Kmart Smart?

 

Mark Snyder's Challenge

Back on April 1, Chief Marketer ran an interview with Mark Snyder, the chief marketer at K Mart.  Mark Snyder took the job with Kmart about the time the stock market collapsed in 2008. 

 

What Mark inherited was a Kmart brand that was fairly worthless.  On just about every attribute, Kmart's image was worse than Target and Wal-Mart.  As Snyder put it, Kmart had "pretty heavy negative perceptions."  I'll say…I think its image could best be summed up in one word—"loser." 

 

I once did focus group research with teens about discount stores.  I'll never forget this one girl describing her feelings when her Mom insisted they go to Kmart.  She said, "I would stay in the car in the parking lot, lock the doors, roll up into a ball underneath the dashboard and pray that nobody I knew would see me."  K Mart was not exactly the brand people wanted to be associated with.

 

So Snyder's goal was to find a new brand identity for K Mart—hopefully one that was favorable.  He knew that Wal-Mart already owned "low price" and Target owned the trendy "cheap chic."  He needed to find something else to own.

 

His choice?  Smart.   To quote Snyder, "We decided Kmart could own the identity as the smartest [discounter]."

 

Smart???  If Kmart is so smart, why is it such a loser?  If I'm smart, why am I associating with such a loser?  Winners are smart, losers are dumb.  And right now, Kmart is not a winner.

 

If I had been in Snyder's shoes, I would have picked something different.  I would have picked the attribute of time.  I would have positioned Kmart as the "fastest" discounter.

 

Time Fits Who Kmart Is

Why win on time?  First, it takes advantage of the few things Kmart already has going for it.  Kmart's stores tend to be smaller than Wal-Mart's and Target's.  Small stores are faster to shop. 

 

Kmart's stores tend to be older and located closer to interior communities (whereas Target and Wal-Mart tend to be more likely on the outskirts of town).  This can make Kmart faster to get to—right in the neighborhood.   

 

Also, customers tend to equate successful stores with busy stores.  Hence, the perception would be that Target and Wal-Mart are so busy that it is hard to just get in and out quickly.  Conversely, Kmart must be faster to shop, since it is probably less crowded.

  

And best of all, if people have a negative conception of shopping Kmart, let them know that the time spent doing it is very short.  We've shortened the pain as much as possible.  Shift the attention to the experience with the product after purchase, not the shopping.

 

Time Fits Our Society Trends

People sense more pressures on their time than ever before.  There are more media choices to spend time on.  There is having to care for both your children and your aging parents at the same time.  Mobile devices mean we can never escape work, and so on. 

 

With more pressure on time, people have to make trade-offs.  Long term trends show that one of those trade-offs is spending less time shopping.  Other activities are getting a higher priority for that time than shopping.  So if that's how people value their time, than why shouldn't Kmart do the same?  Support what people desire by shortening shopping time, so that customers can spend it doing things they would rather do.

 

Time has become the new scarce commodity.  Kmart becomes the savings store that saves you time.

 

Time is Hard For Competitors to Refute

Time is the Achilles heal of Wal-Mart.  It takes forever to journey from their massive parking lots to the massive supercenters.  Navigating the inside of a Wal-Mart Supercenter is a very time-consuming chore.  And those checkout lines?  It seems like weeks go by as you stand there in frustration watching your frozen food melt before you.

 

It is extremely difficult to make significant cuts to the time a customer has to invest when shopping Wal-Mart.  They cannot suddenly make all of their mammoth stores small and convenient.  Their insistent pressure to do whatever it takes to be lowest price runs against spending the money to have fast checkouts.  In other words, Wal-Mart could no longer be who it is if it wanted to outdo Kmart on fast.  And Wal-Mart will not give up its ownership of lowest price to try.

 

Even if you want to save money, there are limits to how much time you want to waste in doing so.  Many would pay a few pennies more to claim back that time and frustration.  When you put time into the value equation, Wal-Mart's value suddenly doesn't look as strong.

 

Dollar stores, like Dollar General and Family Dollar, have seen great growth recently.  Part of that has to do with the economy and the fact that prices in these stores are cheap.  But part of it also has to do with time.  Customers realize that they can park right next to the door of a Dollar General and finish the shopping trip in just a few minutes.  Kmart could tap into that as well.

 

Implications for Kmart

So, if Kmart wants to own time and be known as the "Fastest Discounter" or "Time Savings Store" what must it do? 

