Wednesday, April 23, 2014

When Strategy Kills: A lesson on Sears

"The customer is always right!" I've been watching a lot of the ITV/PBS series Mr. Selfridge (staring Jeremy Piven in a very different role than his Entourage breakout as LA agent Ari Gold), partially because it reminds me of close to home (Chicago, Wisconsin), partially because I watch entirely too much costume drama television.

For those of you unfamiliar with Henry Gordon Selfridge, he was involved with making Marshall Fields a blazing success in Chicago, and for coining such standard retail strategy as "The customer is always right" and "Only ___ Shopping Days until Christmas". His work at Marshall Fields, and the department store he founded in London that still bears his name are monumental examples in strong business strategy.

Reading the Collis and Rukstad article on strategy, they closed with the statement "The value of rhetoric should not be underestimated. A 35-word statement can have substantial impact on a company's success."

Selfridge clearly understood that. He constantly integrated his vision to every employee throughout his store. Here's the made-for-tv version of his strategic vision:

Sadly, Collis & Rukstad mention another Chicago retailer in passing while observing consumer value that once had a thriving vision for how to pursue a vision, but no longer. The matrixes relating to Walmart and Sears made me jump because I had recently read a depressing article in Slate about the closing of Sears flagship downtown Chicago store.

They had the following to say about why Sears had faltered and was shuttering stores, "Sears is dying as a result of two not unrelated phenomena: the shrinking of the middle class and the atomization of American culture. It’s still an all-things-for-all-shoppers emporium that sells pool tables, gas grills, televisions, beds and power drills, then cleans your teeth, checks your eyes and fills out your taxes. But that niche is disappearing as customers hunt for bargains on the Internet and in specialty stores, and as the retail world is pulled apart into avant-garde department stores and discounters — exactly what Sears promised it would never be. Maybe in 1975, a salesman and his boss both bought their shirts and ties at Sears, but now the boss shops at Barneys, and the salesman goes to Men’s Wearhouse. This divide is a result of the fact that, over the last two decades, the top 5 percent of earners have increased their share of consumption from 28 percent to 38 percent."

Perhaps Selfridge had Sears beat by 100 years that specialization (with a lot of wow!) was a more profitable business model to sustain changing times, but perhaps not. Sears was a powerful, profitable company that did stay ahead of changing markets for many decades. 
Slate also linked to an article from Crain's Chicago Business that gave another picture of what's really problematic at Sears these days:

At 7 a.m., 10 senior Sears executives gather in a sixth-floor conference room in Hoffman Estates for a daily meeting — or, as some refer to it, a "daily beating" — with Edward "Eddie" Lampert. ...

But not knowing whether it's going to be a good Eddie day or a bad Eddie day is just the beginning of the uncertainty that plagues the hallways of Sears' northwest suburban corporate complex.

"You never know what the strategy or the plan is," says one executive who requested anonymity because of a confidentiality agreement. "What are we building? What are the criteria for success?"

Sears soon may face more fundamental questions. After the second-worst year in the company's history, and with its annual shareholders meeting two weeks away, there is open discussion of a once-unthinkable proposition: Will this 126-year-old company, which helped define modern America, continue to exist?

"The challenges the company faces today are far worse than ever before, but they're very much self-inflicted," says Arthur Martinez, who served as CEO from 1995 to 2000."

Clearly, while there have been substantial shifts within the American retail economy, the anonymous  executive's statement makes clear the extent to while Sear's is in grave strategic trouble from within. Much like the Collis and Rukstad article pointed out, the whole company is without strategy, management are hamstrung to make corporate strategic moves that could right the ship, and there's no leadership in place.

Sears has also really failed at analysing the "strategic sweet spot." They've missed the boat on their market's context, accommodating their customer's needs, and aligning the company's capabilities with competitors' offerings.

Also, btw, I have no idea how their Italian-yacht jet-setting CEO hasn't been run off by the board at this point, and well, he could use some tough love from Mr. Ari Gold:

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