Hoover believes the only valid reason for the existence of any enterprise is to provide goods and services to people, to somehow make the world a better place. The minute an enterprise forgets that, it’s all over with. Hoover recalls in the early ’70s when he was a Wall Street analyst covering retailing. The retail giants at the time were JC Penney, Kmart, and Sears. There were young emerging competitors, among them a company called “Wal Something” from Arkansas. Hoover and his boss thought it wasn’t even worth a summer intern’s time to look at the company as an investment.
Looking back, he asks himself, “What did we miss?” Think about the theoretical reasons for corporate success. Which company had more experienced executives? Sears. Which company had better marketing? Sears. Which company had better human resources and training? Sears. Which company had better information systems? Sears. Which company had a better real estate? Sears. Which company had better brand recognition with the consumers? Sears. (Die Hard battery, Coldspot, Kenmore, Craftsman Tools. Nobody had heard of Wal-Mart’s Old Roy dog food.)
So what was it that today has made Wal-Mart the largest company in the world and Sears struggling to stay alive? Hoover says Sears took their eye off the customer. They built the world’s tallest building, a real tribute to the customer. They bought Dean Witter so they could go into the stock brokerage business. They bought Caldwell Banker to go into the residential and commercial real estate businesses. They became more concerned about Wall Street than Main Street. They thought, “We are the biggest, best, most profitable retailer in the world, we don’t have to worry about running stores, we can do it in our sleep.”
On the other hand, Sam Walton was obsessed with making life better for his customers (as Sears had been years earlier). In the face of this, Sears could not win, or at least not without changing their whole mindset. The minute you think that power resides in the boardroom or in Washington, or that your company can be made great through acquisitions, rather than by focusing on customers, you are most likely at the beginning of the end.