always cited as a leader in loyalty of personalization. I think you did a great job with that. This personalization becomes more day to driven. How do brands, deep and relevant without crossing into what I guess I would call Creek? You know, I love the reaper still talking about creepy experiences and I feel like it's time for a lot to be really kind of move on from that. And that particular word because what we have is we have customers, all of us who are engaging with all of the generative AI technologies, GPT, Gemini, Claude, the list goes on perplexity. And they're having conversations where it's too way. They ask a question. We've been asking questions forever. But now you can ask a question. And if the answer you get isn't quite right or you want to tailor it, you're actually providing more and more information into the technology about what you're interested in, what you're looking for, you're actually allowing the technology to get to know you. And so what I would argue is that I think all of us as users of the technology, we're responsible for whatever that experience may be. If the experience is getting too personal, I think what you need to think about is how much public information, what is the information that you want to be public? And then maybe there's information that you want to hold closer to the best. I think we're moving into a world where we do have a lot of things to do. have these uber personalized experiences driven by the fact that we're also contributing to having the technology know more about it. So what we need is to make sure that if there are things that we don't want it to know, there is always an opt out. And maybe the opt out is even built out. I'll be candid with you. I've been spending a lot of time over the last, I'm going to say maybe the last 90 to 120 days. Maybe looking at how e-commerce in particular, there's going to be these curation bots and their consumers are going to be sharing more and more information with it. And it is going to go out and shop for us. It's a proxy for us, right? So the actual consumer is not the human being clicking through the front door of the website, but actually coming through the back end. Which of course means retailers and brands have to expose a lot more on the back end for these AI-based bots to be able to interact with the brand product, availability, all of those things. But I think that we're going to see, I think a lot of controls and ring fencing around. What am I willing to share? What it actually has real high value if they use this to come back to me and tell me exactly what it is that I might like from this particular brand or how it's going to solve this particular problem or give me what's best for me in this category. And those things that I don't want to show and I don't want it doing for me. And I don't think people have even really thought through what that looks like at this point right now. But I think that's certainly what's coming. But I think in general to your point, personalization at this point, what was a few years ago? We've been in this industry long enough to remember when people said, "Wait a minute, that's kind of creepy." And with my background, having been in client telling for so many years, people like, "Do you really know this?" I said, "Yeah, you're sales officials who really learn these things." And they can use this in order to deliver a higher quality experience. The problem is people don't often don't want that very intimate knowledge that may happen in a one-to-one human interaction to be available to a broader enterprise or in some cases now, maybe to a technology. And so it's a matter of figuring out where that is. But at the end of the day, people have crossed that threshold now where the idea and the expectation is that as we're interacting with a brand, that they should know enough about us that they're able to make this a highly relevant engagement. And they don't want to waste their time with people that don't. And I think you folks were some of the earliest people in doing a great job in monitoring what was happening there in all over the years. So some great insights there. Thank you. So I'll shift gears a little bit. I want to talk a little bit about another side of the beauty business. Beauty is uniquely sensitive because it really relates to skin, appearance, identity. How do you think retailers should think about fairness and inclusivity? You're really in trust, I guess, is what I would say. But you always AI had to come more embedded in this cost of experience. Yeah, carefully. And I mean, it's like, wow, that's right. But in all seriousness, you're right. In the beauty industry, I mean, one of the things that we always thought about is it doesn't get more personalized than tapping into your facial features, what you would look like. And with things like all of the virtual triant tools, make up trion, your skin tone, skin analysis, hair type, all of that, it can get pretty right. I mean, you really know visually about the person. Right. And then behaviorally, you know about the products and things that they're looking at that they purchased. So to your point earlier, you know, it was a lot about the customer. I based upon how you're interacting with the technology. I think that, touching the previous, say, this concept of opting in and out, being aware, what are the local regulations? What's emerging? Because it's all over the place, right? State by state. And so I think our friends in IT security risk, in organizations and legal, I do think it's really important, particularly like for us in innovation. It was super important, really great relationships with those organizations because you're already pushing the envelope. And now when you're talking about privacy, you know, all of the personally identifiable information, you absolutely have to think about it. You got to have a head of time. Think about it ahead of time. Have the right governance. Have some acceptable use policies that are updated. And it kind of goes back to, I alluded to it earlier, public versus private. And I really can't emphasize that enough. I think all of the public AI and the large language models are great. But then there are things that you don't necessarily want in the public domain. Right. And again, things maybe about that you might know about your customer or your customer revealing things. But really consider this public, how do you use public when to private ties what you're doing and public versus private and have a structure that allows you to leverage balls? Yep, that's great advice. And I hope that the people that are listening to this start to think about that because the governance around all of that is absolutely critical. And the deep thinking that goes around all of that is you start to look at how are you going to engage deeper? Right. And what is public versus private? It's like a little bit about your work with startups and emerging technology. What differentiates innovation in your opinion that truly scales from a point solution to those that don't make it past experimentation? Just a minute or two on that would be great. I think it is kind of audience size. Who does it really resonate with? Those technology, that's solution. Right. What's