 

First, make sure the checkout lines are the fastest in the business.  This is where people are most aware of time.  Make it where they are most aware of how much better you are at minimizing it.

 

Second, save people time through highly edited assortments.  Rather than forcing the customer to waste time trying to choose between dozens of types of ketchup to find the best deal, just sell the best deals.  Tell people that the Kmart merchants spend all the time seeking out the best deals so that you don't have to spend the time doing it.

 

By highly editing the assortments to the best deals, one can put all the one-stop shopping of the mammoth Wal-Mart of Target supercenter into the convenient little Kmart.  The new Kmart would be like three stores in one:  the speedy value food shopping of an Aldi/Save-A-Lot, the speedy value commodity shopping of a Dollar General/Family Dollar, and the speedy value fashion shopping that can be found nowhere else.

 

Third, save people time by linking the stores and internet shopping tightly together.  For items not in the edited assortment, you can supplement via the internet.  Allow people to pick up items ordered on line in the store, so they don't have to wait a few days for a UPS truck (saving waiting time).

 

Kmart becomes the king of convenience:  convenient locations, conveniently sized, one-stop-shopping convenience for food, fashion and commodities, and the most convenient checkout process.  Suddenly Kmart is not a loser.

 

Longer Term Opportunities

Once Kmart sheds the loser image for the time saver image, it opens future opportunities to leverage time.  Fast fashion is a hot trend in apparel retailing.  Firms like H&M and Forever 21 use it to rapidly change the fashion assortment in the store.  This has many benefits.  First, customers are less likely to procrastinate on a purchase, because they know the goods won't be around very long.  Second, customers return more frequently because they want to see the changing assortment of fashion.  Third, by purchasing in small lots, there is less chance of a store being stuck with excess inventory to mark down.

 

Thus, Kmart could morph fast shopping to include fast fashion when appropriate.

 

Then, maybe Kmart could add fast to services which are normally slow, or add fast home delivery to save time, or a host of other things.

 

Wal-Mart can say they save you money so that you live better.  Kmart could say they save you time so enjoy life more.  Now, in my mind that is a smarter Kmart.

 

Final Thoughts

"Kmart Smart" sounds to me more like an advertising slogan than a positioning statement (and not even a very good one).  But that's what happens when you let Chief Marketing Officers do strategy rather than strategists.

Analogy #211: Killing With Good Intentions

THE STORY
When I was a very little boy, I got sick. The doctor prescribed medicine to help me get better.

After taking the medicine, I continued to be sick, so my father told the doctor the medicine wasn’t working. The doctor responded by increasing the dosage. After taking the increased dosage, not only did I not get better, I got worse.

So we went through a few more rounds of upping the dosage until I was very, very ill, coughing up lots of blood and all. There was some concern about whether or not I would survive. Then my dad decided that perhaps it was the medicine which made me ill, so he stopped giving it to me. Not too long thereafter, I became healthy again.

Nowadays, when a doctor or nurse asks me if I have any allergies they should know of, I am quick to tell them not to give me any of that medicine I had as a child.

THE ANALOGY
One of the core foundations to success in medicine is an accurate diagnosis of the problem. If you diagnose the problem incorrectly, you will take the wrong course of action. In my case, the doctor had incorrectly diagnosed my symptoms as being related to the disease rather than a reaction to the medicine. His prescribed solution—increasing the dosage of the medicine—almost killed me.

The symptoms of sickness in a business are usually easy to see—financial losses, large decreases in sales, loss of market share, inability to pay the interest on the debt, and so on. However, just because one can see the symptoms of sickness in the business does not automatically mean that you know how to cure it. You may guess wrong, like my doctor did, and actually do more damage than good.

Any fool could have seen that I was very sick…you didn’t need a medical degree for that. But the one with the medical degree did not know how to cure me, which put my long-term survival at risk.

Victory comes not from identifying the symptoms, but rather from knowing how to remedy the underlying cause of the symptoms. Identify the right cause and then you can prescribe the proper strategy.

THE PRINCIPLE
The principle here is to focus on curing the underlying cause, rather than the symptoms. For example, a symptom of a problem may be poor sales. If you only focus on eliminating the symptom (poor sales), you may conclude this is a marketing problem and pump up the advertising. Unfortunately, this may be exactly the wrong thing to do.

