THE ENTERPRISE--"Maybe, maybe not."
FACTS THAT ARE DISCONCERTING:
--BAD: Probable cost of the Iraq conflict so far: $500 Billion. I'm glad we didn't have such precise accounting during WW-II. Worth it? Maybe, maybe not. Anybody want to put a price tag on "freedom?" I'd bet it is HIGHER than we've spent. Now we just need to make sure we "finish things up right," that's my larger concern.
--WORSE: Bonuses paid by top 5 Wall Street investment banks: Goldman Sachs, Morgan Stanley,Merrill Lynch, Lehman, and Bear Stearns in 2007 were $36 Billion. I wonder what value these organizations created that warranted such huge payments. I guess they'd say "making capital available and finding the right deal partners to put it to work." Worth it? Maybe, maybe not. Richly rewarded? You bet.
--RIDICULOUS: All the flap about Steve Jobs options dating. C'mon. The guy "saved" Apple from oblivion. The board agreed to his options, perhaps even studied them for months, causing the need to "back date them" to when they should have been granted. The shareholders made out famously. Who cares how much they paid Jobs, how and when. It was worth it. PS: I hardly ever attribute things to "one person" and Jobs didn't do it alone--far from it. But he was the difference maker. No doubt about that.
--TYPICAL: Al Gore made his own bed for losing the Presidency when he conveniently distorted the truth during debates and campaigning. Now he is being admired for his movie An Inconvenient Truth.. (I do intend to watch it someday when I can stay calm.) In it, he talks about sea levels rising 20 feet, and shows scary consequences. The U.N. (not the greatest of sources, but an independent one) climate panel cites only a ONE FOOT rise this century. This is also how much sea levels have risen over the past 150 years. He also distorts and misstates the Antarctica situation showing the 2% of it that is warming and ignoring the 98% that is cooling; or the shrinking sea ice in the North Atlantic that is headlined, but nary a mention of the growing sea ice in the South Atlantic. A "campaigner" who got caught finding the "Truth" to be "Inconvenient", does Gore always tell the whole truth? Maybe, maybe not.
"TREES CANNOT GROW TO THE SKY"
Neither can retailers. It is no surprise that both Wal-Mart and Home Depot are having troubles. Both have become so big that their roots, the system and culture that made them successful, can no longer support the growth. Some of you have read my parable of the great tree in the forest, and how it's very size, strength, and rigidity, led to its eventual demise. (For those who have not, and want to read it email me and ask for a copy).
TWO DIFFERENT KINDS OF DIFFICULTIES
Wal-Mart is suffering the fate of all corporate entities that grow so large and dominant that their influence on the social scene in America is both profound and controversial. It happened in the past in different ways, during different eras. The eras of "Big Steel" the emergence of General Motors as the dominant industrial giant of the mid-late 20th century, the growth and influence of first IBM and then Microsoft were all examples of strength that begat problems. Peter Drucker's legendary book, Concept of the Corporation talked about GM as a social institution (all companies are "social institutions"--some just more so than others). If you read the introduction and opening chapters of this 1946 classic, you will swear that Drucker is talking about Wal-Mart, and not GM.
Home Depot has grown in sheer size and apparent profitability, but lost favor as a place to shop. Consumers notice the lack of "service orientation." Employees are disgusted and demotivated. People are what make--or break--a business. Home Depot's size per se is not the problem. It is the insensitivity Nardelli brought to the culture. New, poorly trained and unmotivated store people can't find things in the huge stores; often not as well as customers. They give it a half-hearted try (whereas Lowe's people collaborate to hunt down an elusive item.) What a sad state of affairs, and what a task the new CEO faces.
GREATNESS IS TIED TO ERAS AND CULTURES
Wal-Mart's greatness evolved from a combination of Sam Walton's philosophy of always offering better and better value to its customers and treating its employees--associates--as true partners. Its growth and success were underpinned by Mr. Sam's compulsive interest in what was being offered at retail and how that could be done better. He was always in stores--his own and competitors--until Wal-Mart became too large and he became too infirm to be there. But his legacy was clear--pay attention to your customers and fulfill their wants and needs.
His two "'lieutenants” during Wal-Mart's pivotal growth era were David Glass (who succeeded him at the helm) and Jack Shewmaker (who left the company but remains on its board to this day--decades later.) David and Jack led Wal-Mart to develop the culture and the systems/infrastructure that would dominate retailing for decades, and some of that remains a major competitive advantage today. Where Wal-Mart has lost it is in two areas--both involving "outside" attention.
When Wal-Mart was smaller, but growing rapidly, it was treasured by shoppers as a place for great value and Mr. Sam's legacy of being a "true merchant" was maintained. As it grew into a global behemoth, its buyers became just that--"buyers." They are young, smart, analytical, and well educated. But too many of them are not "merchants." Merchants care most about what the customer wants, and how to present it, not about just how great a deal they can get on it. When this happens, buyers become power-drunk and dictatorial. The company thinks it can do things better than its suppliers, each of which is a specialist in some product category or market segment. That is the beginning of the end.
The second Wal-Mart mistake was to underestimate how its growth and power as a social institution would conflict with its profit motive and come under attack from a different kind of attacker. It was not competitors but social activists and union organizers that caused Wal-Mart's recent problems. Like an army of Lilliputians attacking a mythical giant Gulliver, these groups keep tugging Wal-Mart down, in the media, in local zoning disputes, and in reputation. The isolation that was so desirable in its growth stages can no longer isolate Wal-Mart from its role as the nation's leading employer and social institution. One of Wal-Mart's latest ads tries to remind consumer of its roots and its mission. Will it work? Maybe, maybe not.