the target audience? What's the profile of the perfect customer? Right. Everything is solving, number one, it's got to solve the problem. You know, I honestly, all the years of doing really cool initiatives and all the way from really leading edge to just kind of table stakes, it's got to be easy to use, easy to execute and it's got to solve the problem, real problem. No matter what the cool, innovative thing and there's a lot of it out there has to solve a real problem, has to really have a meaningful impact and I would say to a fairly large set of customers or of people, right, whatever that solution might be. Let's take out a beauty where in our loyalty program, our most valued loyalty tier, those guests that were completely engaged, they contributed a significant amount to the top line. So you know, percentage, right, make such a big impact. It's possible, that's right. A small percentage could really make a difference. So it could be a solution for them, right? But at the end of the day, it's got to solve a problem for more than one thing. You know, or it's got to be, the problem has to be scalable to adapt to your unique needs, etc. I'm going to make sure another Brian is him. Okay, I'm going to share one more Brian is him and that is, don't major in minor things. I can't tell you how many vendors I say that too. You know, I'm like, okay, you've got a really cool technology here, but not solving a big enough problem that you actually have something that the market really can't live without. And so it makes it very, very difficult to find customers and to find value with them. And I think that the way you're thinking about it is exactly right. Identify what the actual business impact around this is. Make sure you're solving a problem that really needs solving and that it back to the prioritization question. That can be prioritized today because it's a big enough problem that it will, you serve maybe other areas of investment they can consider because retailers have to find out about that they can do. And find the right partners that can do that. And consider the job because it's possible. That's why I mentioned previously kind of having a pipeline of innovation. You know, things could be in the scrap yard and the bone yard and whatever, but maybe it's a matter of time. So one of the things that we recognize is all ideas are great ideas and it may be right now. It's not applicable. However, you don't need to reinvent the wheel. You may have experimented with it previously and it's in that pipeline and maybe you can draw upon maybe it's just too soon. Maybe it's too soon and the timing is better when you're two. A few months or a little down the road. So at this point, the rate of change, I saw this week, that AI's capability is doubling every three to four months. So if you start to look, it makes Moore's law look like it didn't matter, right? Like the fundamental amount of technology change is happening, which is opening up new possibilities, new business models, new ways of solving problems. And I think that it's going to become even more important to have kind of a framework by which to evaluate what really makes sense to build because you can build anything. It makes sense to build with delivering us a real problem and I think the subject matter expertise, incorporating that into every decision with the front end of your event and certainly having that filter on the retailer side looking at all this is absolutely crucial. We're kind of down to our last question. I could spend all afternoon talking to you, but we're down to our last question. If you're advising beauty leaders today, think of the one capability that they must get right over the next few years to truly engage deeper in scale smarter. I really believe that the digital experience, and I think I mentioned it, it's ripe for disruption. I think people really need to think about a really interactive engaging experience. One that is iterative. One where it's a two-way conversation. So I do think that we look at all these tools, AI overview, and Google search, GBT, and it's very much of a back-and-forth conversation. And so I do think that it's open-ended, right? You can really ask whatever and you have a reply, but then you need to be able to really have a two-way engaging interactive experience. And I also think it's coming where it needs to be more visually engaging. Not just beautiful, static, flat imagery, but something, think video. And then think video where it's this really immersive, engaging two-way conversation where people can participate. The customer can actually participate in more ways than just a thumbs up or a little heart or something like that. I think that's great. That certainly shows a level of engagement. But I think people need to think about conversational experiences again more of a two-way conversation. Something where you're really engaging and allowing the customer to talk back, if you will. And similarly, inside of video, I think video and a different form of video. That's more like creating what a good human experience would be when you're doing it through video. Where I've spent my life as in clientelling and those learning relationships where both parties invest in creating value together. You learn about me, I tell you about me, you learn about that, you use that to do a better job serving me. I think to your point, that is kind of the next generation of what has to be happening here as people engage digitally with brands is having that approximation of real life face-to-face engagement. Some of that is driven by obviously intelligent systems. Some of that is our people on the other side of that engagement, on the other side of that experience engaging directly with consumers. Yeah, and I'll tell you it's got to be fun. I say that, it's like, well, what does that mean? But I think we can all learn so much from the gaming industry because in the gaming world, ultimately those developers think in terms of micro moments, just incredibly short snippets of time. And when you think about the level of engagement, how long somebody, I think my son spends hours in a particular game, wouldn't we as retailers all love to have that level of engagement? And so something to be said from taking some lessons from gaming platforms and how they really keep you in the game, keep you engaged, I think we need to do the same thing. I think some of these, well, I saw call it or that kind of a mentality needs, we could use a little bit of that gamification and fun, you know, in digital experiences for digital commerce. Okay, well everybody out there, you've heard this, now you know where you need to go. Michelle is telling you where to go, so now you know what to do next. Listen, Michelle, this has been beyond, beyond great getting into all this, I wish we could go longer. Thank you for all of your insights. Thank you for finding a few minutes to come on the show. I want to thank Fujitsu for sponsoring this series and we look forward to hopefully having you on again talking about the other thousand topics that I'm sure that you're ready to talk about. Thanks, Labrion. And again, thanks to Fujitsu for having me. Appreciate it. All right, all the best. Take care. Bye bye. Yeah.