In a prior blog, we looked at what happened when Wendy’s had the “Where’s the Beef” advertising campaign. It was one of the most successful advertising campaigns ever, if measured by recognition. And in the near-term, it brought a lot of traffic back to Wendy’s. But for Wendy’s, that prescription of using those ads almost killed the patient.

You see, the real disease was that in-store operational discipline had deteriorated to the point that the in-store dining experience was awful. All the advertising succeeded in doing was get more people in to have a bad experience sooner, so that the image got worse more quickly. Those ads were as helpful in fixing the problem as that medicine was for me as a child. It was making things worse.

Eventually Wendy’s figured out what the real disease was and improved the in-store dining experience. It was only after fixing the underlying problem that the company was able to improve. Therefore, when designing strategies, build them around underlying issues instead of just surface symptoms.

In general, there are only three main underlying issues to focus on. If the surface symptoms look sickly, they can usually be cured by repairing one of these three issues.

Issue #1: A Reason For Being
Winning strategies start with a winning position—a reason why someone should prefer you over all other alternatives. You need to own a uniquely desirable solution in the marketplace. If you cannot quickly and easily describe why you are the obvious choice in particular area, then don’t be surprised if customers fail to choose you.

I’ve seen many companies try to avoid this positioning issue. Usually, their argument goes something like this: “Sure, I won’t have the leading market share, but if I can just get about a 5 to 10% share, I should be able to do okay. And to get a 5% share, all I need to do is be a credible alternative.”

The problem is that usually there are a dozen or so firms looking to get that 5 to 10% share, and once the market leaders are done getting their 50 to 60% share, there aren’t enough 5 to 10% wedges in the market share pie to satisfy all of those dozens of firms. Just being credible is not enough. You need to have a winning position of leadership with a niche group in order to get even a small share.

K Mart has a lot of bad symptoms and one can use a lot of tactics to try to eliminate those symptoms. However, K Mart’s real problem is that they no longer have a great position—a reason for being. Until that root problem is fixed, the rest is wasted effort. That’s why just putting some Sears brands into K Mart or putting a talking light bulb on TV won’t get the job done. The bad symptoms will remain at K Mart until a strategy is put in place to repair the POSITION.

On the right of this blog, there is a listing of blog topics I have covered. If you click on “Positioning,” you can learn about ways to cure this problem.

Issue #2: Not Delivering on the Promise
A great position is only great if consumers are satisfied that you are superior in delivering on the promises inherent in that position. Home Depot’s early success was based on an encirclement position: Best Assortment, Best Prices, and a High Level of Personal Service.

Over time, Lowe’s tended to neutralize the assortment and price superiority Home Depot once held. In addition, Home Depot lowered its standard for service in order to save money. As a result, Home Depot was no longer winning on the promises behind its position. Therefore, all sorts of bad symptoms started to appear.

It took awhile (and a change in CEO’s), but eventually Home Depot figured out that to fix the symptoms, they had to return to delivering on the promises behind the position. Superior service is once again a priority. The symptoms are starting to get better.

Make sure your position is more than just hollow words. Have your strategy look for ways to increase your ability to “own” your position by pushing the envelope. Increase the distance between your level of delivery and the rest of the market. In addition, before tweaking with your business model, think about the long-term implications it may have on your ability to hold your position. Skimping a little bit on service may have helped a tiny bit in the near term, but created a long-term sickness for Home Depot.

Issue #3: Inefficiency/Complacency
I’ve seen companies who got the first two issues right, but still had some bad symptoms creep in. What was wrong? They got lazy, sloppy, greedy and fat. The headquarters became lavish and bloated. Bureaucratic gridlock made it impossible to get anything done. Inefficiencies and wastefulness sucked up all of the cash.

The world is too competitive to allow for gross inefficiency. A leaner firm can come in and use its superior efficiency to fund a successful attack on your position.

We live in a world of constant change. Lean and nimble companies who have a war chest of money at their disposal are best able to adapt to the change and stay ahead of the game. There is never a good time to rest and stop fighting, because the battle never stops.

SUMMARY
If your company is showing signs of problems, don’t focus on the symptoms. Instead, build your strategy around the root causes of the problem. Typically, those root causes revolve around three issues: poor positioning, poor delivery on the position, or inefficiency/complacency. Get those root issues right, and the bad performance symptoms will tend to go away.

FINAL THOUGHTS
When I make an appointment on the phone to see a doctor, the receptionist will usually ask “what seems to be the problem?” Apparently, they want me to make a self-diagnosis before seeing the doctor. I’m not sure I’m always the most qualified one to do that. That’s why I’m trying to get an appointment with the doctor.

