Scaling Innovation in Beauty Retail with Michelle Pacynski

[Music] Hello everyone, I'm Brian Ameral and welcome to the Clientelling Podcast. In each episode, we'll be talking to the retail industry's most knowledgeable and successful executives, those luminaries that are creating value with the intersection of retail and technology. In every episode, you'll hear about new, innovative and transformational customer-centered ideas that are redefining shopping and creating high-value customer experiences. If you haven't already done so, be sure to subscribe to the podcast and let your friends know by liking us on social media. So, let's get on with the show. [Music] Hi everyone, Brian Ameral here and welcome to today's episode of the Clientelling Podcast. Today, I'm bringing you something a little different and something I think you're really going to enjoy. I've been partnering with Fujitsu to host a series called Engaging Deeper and Scaling Smarter and I've been sitting down with luminaries across fashion, beauty and health retail to explore what innovation really looks like right now and perhaps more importantly where it's going next. Not just in terms of technology, but how it actually reshapes the way we engage customers, empower, associates and run our businesses. This first episode is a candid conversation with Michelle Pasinski, an innovation leader who brings a very real, very grounded perspective to how these ideas come to life. We do get into customer engagement, store transformation and clientelling but through the lens of innovation, leadership and change. And if you haven't come across the series yet on Fujitsu's podcast channel or site, I want to make sure you have access to it here. So, you'll find a link to the full Fujitsu series in the show notes. It's definitely worth following. And with that, let's get into the conversation. [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 Altabutie, a 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, Altabutie's 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 Altabutie's innovation agenda from enterprise AI strategy and governance, building proprietary personalization capabilities that deliver hundreds of millions of highly relevant customer interactions every day. Earlier her career, Michelle served as 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, executives 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 in your right brain, 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 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 it is, then I think you got something that can really scale. It's great. And obviously, I think if there was ever a message this year at NRF, one of the core messages, obviously enhanced by AI, the core message is really, or 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, 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, the 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. It's 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 about the practical things that are out there. There are several questions that I have around all of that. We tell us, 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. 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 your 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 impact creates that talk, 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 this. 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 in 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, do it offrying the commerce experience. But I think it's not necessarily, 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. Good but can't resolve. 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 put in their cart. And so I think that challenge is, but 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? 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 correct in the world of unified cameras. Right. That's great. What a great response. And 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? None of 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 where the download wrote? 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 or 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 than 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 the-- >> A thought of the risk. >> That's the talk value. Is that kind of the talk value topic I 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. >> You're having a lot, right? 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 it would be the best way to put it really making it happen. >> When they do say, right, the more people push back, the more, you know, 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, right? 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. But 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 the believe it or not, Panasonic and the software 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. should be just focused on the experience rather than tinkering with putting cameras into a mirror and you know the quality of the reflective surface and so so yeah I learned that a beauty beauty retailer does that need to build the digital mirror. I gotta tell you anybody that decides that they need to do hardware to do their initiative it's a retailer. Yeah. I would tell them to consider but in any event. Yeah. You folks were at Ulta were always cited as a leader in loyalty and personalization. I think you did a great job with that. This personalization becomes more data driven. How do brands deepen relevance without crossing into what I guess I would call creep. You know I love the he read we're 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 Bellist goes on perplexity and they're having conversations where it's two 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 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 it in itself right 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 really looking at how e-commerce in particular there's going to be these curation bots and their you know consumers are going to be sharing more 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 that 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 or give me what's best for me in this category and those things that I don't want to share with 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 what people said wait a minute that's kind of creepy and with my background having been inclined telling for so many years people like do you really know this I said yeah you're sales associate 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 with technology and 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 but I've been monitoring what was happening there at all to over the years so some great insights there thank you also I'll shift gears a year 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 really can trust I guess is what I would say but it was AI had come more embedded in this cost to experience yeah carefully and I mean it's like wow that's you know right but but you know 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 kind of features what you look like and with things like all of the virtual triantools 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 and then behaviorally you know about the products and things that they're looking at that they purchase so do your point earlier you know what was a lot about the customer based upon how you're interacting with the technology I think that touching the previous say this concept of acting 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 to have 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 ahead 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 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 again things maybe about that you might know about your customer or your customer revealing things so 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 both you know that that's great advice and 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 thinking the deep thinking that goes around all of that is you start to look at power you going to engage deeper right and what is public versus private so a little bit about your work with 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 the minute or two on that would be great. I think it is kind of audience size who does it really resonate with this technology that's solution right what's the target audience what's the profile of the perfect customer right if this thing is solving what number one has got to solve a problem right you know I honestly you know 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 a 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 people right whatever that solution might be let's take ultra beauty we're in our loyalty program our most valued loyalty tier those guests that were completely engaged they contributed a significant amount to the top line yeah top you know percentage right it's possible a small that's right 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 yeah think you know or it's got to be the problem has to be scalable to adapt to your unique needs etc that's one of the brineism okay I'm going to share one more brineism 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 that 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 and they can be prioritized today because it's a big enough problem that it will you serve maybe other areas of investment they consider because retailers have a finite amount of that's something they can do. Find the right. partners that can do that. And consider the top because it's possible. That's that's why I mentioned previously kind of having a pipeline of innovation. You know, things could be in the scrapyard and the vognard, 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 know, 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 on a year or two. A few months for the down the road. Well, at this point, the rate of change, I saw a quote this week that A. I'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 that's 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. What 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 vendor. And certainly having that filter on the retailer side, looking at all this is absolutely crucial. Yeah, kind of that 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, what's right 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. Right. So I do think that we look at all these new tools, AI overview in 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, 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, they 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 experience as 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 approximating what a good human experience would be when you're doing it through video, right? That's right. Where I've spent my life is in client telling and those learning relationships where both parties invest in the and 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 is having that that approximation of real life face to face engagement. Some of that's 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 mean, I say that it's like, well, what does that mean? But but I think we can all learn so much from the gaming industry because in the gaming world, ultimately those 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 by sunspence, you know, hours in a particular game, right? 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 last saw call it or that kind of mentality needs it. 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, we 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, 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, Laprion. And again, and thanks to Fujitsu for having me appreciate it. Well, that's today's show. Thank you for listening. If you like what you heard, be sure to subscribe to the podcast and like us on social media or drop me a line at Brian at retail tank exec.com. If you'd like to learn more about what we do at clientricity, visit www.clientricity.net. Until next time, day well and go do something amazing for your customers. You.