Business success is not one size fits all. What works well for one company is not necessarily good for another. Every company must consider its unique strengths and weaknesses when determining its strategy, and should make choices for the business based on that strategy, which may not follow what the industry does.
Of course, companies should pay attention to what happens their industry. Companies need to evaluate whether or not they should respond to or match what competitors do. However, if and how to respond depends heavily upon an individual company’s strengths and strategy.
Companies need to evaluate whether or not what others do is essential, or even ideal, for successfully competing in the industry. After all, certain industry practices are generally required for success, and this is why, for the most part, industry experience is valuable when running a business. On the other hand, based on a company’s unique strengths and strategies, some businesses perform very well doing what differs markedly from industry norms, yet with enough industry expertise to be successful.
These principles are illustrated by two examples recently appearing in the media. The first covers how David Oreck built his vacuum cleaner business. The second example is TJX, owner of retailer T.J. Maxx.
A February 25-26, 2023 Wall Street Journal obituary article titled “Vacuum Cleaner Tycoon Starred in His Own Ads“ was about David Oreck, founder of the vacuum cleaner company. The article says that “Mr. Oreck went to work in New York for a distributor of RCA and Whirlpool Corp. products, where he learned salesmanship.” With Whirlpool experience, “he started a business whose activities included sales of Whirlpool vacuum cleaners,” the article goes on to say. “After clashing with Whirlpool, he turned to making and marketing vacuums under the Oreck brand,” according to the article.
Mr. Oreck successfully built his business without going the more traditional route of selling his products through third party retailers. The article says, “Rather than dealing with discount stores, he sold vacuums by direct mail and through dedicated Oreck stores. He warned other entrepreneurs against relying on big retailers that would be ‘beating you up all the time to offer a cheaper version of your product’”. As the article reports, “Mr. Oreck sold his vacuum company to a private equity firm in 2003” after successfully building the business. Oreck had initially focused upon selling vacuums to hotels, offering a product that was much easier to use than other vacuum cleaners. According to “The History of Oreck Vacuum Cleaners” at mentalitch.com, Oreck eventually also sold its vacuum to consumers after hotel workers using the product asked to buy it for at home use.
As Mr. Oreck explains in Inc. magazine article “Oreck Founder: Private Equity Bankrupted My Company,“ “ ‘Our people would keep it (the Oreck vacuum) going. If service was required, it was done immediately, and if it couldn’t be done immediately, we gave them a loaner.’ However, third party retailers like big box stores cannot provide that level of attention and service…Oreck says, ‘You don’t get that as a rule from the big box guy.’” In the article, Mr. Oreck explained that he considers private equity’s weak performance with the business to be due to selling Oreck vacuums in big box stores.
According to my research into business success and failure patterns, Oreck’s situation is not uncommon. Businesses often fare poorly when new management not clear on a company’s strengths makes changes that fit poorly. Oreck was successful doing things differently than the more traditional selling through third party big box retailers. The new owners ignored Oreck’s strengths and shifted to a way of selling that did not fit Oreck and was not successful.
Like Oreck, TJX Cos., owner of retailer T.J. Maxx, is a company that does things differently than many in its industry. TJX grew to become a Fortune 100 company, though TJX was actually founded more recently than Oreck. Unlike Oreck, TJX has been successful in today’s changing times. TJX’s success was discussed in a February 23, 2023 Wall Street Journal article titled “TJX Sales Climb as Retailer Draws More Bargain Hunters”. The article reports that the company “logged a 5% jump in sales in the most recently completed quarter as elevated inflation and economic uncertainty pushed shoppers to seek out lower priced clothing,” which the company sells. According to the article, TJX “posted profit of more than $1 billion.”
Like many companies, TJX faces change due to the pandemic, due to the economy and due to rapid advances in technology. The pandemic and better technology have brought more consumer purchasing online. During times like this, many companies see the need for technology transformation, and retailers, in particular, have strived to improve their ecommerce. Differing from the industry, however, TJX put less emphasis upon ecommerce than most major retailers.
Despite less emphasis on online retailing, TJX fared well because what it does differently builds on the company’s strengths. Its T.J. Maxx stores are known for giving shoppers a treasure hunt experience, and that works quite well with bricks and mortar stores. Furthermore, hunting for that inexpensive treasure is attractive to consumers affected by a tough economy, a market T.J. Maxx is well positioned to serve as an off price retailer. Thus, TJX is an example of a Fortune 500 company that does well differing from industry norms.
So, in conclusion, companies should pay attention to industry norms to assess whether it’s important to adopt them. But, in keeping with the line “Think Different” popularized by computer and iPhone maker, Apple, companies must remember that differing from the industry can be successful. There can be value in straying from the industry when being different fits well with company strengths.
