What the demise of Sears teaches us about strategy
What the demise of Sears teaches us about strategy
Why finding the right identity for your organization is essential when formulating a strategy.
Greetings from Vancouver! 👋
A great strategy has many elements including goals, metrics, accountabilities, critical issues and more. However, the most important element of any strategy is figuring out who you should be as an organization, what I call the identity in this week’s edition. Sears embodies the power of finding the right identity and the danger of failing to do so.
Let’s look at three points in the history of the Sears, starting with the Catalog Identity, moving to the Retail Identity and finishing with the Confused Identity. Each point has lessons and questions that every organization should ponder as it thinks about the future.
Let's jump into it!
The Catalog Identity
In 1888, Richard Sears and Alvah Curtis Roebuck introduced its mail ordering catalog, initially focused on watches, diamonds and jewelry. Both men had realized that they could go after a customer segment previously ignored by other companies: farmers. Sears wasn’t the first company to realize the untapped potential of rural communities. Montgomery Ward had launched its catalog in 1872 and would become Sears fiercest rival.
The launch of the Sears catalog captures the first successful identity shift the company made. Its catalog would eventually reach 532 pages, full of Richard’s flamboyant copy, and selling everything from sewing machines, bicycles and even automobiles. It said that most farmers only had two books in their houses, the Bible and the Sears catalog (popularly known as the Consumers Bible).
Richard and Alvah shifted the company from being a watch and jewelry seller to one that could deliver anything, to anyone. In essence, Sears pioneered the identity Amazon would eventually adopt in the early 1990s.
Being able to embrace a different and eventually larger identity shaped the decisions that company would make over the next thirty years. Think of all the products Sears included in the catalog, the logistical decisions on where to build warehouses and what roles to hire. That’s the power of finding the right identity for your business.
The highlight of this period was the 1906 IPO, marking the first major retail public offering in American history. Finding the right identity isn’t meant to last forever. For Sears, it lasted until 1925 when it shifted its identity once again.
Question: When was the last time your management team explored if you have the right identity for your business?
The Retail Store Identity
On February 2, 1925, Sears opened its first retail store inside the Sears complex. It was meant to be an experiment, after all, they had built a highly successful business on the idea that their customers would order products from their catalog and instead of visiting stores directly.
Sears realized that their world was changing. While we see 1929 as the official start of the great depression, many farmers started experiencing issues many years before. Farmers started to migrate towards urban centers and find jobs in the city. There was also a consistent rise in car ownership, making it easier for consumers to drive to larger stores outside of the downtown cores.
Sears made the second identity shift, this time into a retailer. Once again, their new identity shaped many decisions including the location of stores (far from city centers), the design of stores (large and spacious), the accessibility for cars (full of free parking) and so forth. Over the next thirty years, Sears expanded across the United States, Canada and Mexico.
Sears didn’t officially stop issuing its catalog until 1993 but its importance to the company faded quickly in this era. Sears rode the new retail identity until the 1980s, where it tried to shift its identity one more time, failing to make the leap.
Question: Are you thinking through how shifts in the world will affect your business over the next 30 years?
The Confused Identity
In 1985, Sears issued the Discover credit card, after buying a brokerage organization. Sears was trying to add financial services to its offerings but I see it as the start of a confused identity.
Over the next 30 years, Sears did a lot of things. It tried to start the aforementioned credit card business, a home improvement store, and an automobile repair business, just to name a few. In the background, two companies were founded that show two distinct identities Sears could have adopted.
Walmart, started in 1969, would eventually take over Sears as the largest retailer, following a similar model of large stores outside of city centers with ample parking. Walmart focused on lower costs and other elements but Sears wasn’t far from this identity.
Amazon, started in 1994, would eventually aim to sell everything from the internet, using a modern version of the catalog (the Amazon website). Sears had the logistical chops, inventory and selling experience but it never developed the technological ability to sell things online. I can’t help but think of the irony whenever I hear of Amazon wanting to open physical stores.
Sears identity became muddled in the 1980s. It’s not clear who they were and what their focus was. The lack of identity shaped their erratic decision-making in this era. If your business doesn’t know who you are, any decision will seem like a good one. A good identity provides constraints to decision-making, something Sears desperately needed.
Question: Who are you as an organization and who should you be in the future?
Sears is a fascinating case study of the power of finding the right identity to underpin your strategy, while also serving as a cautionary tale for what happens when you don’t adopt a solid identity. An organization may continue to operate for a long time—there are 11 Sears stores as of 2023—but it will experience a gradual and grinding decline.
A strategy may do a marvellous job at determining goals, metrics, accountabilities and critical issues but if it doesn’t figure the identity of your organization, it can all be wasted on the wrong decisions. That’s the price to not knowing who you are as an organization.
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Cheers,
Ruben
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Great story, we will use this learning in our self storage business.