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Protection Syndrome and the Demise of Sears

Sears, the department store that was the equivalent of a combined Amazon and Walmart in the 20th Century, filed for bankruptcy protection on October 15th. The company that invented catalogue retailing, and brought the joy of home delivery to nearly every American household for a century, could have become a dominant retail player. But instead, they are in Chapter 11 with liabilities exceeding assets by $5 billion.

 

There is much written by business analysts over the last twenty years who saw this slow death coming. I won’t cover that ground in great detail, but it includes the burdensome acquisition of Kmart, failed investments in Prodigy (an early-generation online service provider), hurting acquired brands like Lands’ End, and the lack of investment and reinvention of their retail stores. (Notice: I didn’t blame the Amazon effect). Their fundamental plight was a management mindset to protect the legacy brick and mortar model. This is ironic because Sears adapted from its catalogue-based business to retail in the 1920s, and later built successful product brands (Kenmore, Diehard and Craftsman) that America came to trust. But they forgot what their real business was – providing what consumers want, in the most convenient way possible, at a competitive price.

 

Sears lost touch with customers and confused their markets with all sorts of offerings. To me, it became an unfocused bazaar. In the 1980s, you would walk into a Sears store to buy a dishwasher and would have to navigate through All State Insurance and Dean Witter Investment salespeople. They failed to focus on improving the value/price equation of their core product lines and ceded leadership to Walmart, who focused on one thing – delivering the lowest prices every day. Once the logistics and distribution wonder of the world, Sears failed to innovate the supply chain to create competitive value at retail. They could have owned home delivery and in-store pickup, and leveraged their huge retail presence to block Amazon’s blitzkrieg. Ultimately, they failed to invest in customer-centric intelligence to drive understanding of consumer wants and preferences, and used those insights to adapt their business.

 

If you study the moves that Sears’ management made in the last twenty years, you will see a pattern of protection and the application of traditional strategies (e.g, reduce overhead to save money and sell assets to reinvest in more “promising” business lines). But it’s much easier to manage expense reduction than it is to create a culture of innovation and to drive a new vision of the future. For Sears, it was easier to “invest” in other companies because they really didn’t know how to invest in their own. Unfortunately, Sears suffered from a culture of protection. I call it the Protection Syndrome. Protection is the opposite of innovation. When companies, large and small, experience steady success for long periods of time, the managers stay inside the walls too much and fail to adapt fast enough. The CEO of Sears came out of the investment world and was not a visionary like Sam Walton or Jeff Bezos. The view from the top of the Sears Tower should have provided the big picture. Instead, it only made the customers walking on the ground look very small.

 

It may be easy to criticize Sears, but any company is vulnerable to the Protection Syndrome. I believe that today Google may be suffering from the Protection Syndrome. Any major, successful brand will suffer if they rest on their laurels, take their eyes off the customer, and fail to innovate for the future.

 

Marketing Agency Blog Post Author of Protection Syndrome and the Demise of Sears

October 25, 2018
Written by Tom Sullivan

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