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Lands' End CEO definitely had gutsBy Kay Plantes
The Lands' End site is regularly recognized as one of the best Web-shopping sites. The site's revenue contributed significantly to the high acquisition price Sears paid for Lands' End. Was Smith lucky? Hardly. Smith's victory demonstrates two best practices of strategic leadership. First, Smith regularly engaged in mental gymnastics with colleagues, envisioning ways not yet possible to overcome the high cost and inflexibility of catalogue marketing way before the Internet was even invented, e.g. instantaneously "zapping" catalogues to loyal buyers or mailing a catalogue on a disc. In doing so, Smith attuned his instincts to notice any new technology or strategy that could cut marketing costs without lowering awareness, consumer trial and repeat purchasing. No wonder that Smith bet on the Internet well before others understood its potential. Competitors first ignored the Internet and later engaged in a "wait and see" strategy. When Web-based purchasing later became a requirement for them, it added little to their bottom lines. Smith's other best practice was keeping core business leaders out of the way. He isolated the Internet start-up effort, gave it some of Lands' End's best talent, and, most importantly, freed the team to design the business to succeed — not to fit into the traditional catalogue business. For example, prices on slow-moving Internet products changed daily to encourage high inventory turns, an impossible practice with printed catalogues. CEOs and senior leadership teams regularly starve new opportunities because they are unwilling to shift resources from their core (i.e., traditional) business to fund riskier investments, even though such funding could protect future profitability and growth. Or they force managers of the new to report to and use resources of the old. Leadership teams rationalize this decision by saying that they cannot afford to invest fully in the non-core business opportunity. They also argue they're capturing synergies between the old and new, a worthy consideration, but one that should come after the new business is designed to succeed. Leaders who place status quo management over transformative change usually lack courage or are protecting their turf. In either case, the urgent -- today's profits from today's business -- drives out the important -- building a new business model to fuel future growth. Eventually, the old business becomes commoditized and no longer generates profits to fund new opportunities. This explains why so few companies survive 100 years. How do you know if you have a "non-core" business worthy of freedom and full investment? Look for a talented manager who feels increasingly frustrated by the rest of the corporation. He or she is a flag for a starved business opportunity -- selling to a new target market with different needs, entering a new channel, or entering a new category that demands a different business system. In the chase for annual profits leaders too often fail to consider the longer-term impact of present-day decisions. How ironic, as today's profits oftentimes reflect wise thinking from a decade past. Courageous leaders who invested in what were then "non-core" opportunities, and who gave managers needed freedom and funds, shaped today's profit stream. What winning opportunities are being starved in your company? Kay Plantes is a Madison economist, strategy consultant and executive educator. plantes@execpc.com madison.com ©2009 Capital Newspapers. All rights reserved. |
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