The digital CFO: How Target transformed the consumer journey in retail

In this podcast, Heidrick & Struggles’ Alyse Bodine speaks with Cathy Smith, former CFO of Target Corporation, one of the largest retailers in the United States. Smith shares her experience as CFO of Target during its successful digital transformation, including the critical importance of understanding the consumer journey, both physical and digital, to inform the company’s strategy and investments. She further shares her vision on future requirements for talent in the finance function, including more technological and data-driven skills, and advice for women in finance.

Some questions answered in this episode include the following:

• (1:02) What specifically did you do as CFO at Target to help guide its transition to a fully digital company?
• (4:03) Were there any lessons learned or areas that you were surprised about going into this journey?
• (6:18) As new technology has changed both the day-to-day work of the finance function and the competitive landscape, what should CFOs do to stay ahead of the curve?
• (10:44) With the continuous changes that new technologies and digital innovations are bringing to the retail industry, how can CFOs help their companies disrupt rather than be the ones disrupted?
• (13:08) Is there any specific advice you’d offer to young women who want careers in finance?

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast, the premier provider of leadership consulting, culture shaping, and senior-level executive search services. Every day, we’re privileged to talk with fascinating people who are shaping the future through their leadership and vision. In each episode, you’ll hear a different perspective from thought leaders and innovators. Thanks for listening to the Heidrick & Struggles Leadership Podcast.

Alyse Bodine: Hello, I’m Alyse Bodine, a partner in Heidrick & Struggles’ Philadelphia office and global co-head of the Financial Officers Practice. In today’s podcast, I’m speaking with Cathy Smith, former CFO of Target Corporation, one of the largest retailers in the United States. Cathy was CFO of Target from 2015 to October 2019 and was a key contributor to the company’s digital transformation program. Earlier in her career, she held CFO positions at Walmart International and GameStop, among other companies. Cathy, welcome, and thank you for taking the time to speak with us today.

Cathy, during your successful tenure at Target, you helped guide its transition to a fully digital company, from e-commerce to supply chain. What specifically did you do as CFO to ensure that outcome?

Cathy Smith: First, I’m a strategic thought partner, and it may be useful to go back a little bit. About four years ago, we found that the consumer was moving faster than we were. And so we kind of stepped back and said, “What’s our right to win? Where are our strengths and points of differentiation?” And in all visible outcomes or all ideas of where the future was going to go, we said, “The consumer is going to be more digitally enabled.” And so, as a company, we said, “We’re going to have to have a great physical experience,” which is why we then invested in remodels and a great physical experience, but the consumer doesn’t separate a physical experience from a digital experience. When they went on Target.com and then came into the store, they wanted us to know them through that whole journey. They didn’t see the brand differently. So we had to really invest in our digital footprint as well, whether it was in the stores and how our teams serviced guests with their mobile devices to how a guest transitioned their shopping journey, from where they started their shopping journey on a mobile device, probably at their home, and then showed up in our stores on their mobile device, but they still wanted to be in the physical store, whether it was to see the product or ask some questions or just, as I call it, do some retail therapy—grab your Starbucks and wander around. So we had to really invest in digital from end to end, through that entire customer journey and how our team members serviced our guests.

So that’s where we started, four years ago. We said, “We’re going to invest in physical experiences, we’re going to invest in digital experiences, we’re going to make sure that we have a differentiated assortment,” which is why we then leaned on our own brands and launched so many new owned brands.

Then, as the CFO, I made sure that we invested behind exactly the five strategic priorities that we laid out. I made sure we invested our money there, and we stopped investing in places that weren’t one of the five strategic priorities, because that was really important. More importantly, it kept the team focused so that we could advance our strategy faster.

So I helped be a strategic partner, helped make sure our investments were where they needed to be, and then made sure we had the right measurement system so that we could measure our success, and the last one was communicate. I came up with a very simple five-point red, green, yellow stoplight that we would measure ourselves against. And I used it for the internal team, for my board, and for the external community, and I said, “Measure us against these five strategic pillars and red, yellow, green every single quarter.” And I used the exact same scorecard for about a year and a half, just to show the progress that we were making against those, but digital was at the background of all of those.

