Success with Small Bets Tied to a Company’s Past

Many companies face challenges in today’s rapidly changing world. To do well in today’s environment, they need to deal with the situation effectively. And, according to my 25+ years researching business success and failure patterns, small bets tied to a company’s past help pave the way to success.

A recent example is Backstage, the off-price business Macy’s has been expanding, after coming into it as a relatively late entrant. Macy’s success with off-price is described in the September 21, 2018 Fox Business online article “Macy’s Management Talks Omnichannel Strategy, Backstage Expansion, and More” by Joe Tenebruso, in an article from The Motley Fool.

After a brief attempt with freestanding off-price locations, Macy’s shifted to putting its Backstage outlets in its department stores. I see the tiered way Macy’s selected which stores would get Backstage as having characteristics of a small bets approach.  As the Fox article explains, “Macy’s originally began adding backstage outlets to its lower tier stores. But, based on their strong results the company now is bringing Backstage to some of its best Macy’s stores.”  As I see it, there is less risk starting Backstage in lower tier stores, where a closer match with off-price outlet demographics is more likely, thus making the strategy a smaller bet. And, based on my decades of research, smaller bets are what successfully builds companies.

Additionally, despite its big bet title, a Forbes article last May (“Macy’s Is Betting Big On Backstage, Its Off-Price Offshoot” by Walter Loeb) points out something I see as further evidence that Macy’s is making small bets with Backstage. According to the article, co-locating off-price Backstage in Macy’s stores resembles the department store bargain basements of years past. As I see it, this is a reason why co-located off-price outlets may be more successful than freestanding Backstage stores. Co-located off-price builds on what worked well for department stores in the past, so it has a history of good fit, yet is something that makes sense in today’s world where consumers may still be recession scarred. It is an example of how including pieces of being handcuffed to the past adds value to a company’s strategy.

Incorporating what worked well in the past can reduce the risk associated with opening Backstage outlets. That’s why I would disagree with what the title of that Forbes article says when it describes Macy’s Backstage as “Betting Big”. My 25+ years researching business success and failure patterns indicates that small bets are the path to success.  And, Macy’s success with Backstage has characteristics of small, not big, bets.

Furthermore, Macy’s success combining off-price with its department stores illustrates that synergies do exist. Over the not too distant past, many companies have been shedding businesses with the strategic goal of becoming more focused. Macy’s situation illustrates how there can be value in integrating the new with the old, rather than completely separating the two for focus. With its small bets, Macy’s appears to be on the right track, much like earlier examples of successful strategy at Macy’s.


If you’d like help thinking through and evaluating how your company can make the kinds of small bets associated with success, feel free to contact us for consulting or to speak to your group.   

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