Finding the courage to embrace risk
Joe Magnacca, CEO of Massage Envy
In the legendary words of the late, great radio broadcaster Paul Harvey, “And now, the rest of the story.”
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Retail visionary Joe Magnacca, currently CEO of leading massage franchise operation Massage Envy, joined the inaugural Future Leaders Summit, jointly produced by Drug Store News and Mack Elevation Forum, to talk about a subject he knows a lot about — having the courage to take risk.
Indeed, Magnacca’s rather impressive body of work — from 17 years spent at Loblaws to online startup Grocery Gateway, to Shoppers Drug, and then onto the United States, first at Duane Reade and then Walgreens for five years, followed by four tough years at the helm at RadioShack and now leading Massage Envy — has been largely built on embracing risk. In a light, humorous and at times brutally honest discussion, Magnacca explained why he continues to roll the dice and embrace change, outlined his criteria for what defines risk-taking and walked attendees through his own thought processes for some of the biggest decisions he has made over his career.
“To me, risk is all about change. Having the courage to make change in a business, whether it’s an existing business, or a new business or redefining a category — it’s all about change,” Magnacca said.
Being a risk-taker comes down to three key factors, he explained: Having the courage to embrace change; taking that courage to redefine the space you operate in; and in the process of redefining that space, thinking in terms of a revolution rather than an evolution.
But change and taking risk aren’t always so easy to do in the merchant-driven world of retail, Magnacca admitted, where the inclination is to play it safe and to look back to try to replicate past successes rather than look ahead to try to “change the game.”
To help encourage his merchants to “take that second step,” Magnacca challenged his teams at Shoppers, and later at Duane Reade and Walgreens, to look forward to where their businesses were going in the years ahead. “I would use this very simple tactic, and I would encourage you all to view your own businesses this way. I would ask, ‘Where is this category going to be in five years?’”
When you ask a merchant what will happen to their category in five years, you release them from that backward-looking, risk-averse style of thinking, he explained. Once they are focused on the changes that are coming, the discussion shifts to how to get there. “And then I would back that up. So, to do that in five years what needs to happen in three years? And what’s going to happen in three years needs to begin next year, so we have to start on that journey,” he said. “You’ll never start that journey if you don’t know where it is that you’re going.”
Providing a first-hand look at what it means to be a risk-taker and a change agent, Magnacca spoke frankly about one of the most challenging chapters of his career, his decision to leave Walgreens in 2013 — just one week following his promotion to president of the company — to become the CEO of RadioShack.
Looking back on the move, anyone who really knew Magnacca couldn’t have been majorly surprised by the decision, he explained.
“RadioShack, although challenged, had a lot of things going for it,” he said — technology is a fast-growing category, and RadioShack had the potential to harness that growth across its 4,400 U.S.-owned and -operated stores, plus another 1,000 franchised locations. In addition, the company “had an amazing private-brand history,” Magnacca added, a major sweet spot for the career merchant, he confessed.
No doubt, the challenges were significant. For one thing, the company was faced with having to write-off almost 10% of inventory.
Still, despite the challenges — and there were many, from weekly cash meetings to determine things like if the company could afford to buy inventory, make payroll or pay for a promotion, to wrangling with bankers about making critically necessary changes to the business — Magnacca swears he would do it all over again.
A self-proclaimed “merchant first and a marketer second,” the experience at RadioShack forced him out of his comfort zone and made him have to refocus his attention on financials and P&L management. “I don’t regret it,” he said. “Because at the end of the day, what it taught me was that if you don’t take that risk, you’ll never really know what you can achieve.”