(electronic beeping) (light piano music) – Hi, I’m Ed Marsh. Welcome to this episode
of Signals From The OP. Like a military OP or observation post, I try to crawl out ahead of the
normal business battle lines to collect some intelligence
from my manufacturing clients. I look for trends and market movement that might be threats or opportunities. Today I’m going to start with a story as told as Dion Malden. There’s a company in the United States that began by offering a few
products directly to consumers and then quickly expanded its offerings until they included almost everything a person could want. This company went directly to the consumer bypassing local brick and mortar stores. It became enormously successful in meeting the needs of its
customers all over the country. Of course, the local stores were often, as economists will say, disintermediated, which is a fancy way of saying they couldn’t compete
on price and selection, let alone delivery and
convenience, went belly up, and with them with the jobs
and the people they employed. You can probably guess
the company name right? You probably guessed wrong. Malden was talking
about Sears and Roebuck. Today’s topic is Sears, prompted of course by his bankruptcy, which looks headed to liquidation rather than reorganization. The question is, what can we learn from Sears bankruptcy as
industrial businesses? First, let’s put on the table, Sears was not killed by Amazon and it was not killed by the Internet. Proof positive of a Walmart Nordstrom. Remove Amazon’s AWS
contribution to Amazon’s results and both of these brick
and mortar competitors outperform it. Certainly the internet has changed the way buyers think,
behave, research, and buy. But those behaviors are what’s important. Some companies respond better than others. By the way, if you’re
interested, I have signals episode about the demise
of Toys “R” Us as well on Linkedin. That’s the key takeaway here. Buyers expectations change. What Sears offered was access to information and products and there was a time when that was sexy and enough to make it incredibly powerful. In 1983 The New York Times wrote, no one has to tell you, you’ve come to the right place
to look at merchandising. Authority has complete and unmistakable. In Sears had a retail said
in the markets we enter, we will be dominant. As chairman speaking of a push into banking said, on a
scale of 10, not to be flip about it, I’ve got
to sit up on a 10.5. Sears made more profit in
1954 than its market cap was even before the recent slide, the people running it
weren’t dumb, far from it, but the nature of change is that there’s no acute defined moment when it’s clear that change has happened. So what changed over time? Buyer behaviors and expectations. Now here’s the challenge. We’re all consumers and we
instinctively understand as we pull out our mobile device or pull up to the house and see the smile box on the front steps that we changed how we buy and most of us differentiate
between how our business has changed versus our consumer behaviors. If you’re not in tech or healthcare, much of what you do to market and sell is similar to what you
did 15 to 20 years ago, back when Sears was thriving. Of course, that’s now enabled
with email and websites and voicemail is ubiquitous, as are mobile phones, and
fax machines are fading. But the business models
are basically the same. People are still buying and many companies are actually busy with
the orders now due to a strong economy. Because there’s been no bang moment when it becomes clear
to the changes happened, it’s really, really hard
to recognize it until the K is advanced. In the meantime, there’s always an outside cause
to which we can attribute the struggles and the
gradual decline, but it will happen in manufacturing. Maybe is 3D printing and the demise of factories. Maybe it’s the shift
towards a subscription economy and from traditional
capital equipment sales models. Perhaps it’s the commoditization of the machines and the elevated value of data driven insights and services. We can’t predict right now which it will be or what combination or whatever. We’ll cross the glucagon will. It’s easy to see what happened
to Sears in retrospect, just like Kodak and
countless other failures is so much harder to see
them while it’s happening. Because another lesson to take from it, unless you’re a professional mechanic, you could probably have a
toolbox full of craftsman tools and you’ve probably on Kenmore appliances. The product was not the
reason that Sears failed, and yet most industrial
manufacturers assume that continuous improvement
of their product is the key to vitality and simply incorrect. The good news is that we don’t have to be clairvoyant or exactly
right to survive and thrive, but we do have to observe
trends in tech and other industries and
listened closely to buyers the way we manage
complex sales, marketing, indirect sales, channel
pricing and more are increasingly in conflict
with what buyers want and as long as we taught
buyers and customers, it doesn’t matter how strong my franchise reputation brand, position
or product quality are. So here’s the question,
can you become a customer oriented from, can you learn about your customers and be more and more expert than day in their
customer’s business? I’m Ed Marsh. Thank you for joining me for this episode of Signals From The OP. If you enjoyed it, please share it and subscribe either to my youtube channel. Edmarshspeaks.tv or it’s related blog signalsfromtheop. And here’s one more quick prediction as I wrap up. I believe we’re gonna see Amazon step in and accumulate the real estate from a number of Sears locations. If you look at Walmart versus Amazon,
Amazon’s advantage in technology can be fairly
quickly clones by Walmart, whereas Walmart’s advantage
in location in real estate is much harder
for Amazon to replicate. I think it’s going to
be an interesting battle to watch, maybe one
that will eventually be captured in the business
wars podcasts from wondering. It’s worth listening to if you’re not. If you’re not subscribed. Thanks again for joining me. I’m Ed Marsh.