Everybody knows FedEx (see chart here). Pioneers in air delivery, before the days of email we all used Fedex to send documents quickly. For years the name was synonymous with overnight delivery. But, competitors UPS and USPS figured out what FedEx did well domestically, and began offering better service at lower rates. Internationally, DHL improved and eclipsed FedEx services as well. By 2007, FedEx was a once great brand locked into tough competition in a business that was very economically sensitive – and where FedEx had no clear advantage.
A lot of people missed it when FedEx bought Kinko’s. Another great brand, Kinko’s invented the copy center business. Those of us who grew up with carbon paper remember when Kinko’s stores made it possible for everyone to get copies cheap and fast. But, again, lots of people figured out how Kinko’s did it – and pretty quickly Staples, Office Max, Office Depot and many other competitors were offering copies just as fast and cheaper.
Both companies became desperately Locked-in to their Success Formulas. Both needed to change in order to become more competitive. They needed to eclipse competitors by finding new markets and new solutions they could use to grow. Instead, FedEx bought Kinko’s. And both kept doing the same thing. By and large, no one noticed.
Now the 3 (FedEx) plus its acquisition (1 for Kinko’s) sums to 3.5. Both are struggling to compete, trying to do more of the same better, faster and cheaper but to no avail. Now FedEx is announcing it is declaring a quarterly loss – of course blaming rising fuel cost. The fact that they didn’t ever figure out a new Success Fomula that was less fuel dependent is being ignored. In fact FedEx is taking a nearly $900million write off on the Kinko’s acquisition! (read article here) Instead of "synergy" where the combination creates its own benefits, we have value destruction.
And what is FedEx going to do? Why, change the name of Kinko’s to FedEx Offices. Somehow, by destroying the Kinko’s name they will gain some sort of advertising synergy? Maybe that 3.5 will become 3.25 soon.
FedEx needs to develop a new Success Formula. The acquisition of Kinko’s offered the opportunity to figure out something new. But instead, the "operational execution" culture at FedEx caused them to push both companies to simply further attempt maximizing existing Lock-In without much change. There were no Disruptions in FedEx saying "hey, we have to things new and differently to create growth" – nor were there any Disruptions in Kinko’s. Nor was any White Space created to develop a new Success Formula. So both companies kept focused on doing what they always did. Now, both are in growth stalls – and the future is bleak. An improved economy will not turn around FedEx – it will just help all these competitors do better while FedEx continues to struggle – and within a few years we can expect more store closings and weaker service.