If asked to name the world’s top operationally excellent company, one name you would have to consider is Wal-Mart. From humble beginnings, a relentless focus on operations led this company to become the world’s largest. For two decades Wal-Mart has been THE model of supply chain management, inventory reduction, procurement excellence and using technology in support of its operational goals. Wal-Mart has out-retailed every retailer, and become a huge success.
Wal-Mart’s profits have risen consistently for many years. The company’s stock, however, has not done as well. Between 1997 and 2000, the stock went from $10/share to $70/share. Since then, however, WMT has had a series of lower highs every year. Since early 2005, WMT has been a laggard of both the DJIA and the S&P 500. The problem has been a declining price-earnings multiple, as investors wonder how Wal-Mart will continue growing. Yes, profits are up, but how will the world’s biggest company grow?
How has Wal-Mart responded? By increasing its focus on operational excellence! The latest efforts are intended to cut inventory even further. Reducing the numbers of items carried, and risking out-of-stock items in the store. Wal-Mart is willing to have customers not find goods they want in order to even further improve it’s already world-class, record-setting efficiency while seeking to lower costs.
Wal-Mart is continuing to Defend & Extend the Success Formula that made it famous. Yes, that Success Formula made Wal-Mart an incredible success. But now Wal-Mart has to learn how to do new things in order to grow. Focus, focus, focus Wal-Mart has already proven it can do. But, since the company is unwilling to Disrupt itself, it keeps hoping that "more, better, faster" of what first made it famous will somehow bring it out of a 5-year slump. Instead, Wal-Mart needs internal Disruption, and White Space, to overcome the Challenges which have slowed its growth (and investor enthusiasm.) All 1-Trick ponies are eventually eclipsed by alternatives that change the competitive playing field.
No one thinks Wal-Mart is in a slide to ruin. After all, they are ….. Wal-Mart! But, then again, no one predicted that we’d see the wholesale decline in Woolworths, then Sears … and there was AT&T, and Polaroid …. and Xerox once looked like it could copy its success forever ….
Well said, Adam. It’s darn interesting to see this story from the consumer electronics trade publication TWICE too:
http://www.twice.com/article/CA6323405.html
As you can see, Wal*Mart is also now moving into higher end retailing too, which should give Circuit City and Best Buy a spot of anxiety or worse.
Just in case you don’t want to register, here are some highlights from the article too (just realized you needed to register on the site to get to the full text):
“The retailer’s experimental supercenter, which opened last month in this well-heeled Dallas suburb, puts into practice what management has been preaching about attracting higher-income customers.
“And based on the CE department’s dramatically expanded footprint, upgraded assortment and newly knowledgeable sales staff, Wal-Mart has made electronics a key battleground for consumers’ hearts, minds and wallets.
“The store, from its two-tone brick exterior to simulated wood floors and faux marble rest rooms, is a striking departure from the chain’s typically drab blue and gray facilities. Aisles are wide, bright and uncluttered; oversized signage abounds; flat-panel displays provide directional messages; and associates have traded in their smocks for the Best Buy uniform of khaki pants and blue polo shirts.”
etc. etc.