Tuesday, 15 October 2013

Why do some High Street brands fail and others thrive? (Clue: it’s not because of the internet)

[Originally published on the Aspley Consultants website]

Last year saw the demise of three more well-known names on the high street: Jessops, HMV and Blockbusters.

Whilst it is sometimes sad to see the disappearance of familiar brands, people can benefit from their failure.  Why did these formerly successful companies fail and see what can be learnt from them?
Here are five contributory factors (there may be more):
  • Growth of online shopping – People continue to do more of their shopping on the internet.  In the case of Jessops, this meant buying cameras and photographic equipment or materials from online providers able to offer greatly reduced prices over retailers relying on high street presence.  In the case of HMV and Blockbusters, the internet gives the ability to download (or rent) both music and movies.  This provided greater choice at lower prices.
  • Relative costs – The traditional high street retailer faces the costs of renting, fitting out and maintaining a network of shops as well as recruiting and training large numbers of staff.  Conversely, the online retailer’s costs consist of vast warehouse space, reduced staff overheads and online support, both of which, whilst not trifling, are nevertheless significantly cheaper.
  • Supermarket diversification – The big supermarkets have provided even more competition to the high street retailers, complementing their traditional ‘food and household products’ with a range of goods including DVDs, computers, cameras and washing machines.  The convenience of buying these products whilst doing the weekly shop has reduced footfall on the high street.
  • New product turnover – The recent boom in communications and computer gadgetry (e.g. tablets, phones etc.) has been so rapid that high street retailers have found it harder to manage inventory turnover as efficiently as their online competitors whose systems have enabled them more quickly to replace non-selling items with things people really want to buy.
  • Poor channel integration – The internet hasn’t replaced every high street retailer and there are clearly some well-known names that persist because they have managed to integrate the increasing number of ways in which we can view, choose and purchase products (i.e. otherwise known as ‘channels).  Using the internet to support an existing high street presence works, as shown in the success of John Lewis, Tesco and other stores that allow you to order online and collect in-store.
Note that these are ‘contributory factors’.  They are not the cause of the demise of Jessops, HMV and Blockbusters, let alone a root cause.  All of these are symptoms of a failure to learn and it is this failure that is the root cause behind their closures.
These companies and many others before them (e.g. Kodak, Woolworths, Comet, Habitat, and Clinton Cards etc.) failed to adapt to the changing world around them with sufficient speed, if at all.  As people began to change their buying habits, these firms either failed to notice or, if they did notice, did not react quickly enough to take advantage of the new opportunities that such changes brought with them.

The internet did not cause these companies to fail.

It was the slow rate at which they adapted to the reality of the internet (relative to their competitors) that caused such failure.
This was the result of insufficient or non-existent ‘adaptive learning’, which is the bed-rock of any learning organisation.

Adaptive learning is, as it sounds, based upon observing changes in one’s environment and adapting to them.  Organisations embrace adaptive learning when they identify lessons from projects or day-to-day operations, or when they conduct one-to-one interviews with key personnel or when they make changes based upon what such activities have taught them.  Such learning is reactive and whilst it is, by its very nature, backward-looking, those organisations that benefit most from this are lean and able to make and implement decisions quickly, identifying lessons and learning from them at speed.  This learning has also been termed, “single-loop learning”, using the analogy of a simple electrical circuit.  (For more information on 'lessons learned', please follow this link to the Lessons Learned pages on the Knoco website).

There is another, more radical form of learning, known as ‘generative learning’.  This is where innovation, experimentation, modelling and scenario planning are used.  Such learning is forward-looking, is less focussed on events and more on trends and ‘the bigger picture’.  This learning has also been termed, “double-loop learning”, to reflect the questioning of basic assumptions that is absent from its single-loop counterpart (i.e. having gone round the learning loop once, you add or remove a variable, constraint or assumption and then repeat the journey a second time).

Examples of organisations using generative learning include:
  • Apple turning traditional assumptions about software vs. hardware on their head;
  • No frills airlines stripping away unsought services and their associated costs;
  • BP’s recognition that it is an energy company, not solely an ‘oil’ company;
  • Tesco’s pioneering use of the ‘Clubcard’;
  • F W De Klerk’s speech to the South African parliament in February 1990;
  • Anita Roddick showing how cosmetics and environmental concerns were compatible;
  • The Thatcher governments’ privatisation programme;
  • Ghandi’s policy of non-violent protest against British India;
There are countless more.

However, what these all have in common is radicalism – a willingness to break the mould and do things differently.  No tinkering on the edges, no pulling or pushing on the same levers but an insistence that new, different levers be found and used instead.

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