Alyse Bodine: Were there any lessons learned? Were there areas that you were surprised about going into this journey?

Cathy Smith: The biggest lesson is that we first thought we needed to close doors, and so I did a really deep dive on all of our physical assets, every one of our 1,850 stores, and really understood them. What we realized was they actually were going to be a great distribution point. We said, “We know we’ve got great physically located assets,” and so while we initially went down the path of closing stores, as we gathered more and more insights, we said, “Wait a minute. All of our stores are within 10 miles of 90% of the population of the United States. That’s going to be essential in all versions of the future.” And so we didn’t close stores.

The other learning, which came a little later, was everyone was doing a lot of analysis then, and we found out that if you have a physical and a digital presence, you get one and one equals three for the consumer; you get more brand awareness. They’re more comfortable shopping online if they can return in store and vice versa. And so you want to be very thoughtful, which is why I think some of these retailers today that are shutting stores is a real challenge, because you lose your brand awareness both physically and digitally. And I go back to the consumer doesn’t care—they see one seamless brand experience; they don’t see it as a physical and a digital experience.

Alyse Bodine: It’s interesting—consumers kind of want their cake and eat it too. They want the digital online ease but also, in a similar way, the ease of a physical location.

Cathy Smith: They want all of the above, right? Which is why we knew that we had to deliver ease and convenience. We had a strength in the physical locations, and we had a ton of brand loyalty and love, but we had to deliver ease and convenience [along the entire journey—physical and digital]. If they start their shopping journey on Target.com, they want to be able to some days come into the store and pick up their purchases, some days pull into the parking lot—they’ve got the kids in the backseat—and be able to put their items in the trunk within two minutes. Some days I need you to bring it to my home with my personal shopper, some days I want you to just send it to me two days free, and some days I want to wander around for retail therapy. All of those, we said, we have a right to win in. And every one of those journeys were digitally enabled.

Alyse Bodine: Cathy, thinking about the finance function specifically, as new technology has changed both the day-to-day work of the function and the competitive landscape, what should CFOs do to stay ahead of the curve?

Cathy Smith: I love this question because there’s a ton of research that says if you think seven years out, you break incremental thinking and you go to transformational thinking, and I’ve spent a lot of time thinking through this. I like to ask, “How will finance create value in the future?” and then work backwards from there. And when you do, you realize you may not have the skills and capabilities today that are going to allow you to be successful in the future, and that’s exactly what we did at Target in our finance organization. We realized we needed to have some light coding skills for robotics process automation. We needed to not be afraid of but embrace artificial intelligence and machine learning because it has some real applications in the work we’re doing in the finance community today. We needed to be thinking about blockchain, especially around all of the intercompany transfers; it’s a really logical place to use the technology. And everywhere in forecasting for FP&A [financial planning and analysis] we should be using predictive analytics. And so we, as a finance organization, said, “What do we need to look like in seven years?” and then we worked backwards, and now we’ve been working on our skills and capabilities.

Alyse Bodine: So with that, Cathy, how do you see the role of the finance function and the CFO five years from now?

Cathy Smith: In all versions of the future, we’re going to be more digitally enabled, so back to all of those digital technologies—robotics process automation, artificial intelligence, machine learning, blockchain, predictive analytics—we know we need to be using and deploying those in our function in all versions of the future.

We also have to be more data-driven; there’s no question. I have this great vision of using data to lead us to things as opposed to using data in service of, and there’s a difference there. And so the conversation I’m having, for example, with my internal audit team is how do you get data to predict or to guide you to where the risks are so that you can work on the development of the process or the product and remove the risk there, as opposed to using data at the back end for an audit in order to bring to light where the risk might be? There’s a nuance there. So in all versions of the future, we’re going to need to be more data-driven. And getting my team and our teams really comfortable with this. If you’re the generator of data, make sure you have good governance and standards; if you’re the receiver of data, make sure there’s good governance and standards. Because data is going to be key in all versions.

The next one is complex problem-solving skills. I like to say that all the easy problems are gone, and so we need more complex problem-solving skills today and into the future. I lean on Six Sigma because I grew up in aerospace defense, and so the Six Sigma toolkit is what I lean on: five whys and root-cause corrective action and just the basic tools from Six Sigma. But whatever your preferred toolkit is, go to it and enhance it because you need more complex problem-solving skills.