Similarly, if one of your business divisions is having problems, don’t just rely on their own abilities at self-diagnosis. Take the time to get an objective and accurate diagnosis. Remember, if they are so smart, then how come their division is so sick?

A Divine Right to Perpetual Success

THE STORY
Back in the 1980’s, Donald Katz wrote a book about the history of the Sears retail company. The book was titled The Big Store. In this book, Mr. Katz went into great detail about all of the successes and failures Sears has had throughout the years.

Katz tells a story in the book about one of the low points, when Sears was losing customers and having financial difficulties. A group of Sears executives got together to try to diagnose the problem and find a solution. One of the executives exclaimed that he knew what the problem was. I lost my copy of this book a long time ago, so I cannot quote it exactly, but what that executive said went something like this:

“The problem is that people have forgotten that we are Sears. If we can just remind them that we are Sears, then they will come back and shop us again. Sears represents Americana. Sears is a part of our American heritage. If people could just remember how great Sears is, they would come back.”

Apparently, to this executive, the problem with Sears was the stupidity of the customers. These customers had forgotten that Sears is a successful brand who deserved their patronage simply because it was Sears. People had forgotten that Americans are supposed to shop Sears because that is what Americans do.

Contrast this to the response to a blog called Brand Autopsy by John Moore. On March 21, 2007 John posed the question: If Sears went out of business tomorrow, would anybody care? Some of the responses were as follows:

“Miss Sears? I can't remember the last time I was in one of their stores. Sears was a regular stop for my parents while I was growing up in the 60's.”

“Going to Sears is like a trip to the museum. You get to experience the past permanently.”

“I gave up on Sears years ago.”

“Did anyone miss Roebuck all that much?”

THE ANALOGY
The Sears executive in the story assumed that for some reason Sears deserved perpetual success. It was as if there had been a decree from heaven that people were supposed to always love Sears. If people stopped loving Sears, it was because they forgot that Sears had a divine right to always be successful. If people would only remember that Sears is a successful brand, then it would be successful again.

This executive made the fatal mistake of taking success for granted. He assumed that once a brand attains success, that success cannot be taken away—once successful, always successful.

Unfortunately, brands have to win their loyalty every day. Past victories do not ensure future victories. When developing strategies, do not take success for granted. Do not take your customers for granted. Future strategies need to incorporate tactics designed to continually make the brand relevant and desirable.

The second fatal mistake this executive made was to blame any failure on the customer, rather than the business or the executives. Remember, the customer is the one with the money. If they don’t like you, they will spend the money elsewhere. It is your responsibility to get them to spend it with you. If they spend it elsewhere, you have to take the blame. If you take the approach to failure as “My strategy was perfect, it was the customer who was flawed,” then you are doomed to repeat that failure.

THE PRINCIPLE
The principle here is that reputations are perishable. Just because you have a great reputation today does not mean that you will have a great reputation tomorrow. There are several ways that one can lose a great reputation:

1) You stop doing the things which gave you the great reputation in the first place, like great service or great prices.

2) The marketplace changes and customers start valuing something different. If you do not change with the times, your prior benefits can become less desirable or even obsolete.

3) A scandal or crisis causes people to lose faith in you.

4) You are providing the same level of benefits as before, which used to be the best available. But now someone has found a way to do the same thing better than you.

Because reputations are perishable, one can never take them for granted. Every strategy needs to deal with the question of how to ensure that customers continue to love you, in spite of all the changes in the environment. If you assume that customers will love you pretty much regardless of what you do, then your strategy can fall into the trap of “customer exploitation.”

Of course, you would never refer to a strategy as being rooted in customer exploitation, but many strategies end up being that way. Here’s how the process tends to go.

If you assume customers as a given, then your focus shifts to profits. The strategic question then becomes: How can you squeeze a little bit more profitability out of those customers? The answer tends to be through a combination of small modifications: raising prices, cutting service, cutting quality, etc. The subtle thinking in the back of the mind is that customers love us, so they will put up with a small about of these reductions to the overall value of the offering. In fact, we can even come up with a fancy name for it, called “brand premium.” In other words, our brand is so strong, that we can charge a premium. Or to say it another way, if the brand is strong enough, we can exploit our customers more.

