Is Your Strategy Showing?

Usually, when a business has a solid, well-executed strategy, someone looking in from the outside can figure it out and point to the supporting activities that make it work. You might think that if these things can’t be discerned from the outside, they are just cleverly concealed. More likely, the strategy is weak or poorly executed.

Think about Southwest Airlines. Obviously it is a low-price, no-frills airline, but far more detail is very visible. Southwest does almost everything differently than other airlines. All activities are designed to support lower ticket prices, lower costs and a sustainable competitive advantage.

You don’t find Southwest on third-party Internet travel sites. That is no accident. Selling exclusively through the company’s Web site, Southwest shares margin with no one. When traveling, there are no provisions for connecting to other airlines. Southwest doesn’t, eliminating costs of coordinating bookings and schedules or moving baggage to and from other airlines. You’ll find your plane is a Boeing 737. They are all 737s, the better to leverage investments in maintenance, training and spare parts.

You may not recognize the name of the airport at your destination city. Where possible, Southwest avoids expensive major airports and uses less-convenient smaller ones. For example, in Chicago, Southwest eschews O’Hare in favor of Midway. Southwest flies point-to-point, avoiding the flight connection costs of the hub-and-spoke system favored by major competitors.

Contrast that match of strategy, supporting structures, activities and competence with another well-known company, Sears Holdings Corp., parent of Sears and Kmart. What can we discern about Sears’ strategy? Are the goals and supporting structures or activities visible?

Sears was once our national retail giant, selling a broad line of wares through its ubiquitous stores and famous catalog. Craftsman tools, Kenmore appliances and Diehard auto batteries are three of the strongest brands in their segments; great products offered at prices that are good for both the consumer and the company. So one might expect a strong segue from catalog leadership to the Internet and a build-from-the-core strategy beginning with those strong hard-goods brands.

Looking from the outside in, what we see seems to be a mish-mash of initiatives attempting to provide “family shopping experiences” at the retail stores and a ho-hum presence on an Internet dominated by Amazon.com and a wide variety of big-box and specialty retailers.

Kmart purchased Sears in 2004, forming Sears Holdings and keeping the Sears and Kmart brands separate. For its part, Kmart has adopted the deep-discount superstore strategy finely honed by Wal-Mart. If you walk through a Wal-Mart and a Kmart, you don’t have to be a genius to see which company has all the necessary supporting activities and skills in place. Kmart has emulated being big and cheap, but not the store design and layout, merchandise organization, inventory management and other supporting activities that make it work for Wal-Mart. It’s in a weak “me too” position.

The relationship between Kmart and Martha Stewart for her Martha Stewart Everyday line further muddied the water. Kmart was straddling the cheap discount strategy and an affordable designer label strategy, and it hasn’t worked. Martha now is taking her products and going home — actually, to Home Depot. She has said that her Everyday brand has been “diminished” by a lack of attention to quality and the atmosphere of Kmart stores. The critical supporting activities for the designer strategy were not executed.

I’ve always liked clothing from Lands End, which Sears purchased in 2002. I recently visited a Sears store and walked through the Lands End display, an oasis of quality surrounded by a hodge-podge of marked-down merchandise and disinterested employees. In my eyes, instead of elevating Sears, that scene diminished Lands End. When I saw it, I understood what Martha Stewart was talking about. Sears’ core competence and strongest brands are all hard goods, but it continues fleeing from that strength in pursuit of soft-goods success.

Sears recently announced it will open new toy stores and full-service beauty parlors inside selected stores to further enhance the “family shopping experience.” Looking from the outside, it looks like an attempt to put more stuff in the already crowded stores. I don’t see the strategic intent in any of this, and I think that has something to do with Sears’ financial results.

If you want to check your strategy, ask a colleague to take a critical look at how you do business versus your competitors. Have you really found a sustainable competitive advantage? Do you excel at the activities necessary to sustain your lead? Are you really differentiated in some way or are you just one more player trying to do the same things as everyone else marginally better?

Originally published in the Central Penn Business Journal “Whiteboard”

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