Why did Sears (and other established companies) Fail?

This isn’t just a sears problem, but seems to be a problem across the board with many companies, not all, but many.

The issue is that companies find something successful and they start to grow. They can get really big. For example, sears at one time was the largest retailer in the US, much bigger than Walmart. Then the founders, and those that are associated with the initial growth move on. It could be old age, wanting new challenges, whatever. Who fills in the spots? It’s not people with the same type of thinking. It’s typically MBAs and people that are accountants, or at least lean that way. The result is typically that growth grinds to a halt. These people try to optimize the business. In the really old days, this was called Morganization, after JP Morgan. Many times this means trying to sell and do things for no other reason than for trying to increase profit margins. When these people win, and shareholders always love these stories, sales start to fall. Why? Because customers tend to not buy on price, but on value. When the value of the product falls, they tend not to buy. Customers want more value for less money. Not less value for the same money.

AT the same time, other companies find out things and give these features to customers. The market place tends to change. If you don’t change with the marketplace, you end up with problems.

Big companies tend to have problems with innovation. Not only is there the Morganization going on, but there is the general problem of innovation in a large company. Sustaining innovation is hard. The finance department and hr tend to be against innovation. The finance department is about controlling costs. Hr is about hiring for known jobs. Both are really hard to do under innovation. In many companies, the hr and finance departments win this battle.

It wasn’t just sears. GM, Chrysler, and ford have this problem. Many retailers have this problem. Ibm is on this trail. It is much more common than people think.