Yes, there is some truth to the power of a brand. But that power can evaporate if we exploit the customer too much. Back in the 1960s and 1970s, Schlitz was one of the top selling beers in the United States. Even as late as 1976, it was the #2 brand in the country. But the Schlitz company started taking its success and its customers for granted. Instead of worrying about its customers, it looked for ways to squeeze more profits out of what they assumed to be a guaranteed perpetual flow of business forever.

To improve profitability, Schlitz found a less expensive way to make beer. Unfortunately, this process had the negative side effect of making the beer taste less desirable. Although people had loved the Schlitz brand in the past, they did not care for the inferior taste of the new beer made with the cheaper process. The love was lost. They abandoned the beer in droves. Today, Schlitz is a minor factor in the industry, made in small quantities by Pabst.

So what do I think was the principle factor behind the decline of the Sears brand? Back at the height of the Sears success (in the 1950s and 1960s), the US had Fair Trade laws. These laws made it illegal for a retailer to sell a product below the retail price suggested by the manufacturer of the product. If you were a retailer selling name brand products, you could never really get a price advantage over the competition. By law, you were constrained to price parity.

This is where the genius of Sears came in. Sears developed its own lines of products under its own brand names, like Kenmore and Craftsman. They positioned them to be every bit as good as the brand name products. However, because Sears owned the brands, it could charge whatever price it wanted. It was not restricted by the Fair Trade laws. Therefore, it priced its brands to always be below the fair trade price on the equivalent brand named goods.

In essence, Sears was the Wal-Mart of the 1950s and 1960s. It owned the reputation for “always low prices.” The laws of the United States almost guaranteed that Sears would be lowest priced alternative.

However, the Fair Trade laws started being abolished in the late 1960s/early 1970s. Suddenly, Sears was no longer guaranteed to have the lowest prices. Department Stores and Big-box specialty stores could now underprice the Sears private label with the often more desirable brand names. In fact, the repeal of the Fair Trade laws helped spur the rapid growth of discount department stores, like K Mart and Wal-Mart.

The reason people had loved Sears (lowest prices) vaporized. Sears was no longer the “Wal-Mart” of their time. Now Wal-Mart was the Wal-Mart of their time. Because Sears did not understand why people used to love them, they had no idea why people stopped loving them when the environment changed.

When Sears lost its original reason for success, it needed to do one of two things with its strategy. Either it needed reinvent itself so that it could hold onto its lowest price reputation (in other words, morph into a discount store like Wal-Mart), or find a new position as desirable as the old one (which they have never found).

It is not the customer’s fault that Sears is not doing well. The customer did not forget what made Sears great. Sears failed to understand the impact that Fair Trade laws had on their success, and so it misread the impact when those laws were lifted. The Sears strategy never found a new reason for customers to love them, because the company was apparently not aware that it even needed a new reason for people to love them. They thought “Americana” was enough. Sadly, it was not.

SUMMARY
There is no such thing as a perpetual divine right to success. Customers love you for a reason. Things can change, causing that reason to no longer apply. Therefore, strategic processes must always have at their core a reassessment to ensure that the company continues to have a desirable and winnable position in the hearts of their customers. Otherwise, you can take the customer for granted and increase your exploitation of them until they eventually leave.

FINAL THOUGHTS
During this same time period (the 1960s/70s), Kresge could see what was going on in the environment and morphed itself from being a variety store chain (S.S. Kresge) into being the leading discount store chain (K Mart). Sears could have done the same. It is their own fault that they did not.

An “Able” Position

THE STORY
Have you ever noticed that in many little diners there is a sign on the wall claiming that the diner sells “the world’s best coffee”? This brings to mind several questions:

1) If a lot of diners have this sign, then how can all of them be true? How many “World’s Best Coffees” can there be?

2) What could a little old diner in the middle of nowhere be doing so differently to make their coffee the world’s best? Can they afford to have someone combing the world for the world’s best coffee beans?

3) Who gets to determine what the world’s best coffee should taste like? Isn’t it true that different people like different types of coffees?

5) How could anyone taste a sample from every establishment in the world that sells coffee in order to assure me that they know which one tastes best? After that many samples, how would they even remember what each one tasted like?

4) If their coffee is so good, then why do I see more people at a Starbucks?

5) If their coffee is so good, then why is it so cheap?

THE ANALOGY
All businesses need a position in the marketplace. Positions tell people what your business stands for and why they should prefer doing business with you. If you cannot come up with a position which explains why people should prefer to patronize you, then why are you in business? Why should people care about you? Just “showing up” is not good enough. Your business needs to create a competitive advantage through proper positioning.

