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Good To Great To Gone: Circuit City

March 12, 2009 By

For those who have read Jim Collins’ book “Good to Great” (Amazon link), you’ll remember that Circuit City was used as one of the select examples of “good to great” companies. If you haven’t read the book, I can definitely recommend it.

Circuit City basically dominated the stock market—beating average performance by 22 times at its height—for a 15+ year period. However, one of the key traits of a “great” company is that it’s able to withstand setbacks, whether personnel-wise, economic or other. This hasn’t been the case with Circuit City as it closed its doors last week after filing for bankruptcy in late 2008. This obviously baffled me and I’ve tried to find answers to how this happened. In the end, it boiled down to losing the competitive advantage:

  • Their branding model didn’t work anymore. The goal of Circuit City was to become the best at service, selection, savings and satisfaction. However, other market players had mastered one or multiple of these categories in a better way than Circuit City: Best Buy (service and selection), WalMart (savings) and Amazon.com (satisfaction). As a result, Circuit City failed to gain a competitive edge.
  • Circuit City had a tradition of paying their employees well and training them to deliver the best possible service, but cost cutting procedures led to stripping sales commissions from sales staff and eventually to layoffs of these well-paid and knowledgeable employees. This also hurt their competitive advantage.
  • The economic recession wasn’t a key driver but it does magnify the effects and was strong enough to push Circuit City over the edge.

In essence, Circuit City destroyed its business by destroying the underlying foundation on which it was built and failing to reinvent itself.

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The Bottleneck Of Innovation

February 12, 2009 By

Innovations happen all the time and can be as incremental as putting a new type of bottle cap onto a bottle. It’s when innovations don’t happen within your organization that you should start to worry. Strategies don’t change from one day to another—or at least they shouldn’t. If the direction and the philosophy are clear, put your marketing hard-hat on and get cracking. In the era of the real-time stream, innovations are becoming increasingly important as they become the changes that meet the new demands.

Find the innovation bottlenecks in your organization. Remove them.

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Natural

January 27, 2009 By

Some companies switch their strategic and operational focus. Consider Kimberley-Clark, which started out as a manufacturer of industrial paper, but switched its focus entirely toward consumer goods. Kimberley-Clark was able to make the transition not only because it was well-considered, but it was a good, natural move for its management.

Opportunities will come and go, but the ones that you capitalize on should feel natural to you and the people you work with. One company executive told me about his bad experiences after the company bought themselves into certain markets only to find out that they had opened very expensive cans of worms. They forced the issue and are paying the price right now. Moreover, they’re stuck with a more difficult decision: continue and try to battle through all the complications that have now arisen—or—divest in the new activities and cut your losses? Neither is a desirable outcome and the experience will be an expensive lesson.

Don’t force the issue. Go naturally.

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Combining Long-Term Thinking With Real-Time Action

January 15, 2009 By

The growing challenge that companies face these days is the real-time stream. News, information, developments, feedback, et cetera are increasingly available and confronting you in real-time. Real-time information often requires real-time action, but how does that affect long-term planning?

Long-term strategies—or strategies in general if you will—have always focused on achievements, objectives that needed to be reached by a certain point in the future. A more real-time focus on business would dictate objectives to be around a shorter time cycle and could be detrimental to long-term strategic planning.

However, I disagree. While the real-time stream does stress more real-time action, action must be focused on protecting the future. This does call for an adjusted approach to business. Achievements should focus more on shorter-term objectives but should contribute to a longer-term goal. Policies need to be created to deal with real-time interferences and processes need to be ironed out to improve responsiveness. The strategy should become more of a philosophy, a way of doing business with certain goals or ideal future situations as targets. Tactics and operations should become more agile and should focus more on short-term measurable results that can be continuously tweaked.

Prepare yourself to deal with the real-time stream but don’t lose sight of the future.

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Protect The Future

December 21, 2008 By

Last month I had the opportunity to visit a presentation and Q&A session with Jeff Immelt. Jeff talked about numerous subjects such as the presidential elections, the economic downturn, corporate social responsibility, and—of course—life as the CEO of General Electric (GE).

He also mentioned “protecting the future”. Every major business decision and business activity was made based on the protecting the future. Many companies capitalize on opportunities in the here and now, generate massive amounts of buzz for a certain (short) period of time, or are focused on quick wins. The question remains, however, whether these initiatives contribute to setting a company up for long-term success.

Using the “protect the future” mantra helps you analyze opportunities and make conscious decisions.

Are your initiatives focused on protecting the future?

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