And then the last one is we’ve got to be better storytellers. There’s no question. When I think about finance in the future, the role is going to be, as I said, more digitally enabled, more data-driven; we’re going to have to have better complex problem-solving skills; and then the last one is we’re going to have to be better storytellers. Because with the plethora of data coming at us, being able to synthesize that and make it be insightful to the users of it is going to be really critical. So we’re working a lot at Target right now on how do we become better storytellers.

Alyse Bodine: When you do think about the more traditional rotations that finance executives rotate through, up and coming, it’ll be interesting to see what is added to that curriculum.

Cathy Smith: I’ve actually thought about that. I hired, about a year ago, my head of financial planning and analysis, and I very strongly considered a data scientist instead of a more traditional finance person. And the reason why was that I wanted someone to really lean hard into being data-driven for analytics. I ended up going with a more traditional finance person, and she’s fabulous, but she happens to bend that way herself. And so really pulling forward digital enablement and data is going to be critical. So when you think about rotations, I think there’s going to be one in data science or data analytics or something in that world.

Alyse Bodine: Thinking about the continuous changes that new technologies and digital innovations are bringing to the retail industry, how can CFOs help their companies disrupt rather than be the ones disrupted?

Cathy Smith: The first thing I think of is never become complacent and always be scanning the external environment, with a really critical eye, for what’s going on there. There’s something I learned when I was at Walmart and that Sam Walton did, and that is that he walked into a lot of competitors’ stores, and he’d look for what they did well, not for what they didn’t do well. Because it’s easy to pick out and be critical of others on what they’re not doing well, but go and find the one thing that they’re doing well because you want to be sensitive to what the competition is doing well. So always be thinking about what the competitors are doing. Be a student of your business and your customers and your competitors. And I think you have to keep that lens and that balance at all times.

And then Jeff Bezos says something that I find relevant, and that is to focus on the things that don’t change. And so, from his perspective, things like low cost and faster delivery are not going to change, and so he’s made sure that Amazon focuses on those relentlessly. For us at Target, we’re going to make sure we understand what makes us different, and so having a curated assortment and a great physical and digital experience matter a lot for us. But focus on the things that won’t change as well when you think about the disruptors that are going to be out there.

Alyse Bodine: You talked a lot about keeping an eye on the competition, what they’re doing right, also noting perhaps what they’re not doing as well. What about learning from other industry sectors? I think about the healthcare industry, the consumer aspect of healthcare now. In the world of retail, are there industry sectors that you look to for guidance?

Cathy Smith: First off, all great finance partners need to be looking at all industries because there’s something interesting in all of them. And the great news about a finance person is that our skills and capabilities are fungible; they can go across industries. And I’m a great example in that I’ve seen five different industries in my career, so I would be the first to tell you that. And so I do think that there’s something applicable. I pick up from my experiences—something out of aerospace defense, out of healthcare, out of manufacturing, an international footprint versus a domestic footprint. I absolutely think there is something always going on. And so I’m kind of a forever consumer of the headlines, and across all industries, not just retail and consumer.

Alyse Bodine: Finance as a function is much friendlier to women today than it was even 15 years ago. Nonetheless, is there any specific advice you’d offer to young women who want careers in finance?

Cathy Smith: First off, finance is the best function. It’s the one discipline where you can see the whole picture, and it is the language of business, so I think it is absolutely the best function. My advice would be this: be bold and curious and accountable. When I look back through my career, that’s the common element that I’ve always done. I’m always the first to raise my hand and say, “I’ll take on that assignment,” whatever it is. And I’m very curious. I’m that person who could have taken every class at college because I would have found something interesting about them all. So I would say be very curious, and then be accountable, make sure you deliver, and so hold yourself accountable to delivering outcomes and results. And then lastly, lead authentically. And I always remind women that you can do anything.

Alyse Bodine: And if you were to give one piece of advice to future leaders about what they most need to do today to thrive, what would it be?

Cathy Smith: Stay curious. Realize that change is the only constant. And so learning to live with, and maybe even thrive with, change would be my piece of advice.

Alyse Bodine: Cathy, thank you for making the time to speak with us today.

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