Not all attempts at positioning are successful. In the story above, the diners claimed to have a position: the place to get the best cup of coffee in the world. I seriously doubt that anyone takes such a statement seriously. If your position is not taken seriously, then it is not really a position.

Therefore, one not only needs a position, but one needs a successful position.

THE PRINCIPLE
Successful positions have four characteristics. I call them the 4 “ables”. To be successful, a position must be:

1) Desirable
2) Achieveable
3) Believable
4) Ownable

Each of these is explained in more detail below.

1) Desirable
It is possible to create a position you can achieve and own, but that very few people actually care about. For example, you could create a one-stop shopping environment for people who want to get just ice cream and battery acid on the same trip. The world may allow you to own that position, but very few people are looking for something like that. It’s not the sort of position that will cause people to prefer you. First of all, those two items are not usually bought together and there is little advantage to bringing them together into the same store. Second, there could be fears that the ice cream would be poisoned by coming in contact with the battery acid.

Therefore, when choosing a position, make sure that you have chosen something people want—something so desirable that it would cause a significant number of people to choose you first over the alternatives.

2) Achievable
It’s great to come up with a position which people desire. However, if you are incapable of living up to the promises of such a positioning, then you are just going to end up disappointing people. For example, around 20 to 25% of the consumer population will put up with a lot of grief to get the lowest price. Therefore, owning the low price position in your industry will make you popular with a lot of people. However, if you are a small business with a high cost structure, then it is highly unlikely you can achieve and sustain the lowest prices in the industry. Eventually, people will figure out that you really are not the lowest priced and you will lose the battle. (In today’s internet age, there are so many sites doing comparison pricing and performance ratings that it is even harder to fool people with an unachievable position.)

You need to pick a position which is suitable to your capabilities—something you can be the best at. What is achievable for someone else, may not be achievable for you (and vice versa). That’s why there is not one single position which is best for everyone. You have to find the one that is best for you.

3) Believable
People act based on what they believe. If people do not believe that you own a position, you will not get credit for it. People’s beliefs are not always rooted in reality. Therefore, achieving a position which is verified by scientific measurement may still fail if customers do not believe it to be true. Positions are held in the mind of the customer. It is in the mind where you have to measure you success.

In the story above, it is hard to believe that a small diner has the world’s best coffee (even if it does). Therefore, it is not a very persuasive reason for choosing the diner.

A few years back, I saw a Menard’s home improvement center with a large sign on the outside claiming that Menard’s was “the official home improvement center of the new millennium.” First of all, I’m not exactly sure what that means. Second of all, it is hard for me to believe that such a claim is true. Third, the only thing it got me to believe was that there are some goofy sign creators at Menard’s (and that’s not a reason to prefer them).

Sometimes, companies that have tried to own a “quality” position have had believability issues because their prices are too low. Like in the story above, customers can wonder how your quality could possibly be that good if your prices are that cheap. In many cases, companies going after a “quality” position have had greater success once they raised their prices, because it made their position more believable.

4) Ownable
Finally, a position must be ownable—something that is relatively unique to your firm and not already owned by someone else. Remember, the goal is to find a position which will cause people to prefer you over someone else. If everyone has this quality, then it will not get people to prefer you. For example, if a doctor claimed his position to be “the doctor that cures people of their illnesses” it would not be a very successful position. After all, it is assumed that all doctors are qualified to cure people of illnesses. Hence, it would not be something that this doctor could own. He couldn’t say, “Unlike most other doctors, I cure people of illnesses.”

Another ownership problem occurs when someone claims ownership to that position before you. For example, Wal-Mart has spent a great deal of time and effort to own the low price position in basic consumables. For a newcomer to try to take that position away would be very difficult. It is already owned by Wal-Mart. It is usually better to look for a position not already firmly held by someone in the industry.

Last week, Eddie Lampert, Chairman of Sears Holdings announced the new positions for Sears and K Mart. Although it is too early to make a final assessment, let’s put the new positions to the test. For Sears, the new position is to be a “one-stop shop for the home.” The slogan is “Sears. Where it Begins.” The icon is a throwback to the big Sears catalog, where stories about people and their homes come out of the book.

For K Mart, the position revolves around being a “marketplace of discoveries.” The slogan is “turn on to something new.” The icon is a throwback to the blue light special via a cartoon Mr. Bluelight.

