Business Troubles Often Start Long Before Disruption Occurs

When disruption looms and companies run into serious trouble, the cause of the difficulties is often attributed to businesses responding inadequately to major technological shifts. However, the true cause of the trouble may go far deeper and be more longstanding. It goes well beyond companies merely missing out on opportunities brought by technological change.

Sears is an example. Like much of the retail sector’s weakness, Sears’ troubles have been said to result from its inadequate response to the rise of online shopping. But, Sears’ troubles actually go well beyond that. The impetus for Sears’ recent bankruptcy began long before the age of online shopping. And, as someone who has been researching business success and failure patterns for 25+ years, I see signs of trouble for Sears that go deeper than merely missing the digital opportunities of online retailing.

What happened with Sears is discussed in a recent Crain’s Chicago Business article “Sears’ Biggest Mistake” by Joe Cahill on October 11, 2018.  It says that Sears’ problems began well before its current CEO took control in 2005.  As I see it, however, not only do Sears’ troubles go back a long time, like the Crain’s article states, but they also entail far more than merely missing the tremendous opportunity in online shopping.

Nonetheless, the Crain’s Chicago Business article stresses how Sears missed out on e-commerce. The article’s subhead reads, “In short, the retailer chose to imitate Wal-Mart, when it should have tried to pre-empt Amazon.” The article describes Sears’ situation as one of “missed opportunity” and explains that “Sears started down the wrong path long before Lampert appeared”. Lampert is Sears’ “CEO and majority shareholder” “who has controlled the company since 2005.” The article goes on to say that if Sears had gone after e-commerce earlier and used its “resources, to build a top-flight e-tailing operation,” “it could have positioned itself to profit from the industry’s evolution.”

As I see it, Sears lost its footing long before being too slow with e-commerce. Years earlier, Sears got distracted from retail by pursuing too much in financial services. It let competitors like Kohl’s and Home Depot, both of which have strengths more like what Sears once had, deeply infiltrate its turf. Unlike rivals such as Wal-Mart, whose discount oriented approach differs considerably from what Sears did, Kohl’s and Home Depot compete in areas more like what Sears has offered. Yet, via its complacency as a competitor, Sears gave retailers like Kohl’s and Home Depot plenty of room to thrive, thus, allowing those relative newcomers ample opportunity to grow. Sears’ weakness in this regard has nothing to do with e-commerce.

Whether Sears could have invested resources and “positioned itself to profit from the industry’s evolution” is uncertain. It would seem like the same issues that let Sears lose out while Kohl’s and Home Depot grew would also impair Sears if it had invested heavily and early in e-tailing. This is the case because it generally is not enough to merely identify and pursue the latest trend.  It’s also important that a company have the right strengths to pursue that up and coming opportunity. Nonetheless, companies often choose to move forward on a seemingly attractive trend when they are not capable of readily doing what is needed to succeed. Sears could have easily run into this problem if it had chosen to pursue e-commerce in a big way much earlier.

So, in conclusion, the impetus for an eventual troubled business can go back a long time. While it’s tempting to blame retailers’ woes on failure to adequately embrace e-commerce, there’s often more going on that has been keeping business from successfully moving forward.

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