Now, Wal-Mart has gone through a spate of trying to be something(s) it is NOT--fashion forward, radical and upscale. Hiring marketers who neither understood nor reflected it's core values and enduring a revolving door of key executives (over the past 3-5 years) caused by scandal and missteps (usually the promoting person's mistake). The "great tree" is breaking down. Broken limbs from the storms of competition and social pressure lay everywhere. The big question is does Lee Scott have what it takes to return Wal-Mart to its core values and its key success factors. Maybe, maybe not.
ONE COMPANY'S HERO CAN BE ANOTHER'S "GOAT"
Bob Nardelli was a star in the tough, no nonsense culture Jack Welch built at GE. Bernie Marcus and Arthur Blank built an entirely different culture at the Home Depot and it grew into a Wal-Mart-like leader in its retail markets. Then Nardelli came, and everything changed. There was no doubt that Marcus' and Blank's completely decentralized Home Depot had to change. The issue was how, and in what cultural style.
The answer is now clear. Nardelli may have known what to do, but his hard-nosed and heavy-handed way that worked so well at GE, didn't at Home Depot. The turnover in executive ranks was huge. Some was appropriate, but was it all? I doubt it. Could someone else have done it better? Perhaps. Could a different approach have worked? Probably so. The real question for the Home Depot board now is, "Why choose a CEO whose roots, value systems and experience base are as alien to Home Depot his predecessor's? Will this one really do much different or better things?" He also has zero retailing experience. He is not a "merchant" or a "partner" either. Is Frank Blake up to this task? Maybe, maybe not.
As the next few years unfold, Wal-Mart will gain in social consciousness that is already evident. It must make a larger, harder change if it is to maintain and grow from its lofty perch. It needs to reinstate into its merchandising and buying organization the "merchant mentality" and the "servant leadership" principles of Sam Walton. If it doesn't do that, nothing much it does will work better. It grew by finding strong suppliers and treating them in a tough, but fair, partner-like manner. Can it--and will it do these things? Maybe, maybe not.
Wal-Mart has retained the "tough", but fallen from grace in the two important ones--"fair" and "partner-like." Wal-Mart has ceased to be fair with its suppliers. And it has ceased to believe that it needs them as partners. That one will fell the mighty tree---not tomorrow, or next year--but over the next decade. Both of America's retailing giants are suffering from a near terminal case of "toughness" and lacking the "firm, but fair" approach that makes suppliers celebrate when chosen. The best suppliers will slowly find more deserving and grateful customers for their best ideas, and best partnerships.
Even the greatest trees can fall from too much stiffness and rigidity, rot from within, and attack from parasites and sheer size. Those that survive manage to prune the dead parts, send out seeds to start new trees, and claim not just one place in the forest, but an entire area of the forest. Home Depot Supply may be too far from the parent's core to serve it well. Wal-Mart is already giving up on some of its far-flung, one-size fits all expansions. Both would be wise to remember that "trees cannot grow to the sky” BUT, "forests can grow to the horizon." Look back at Sears, Roebuck and Montgomery Ward, giants of an earlier era. Watch to see if the contenders will learn new lessons, or fall prey to the same old failures. Maybe, maybe not.
That's enough ranting for a wintry, snowy Ohio day. When you don't need to go anywhere, and are in a warm, safe place, the "winter storm" is beautiful, so hold the calls to FEMA. (See below :-))
Best, John
DENVER WEATHER BULLETIN (not the most recent storm, a prior one)
Up here, in the "Mile-Hi City", we just recovered from a Historic event--- may I even say a "Weather Event" of "Biblical Proportions" with a historic blizzard of up to 44" inches of snow and winds to 90 MPH that broke trees in half, knocked down utility poles, stranded hundreds of motorists in lethal snow banks, closed ALL roads, isolated scores of communities and cut power to 10's of thousands.
George Bush did not come. FEMA did nothing. No one howled for the government. No one blamed the government.
No one even uttered an expletive on TV. Jesse Jackson or Al Sharpton did not visit. Our Mayor and our Governor did not blame Bush or anyone else. Nobody demanded $2,000 debit cards.No one asked for a FEMA Trailer House. No one looted. Nobody - I mean Nobody demanded the government do something. Nobody expected the government to do anything, either.
Nope, we just melted the snow for water. Sent out caravans of SUV's to pluck people out of snow engulfed cars. The truck drivers pulled people out of snow banks and didn't ask for a penny. Local restaurants made food and the police and fire departments delivered it to the snowbound families. Families took in the stranded people - total strangers. We fired up wood stoves, broke out coal oil lanterns or Coleman lanterns. We put on extra layers of clothes because up here it is "Work or Die".
We did not wait for some affirmative action government to get us out of a mess created by being immobilized by a welfare program that trades votes for 'sittin at home' checks. Even though a Category "5" blizzard of this scale has never fallen this early, we know it can happen and how to deal with it ourselves. "In my many travels, I have noticed that once one gets north of about 48 degrees North Latitude, 90% of the world's social problems evaporate." It does seem that way, at least to me. I hope this gets passed on.
Maybe SOME people will get the message. The world does Not owe you a living.
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