Starting with Sears:
1) Is it desirable? It’s nice to get everything relevant for the home at one place. But do I really want a Home Depot and a Bed Bath and Beyond under one roof? Maybe.

2) Is it Achievable? Well, wasn’t Sears’ Great Indoors format everything possible for the home under one roof? So it can be done. (Of course, the lack of success of the Great Indoors does make one a little skeptical about the desirability).

3) Is it Believable? What about all the clothing in the store? What does that have to do with the home? I doubt that all the clothes are being taken out. So it is reasonably believable, but compromised by non-home items.

4) Is it Ownable? Home Depot and Lowes own the hardlines part of the home and Bed Bath & Beyond owns the softlines part of the home. By combining the two, do you compromise your image as an expert? Can people believe that you are the expert in both?

Now how abut Kmart:
1) Is it Desirable? I’m not convinced of what it is I am to desire. Is it the ability to find new and different items? If so, that is desirable.

2) Is it Achievable? It is very difficult to always be on the cutting edge of what is new and different, especially as a discount store.

3) Is it Believable? Kmart is not known as being hip or new or unique. This will be a tough sell. Having a cartoon light explaining it to me probably will not change minds. So far, I’d say no.

4) Is it Ownable? Target owns the hip, new discovery position in discount stores. If the bent is more towards one-time closeouts, that is owned by Big Lots. I don’t see a lot of ownership possibilities, here.

Final vote: Sears brand has modest potential, Kmart seems weak. Neither a home run.

SUMMARY
Successful positions must be desirable, achievable, believable and ownable.

FINAL THOUGHTS
On May 4, 2007, Eddie Lampert said, “A company without positioning is like a ship without a rudder.” I’d add that a company with a weak position is like a ship with a broken rudder which causes you to go in circles, rather than moving forward.

Keep an Eye on the Ball

THE STORY
As I said in an earlier blog, I know a lot of Vince Lombardi stories after having lived in Green Bay for 10 years. Vince Lombardi was a firm believer in discipline and in mastering the fundamental basics of football. He used to say that his definition of a great football team is one which executes the fundamentals so flawlessly that even if the opposition knows exactly what play you are going to run, they cannot stop you.

There was a time when one of his teams did not seem to share in Lombardi’s passion for mastering the fundamentals. After a particularly bad game in which the team did a poor job of executing the basics, Vince Lombardi decided that the team needed to relearn the fundamentals of the game. Therefore, he ordered everyone to show up the next day for a lecture and practice session in the fundamentals of football.

The next day, Vince Lombardi gathered the team around him so that he could lecture them. He started off by placing his hand up in the air so that everyone could see what he was holding. Then he started his lecture by saying, “For those of you that don’t know it, this, my friends, is a football.”

THE ANALOGY
Just as great football teams continuously spend time mastering the basic fundamentals of the game, so must businesses. Basic fundamentals like pleasing the customer and following through when others are depending on you never go out of style. Sometimes, however, we can get so caught up in the razzle-dazzle of our strategy that we can forget to execute on the basic fundamentals of business. Just having a great strategy is not enough. You have to deliver what the strategy promises every single day.

Sometimes a football player can get so caught up in doing their little part that they can forget the big picture and lose site of where the football is. At the end of the day, if you don’t know where the football is, you cannot win games. The team needs to keep their eyes on the ball.

The same is true for businesses. You need to keep an eye focused on the basic fundamentals of your business in order to win.

THE PRINCIPLE
In yesterday’s blog I made reference to the need for balance between personalization and standardization. Then we talked about the importance of personalizing your strategy around your unique capabilities. Today we will talk about the other half of that balance—the need to get the standard fundamentals of business executed properly.

I can best illustrate this principle with another story. I know a retired professor who used to hold the Kresge Chair of Retailing at the University of Michigan School of Business. Because of his position in holding the Kresge Chair of Retailing, he got to spend time over the years with the executives at K Mart.

Back in the late 1980s and early 1990s, K Mart was run by a gentleman by the name of Joseph Antonini. Joseph Antonini was a smart fellow who understood what was going on at K Mart and developed a pretty good strategy for the situation. At the time, K Mart was still very profitable and creating lots of cash flow. But Antonini knew that as more Wal-Marts invaded K Mart turf, that cash flow would eventually start to vaporize. Therefore, he devised a two-step plan.

