Amazon has engulfed nearly every aspect of retail and is positioned for more. Its North American sales have quintupled since 2010. Between 2015 and 2016, Amazon captured well over a third of all American online retail sales—including 43 percent in 2016. Moves to vertically integrate its supply chain by solidifying an ocean freight license, marketing in-home deliver, and creating a $1.5 billion cargo airline would make the 1920s robber barons blush. Traditional retailers looking to compete against Amazon face even bigger obstacles: Amazon’s market capitalization. In the last 10 years, retailer mainstays Sears, JC Penny and Kohls lost an average of 82 percent of their value. Amazon gained 1,934 percent, allowing it access to the cheap capital the finances its growth.
It isn’t just the company’s world-class logistics traditional retailers are facing—it’s the threat Amazon poses to different retail segments combined with its reputation among consumers. The recent Whole Foods acquisition instantly erased $12 billion in shareholder value from six major food retailers. Meanwhile, consumers love Amazon. It is one of the most trusted brands in America. It controls one of the world’s least exclusive clubs: in 2017, 80 million Americans were members of its Prime 2-day shipping and entertainment program (by contrast, France has a population of about 69 million people).
How can retailers compete with Amazon? It’s an 800-pound gorilla that is beloved by consumers, with exceptional operations and a limitless pocketbook.
This is an attempt to scratch the surface of the tactics and strategies that powered history’s Fortune 100 retailers. The analysis is based off a data set created from Fortune Magazine, industry publications, Capital IQ, and public financial documents. It was then organized across 10 industries, 22 supersectors, and 30 sectors through Russell’s Industry Classification Benchmark (ICB). Drawing on this data, six major insights emerged—each powering the eras’ greatest retailers. Some are obvious, some aren’t. All are required if modern retail executives want to compete against Amazon.
It’s 2017 and the impossible has happened. I agree with Ross Douthat.
Douthat is an op-ed writer for the New York Times. He shouldn’t be. He once argued that people waiting longer to have children is “a decadence that first arose in the West but now haunts rich societies around the globe.” He spent most of 2016 arguing that Trump would not be the Republican nominee, nor would he win the Presidency. After Donald Trump won the Presidential election and explicitly campaigned against Republican policies, Douthat thought to himself, “Democrats need to become more like Republicans.” He wrote anti-gay marriage columns as recently as 2013. For some reason, people take him seriously.
Today he told a Friedman-esq story about a friend’s theory on Trump shaming businesses into not leaving.
In 1946, over a decade before he became the architect of the Vietnam War, Robert McNamara was hired to rehaul the Ford Motor Company. It was in desperate need of help. The iconic corporation was hemorrhaging about $9 million a month. McNamara, an accountant by training who rose to prominence by applying statistical methods to warfare planning, immediately transformed the culture.
Decisions were no longer made from the eye of a designer, or the experience of the line-worker. He immediately developed complex financial metrics to measure a product’s viability. Every penny spent in manufacturing, marketing, design, and engineering had to be justified and rationalized through this analysis. It shifted power from engineers to MBAs. Within three years he doubled the company’s profits. In Makers and Takers, Rana Foroohar argues that this was the end of American global automobile leadership. As crazy as it sounds, the question needs to be asked: Did modern finance destroy innovation?
Bell Labs, the world’s most innovative organization in history, had a simple view on innovation. Whatever improvement came out of their Murray Hill headquarters had to do the job “better, or cheaper, or both” than its predecessor. In thirty years, this philosophy allowed the company to develop semiconductors, lasers, fiber optics, solar panels, the Unix operating system, the C++ programing language, cellular phone networks, and much more. At its peak, America’s monopolistic telephone company was one of the most profitable organizations in the world. In his book The Idea Factory, Jon Gertner makes the case that nearly every single improvement in modern communications can be traced back to one lab, at one company—AT&T. Trillions of dollars in economic growth, millions of jobs, all from one group.
The question is, what can we learn from Bell Labs?
Change Management is a vague concept. It has been around for about fifty years, but there it lacks an 100 percent agreed upon definition. A cynic would say it’s almost like people built an entire industry without fully understanding what it is they were claiming to do. John Kotter, who popularized the term, originally considered it an 8-step linear process. PROSCI, the largest and most well known change management firm, defined it as “the discipline that guides how we prepare, equip and support individuals to successfully adopt change in order to drive organizational success and outcomes.”
These are partially correct, but holistically wrong. Change Management is just the tactical implementation of strategy. Continue reading
oday marks the 21st
anniversary of the death of Thurgood Marshall. He was a complicated man and perhaps the person most responsible for ending segregation in America; first as Chief Counsel of the NAACP’s Legal Defense Fund and then as a Supreme Court Justice. Marshall had immeasurable courage, once saving an innocent plaintiff from certain execution by interrupting a poker game between the President of the United States and the Chief Justice of the Supreme Court. When asked by Marshall to sign a stay of execution Chief Justice Fred Vinson
remarked, “I’ll tell you one thing, if you’ve got guts enough to break in on this, I’ve got guts enough to sign it.”
For those interested in learning more about Marshall I’d recommend Gilbert King’s Devil in the Grove a Pulitzer Prize winning investigation into the 1949 Groveland Four Trial. The book offers a history of the civil rights movement, a biography of Thurgood Marshall, and a parallel to Obama’s second term strategy.
verturning 100 plus years of institutional racism needed not only courage, but a legal and strategic genius. Marshall was both. If he found out that a judge liked English precedents he would craft a brief overflowing with English cases from the 1700s. If he needed help from federal officials he would release a well-placed memo condemning communism. If he needed information from a rival he would take them out drinking. “He’d get a lot of outside lawyers together in a room, and he’d be talking and laughing and drinking along with the rest of them and getting everybody relaxed and open, and he’d seem to be having such a good time with them that you wouldn’t think he was listening.” Franklin Williams a former NAACP lawyer turned diplomat later recalled, “But after they’d left, there it all was—he’d had the benefit of all their brains, which was his strategy in the first place.”