Saturday, June 10, 2017

The Incoherent Sears


A big theme centering on this week’s readings was coherence, the ability of a company to align its differentiating internal capabilities with the right external market position.  The authors of “The Coherence Premium,” suggest companies should figure out what they are really good at and develop those capabilities until they are best in class and then align the capabilities with the right marketplace. 
Southwest did this by developing capabilities in providing “outstanding, passionate, caring Customer Service combined with an efficient, simple, low-fare Customer experience provided with high reliability and operating expertise.”  And CEO Jeff Immelt did this by moving from a “classic conglomerate” to a high-tech, manufacturing-based, global product and services enterprise, shedding pieces of the business deemed not aligned with the company’s core along the way. 

One could look at the onetime retail giant and American icon Sears as an example of why an incoherent strategy will lead even the biggest companies to fail.  Just this week, Sears Holdings announced it was closing 66 more stores in its drive to “bring its Sears and Kmart stores back to profitability,” including 49 Kmart stores and 17 Sears stores.  The new closures bring the total to 180 shutdowns Sears announced earlier this year.1  The closings follow an effort by Sears to raise needed cash by selling one if most iconic and successful brands, Craftsman tools, to Stanley Black & Decker for $900 million.2 
Three strategies Sears executed over several decades are aligned perfectly with three of the “Seven Ways to fail Big” which account for most business failures according to the authors:

1.     In 1981, Sears launched an expansion outside its “core” retailing business into financial and real estate services with the purchase of the Dean Witter Reynolds securities firm and the Coldwell Banker real estate operation.  This was a solid example of “The Synergy Mirage” as the new business lines had very few synergies with Sears’ core business. 3

2.    Over the last decade, Sears sold off brands like Lands End losing brand and scale advantages and in 2004, Sears and Kmart merged in an attempt to bring two struggling retailers together into one profitable one.  Further, Sears began selling some of its best stores in 2013 in order to shore up its financial situation.  These series of events provide a solid examples resulting from a “Consolidation Rush” in a maturing industry. 3

3.    Sears has failed to update its retail model, opting for “Staying the Course” even when online retailers such as Amazon thrive.  Amazon  is now worth more than these 10 well-known retailers COMBINED: Macy's, Kohl's, Sears, JCPenney, Nordstrom, Best Buy, Barnes & Noble, Dillard's, Gap, and Target.4
The authors of “Seven Ways to Fail Big” suggest a Devil’s Advocate be used before executing a new strategy.  I found that to be most interesting as I have seen time and again during my professional life when leaders make decisions without consulting subject matter experts or by having and objective and independent review.  I wonder if Sears had sought out such a review would have prevented its demise. 

Sources:

1.       McCoy, Kevin (2017). Sears is closing 66 more stores.  USA Today.  Retrieved from hxxps://www.usatoday.com/story/money/2017/06/06/report-sears-closing-72-additional-stores/102563986/.

2.       La Monica, Paul R (2017). Sears sells Craftsman to Stanley Black & Decker.  CNN Money.  Retrieved from hxxp://money.cnn.com/2017/01/05/investing/sears-sells-craftsman-stanley-black-decker/index.html.

3.       Mourdoukoutas, Panos (2015).  Four strategic mistakes that haunt sears.  Forbes.  Retrieved from hxxps://www.forbes.com/sites/panosmourdoukoutas/2015/06/10/four-strategic-mistakes-that-haunt-sears/#3a455e4c62a4.

4.       La Monica, Paul R (2017).  Amazon worth more than Sears, Macy’s, and Target combined.  CNN Money.  Retrieved from hxxp://money.cnn.com/2017/01/06/investing/amazon-rules-retail-worth-more-than-almost-everyone/index.html

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