1) First, put a little money back into the K Mart stores to freshen up the image, so that they would continue to put out cash for a little longer length of time.

2) Take the remaining money and invest in a portfolio of all of the new and exciting growth retailers who were building various kinds of specialty superstores. Antonini was busy on this front. Some of his diversifications included:

- Builders Square Home Improvement Centers (like Home Depot)
- Pace Membership Warehouse (like Costco)
- Borders Books (like Barnes and Noble)
- Sports Authority (Sporting Goods Superstore)
- PayLess Drugs (Drug Store Superstore)
- K Mart Supercenters (like Wal-Mart supercenters)

The rationale behind the strategy was that about the time K Mart would stop being a cash cow, these other formats would be strong and take their place. Antonini saw real estate development as one of K Mart’s core competencies, so he figured he could quickly grow these concepts into large chains and end up with a strong a portfolio of the next great retail concepts.

In theory, the strategy sounded fine. In reality, it was a disaster. The diversifications languished under K Mart management, and the refurbishment of the K Mart stores was executed poorly.

Eventually, Antonini confided to my professor friend that he had no problems coming up with great strategies, but he couldn’t find anyone in the K Mart organization competent enough to bring them to life. In other words, the strategies were fine, but the organization was inept at the basic execution of retail fundamentals. Without attention to the basic details of running a strong business, the strategy died a horrible death.

Was Antonini wrong in his vision of a small refurbishment program for K Mart? Well, he was correct in assessing the fact that Wal-Mart would eventually strangle K Mart’s cash flow. He was correct in not betting it all on a costly remake of the chain, for K Mart would never outlast Wal-Mart. But putting a little money in to provide a little more payback for the diversification sounded sensible.

Was Antonini wrong in his diversification vision? Well, other companies made a fortune building chains in the same formats he diversified into. Home Depot and Lowes are huge successes in home improvement centers. Barnes & Nobel is doing well, and so is Borders, once it was freed from K Mart management. There are successful sports superstores out there as well. So Antonini was not wrong in seeing the potential in these formats.

What killed K Mart was the fact that it was out of balance. It had found the “right” strategy, unique for its position and real estate skill set. However, it had failed miserably on developing the standardized tools for successful execution of retail formats. K Mart had taken its eyes off the ball and could no longer execute the fundamentals.

There were rumors that K Mart had gotten fat and lazy during its glory years of the 1960s and 1970s and had forgotten how to be a lean, mean retail fighting machine. It had fallen into the trap of believing that just because it built stores in the right format, that it would automatically be successful. No, you still have to excel in the fundamentals, every day. Just “showing up” is not good enough. You have to be ready to play at a high level.

This principle is true in football and true for businesses as well. Just because a team won the Superbowl last year does not mean that they “have arrived” and can slack off the following year. The basic execution of blocking and tackling that Lombardi stressed in the 1960s is still important today. You can never get sloppy on these fundamentals and stay on top.

Now some people make the mistake in believing that because getting the fundamentals right is so important, that the only thing they concentrate on is getting the fundamentals right. Doing so gets you just as out of balance as what happened to K Mart, only in a different way. The problem is that situations change. Consumers change, technology changes, economies change, government regulations change, competition changes, and so on. Eventually enough change occurs in the environment that a once successful strategy will no longer be appropriate.

ALL STRATEGIES EVENTUALLY FAIL. If you do not modify your strategy and adapt to the changes, YOU will eventually fail. You may have perfected the execution of your particular strategy, but if the strategy becomes obsolete, it really doesn’t matter. That is why you need a balance between getting the basics right (standardization) and modifying your strategy so that your capabilities are uniquely in tune with an important part of the changing realities (personalization).

So to be successful, it helps to keep one eye on the ball of the game you are currently playing (as referenced in today’s blog) and one eye looking in your refrigerator to see what new dish you can create for the next strategic challenge (yesterday’s blog topic).

SUMMARY
A “great” strategy poorly executed is really not a very good strategy at all. The business world is too competitive. Someone else will adopt a similar strategy and out-execute your business, leaving you at a loss. Getting the big picture strategy right is only part of the goal. You still have to do the little details well.

At the same time, just doing the little details well is not good enough either. There needs to be an ever evolving big picture strategy to ensure that you are excelling at things that are still relevant in the marketplace.

FINAL THOUGHTS
When a person loses their balance, they tend to fall down. When a company loses its balance, it can also fall down…and it probably won’t be a gentle landing.