Success breeds complacency. Complacency breeds failure. Only the paranoid survive.
– Andy Grove
This Andy Grove quote is one of my personal favourite quotes, and as a reader of quotes, that’s saying something. To some degree, it addresses the question of what the 20-plus retail business collapses that have occurred in a wide range of categories in Australian retail have in common.
Was it high cost structures, a blurry point of difference, lack of innovation, strategy or competitive spirit? Too small to be big, or too big to be small? Did they believe, to the exclusion of everything else, that product is king or queen? Did they think that a shop-on-every-corner mentality mattered most? Were they under-capitalised, under-researched, underwhelming and over geared?
From Max Brenner, to David Lawrence, to Oliver Brown – the host of recent global retail collapses have certainly exhibited some or all of these symptoms. And yet there may well be two more factors at play.
The first common factor I would suggest, and hope to illustrate through the following story, is what I’m calling healthy paranoia and a “never take your eye of the ball” syndrome.
Twelve years ago, anyone who wanted the latest and best smartphone was excited about the Nokia N95. Launched at the Nokia Open Studio in September 2006, it was trumpeted as the all-in-one multimedia computer and went on to achieve sales of a million handsets within the UK in its first year.
In fact, Nokia executives where so pleased with themselves, the story goes, that they all took an executive holiday, simultaneously demeaning this cheeky little upstart in the US about to launch its first phone.
That phone was the Apple iPhone.
Until Apple’s entry into the mobile world, handsets had been designed by companies that viewed the device as a phone first and a computer second. That’s not too surprising given its history and evolution, starting out as a basic telephone and slowly but surely acquiring more computing features.
But a new entrant can turn thinking on its head, and that’s precisely what Apple did by viewing the handset as primarily a computer that just happened to include a phone capability.
From this, can we surmise that many of the businesses that have fallen over in retail did so simply because their competitors did it faster, cheaper and better (in terms of quality, trend, etc), and their leaders, perhaps, weren’t paranoid enough to pivot their business models quickly in response a new threat? Probably.
It’s a tricky feat to keep your on the road ahead, as well as the one you’re driving on, but that’s what you need to do in retail. Owning or running a business these days is anything but ‘set and forget’, and yes, we should have sold more chocolate sundaes or brown dresses, but what if customers change their minds and don’t want that stuff anymore? Leaders with a healthy paranoia will see category decline months and maybe even years before it’s too late, and pivot accordingly.
I don’t buy the view that these business failures are a direct consequence of online sales. Innovation, fuelled by healthy paranoia, would have embraced new customer distribution channels and pivoted across that space as well. Others have done this.
To my mind, there is another common factor in the demise of global retailers, and I’m going to call this ‘leadership lineal thinking’.
The world isn’t lineal anymore. There is no predictable order; logical predictions are no longer reliable indicators in today’s marketplace. For example, lineal expressions of retail distribution, shown in the classic growth and distribution footprint, are changing. Customers are more random and concentric in their research, use of time, and shopping armoury, and this will only accelerate tenfold in future.
How you deliver agility and nimbleness into your retail model – building your loyal tribe across physical, digital and virtual networks, being able to pivot across categories within your business, building brand invitation to play across categories – will be absolutely critical across all facets of your retail ecosystem.
‘Fit’ retailers aren’t thinking lineally, they are employing adaptive, nimble and agile, community-based thinking both within their organisational leadership and in the environment through which they distribute their brand experience and products.
Retailers that can relentlessly evolve are winning the day. Long leases and heavy inventory loads are no longer assets in this new order.
Watch how successful retailers, such as JB Hi-Fi and Chemist Warehouse, adapt their models constantly.
If the metaphor that it’s a jungle out there applies, then being an elephant doesn’t make you the most likely to evolve, it just makes you the biggest target, and the slowest to pivot.