WalMart prides itself on great execution. For years management has bragged about the company’s ability to get things done quickly and cheaply. But now the company has run into problems. Revenue growth has slowed, and the future is very unclear. A five year stock chart shows declining equity value of about $80billion. WalMart is finding out that when innovating, it’s execution skills are greatly lacking.
This week it was reported (see Tribune article here) that WalMart is going to report that it’s November sales actually FELL for the first time in a decade. This is just the latest in a string of bad news. Included is the fact that WalMart is planning to cut back its expansion plans in response to its declining year-over-year same store sales. The company’s foray into more trendy fashion goods has flopped, with those products being pulled. It’s taking on the drug retailers with flat price generic pharmaceuticals – largely to a market yawn. Net – WalMart monthly sales are up only half of Target‘s (who’s 5 year chart shows they found the $80B Walmart lost).
Readers of this blog know I’ve long stated that WalMart‘s future is dicey for investors and employees. Totally Locked In to its strategy of low cost, management has pruned any skills at innovation. Long gone are the people who in the 1960s helped Sam Walton pioneer the innovations to drive the low cost strategy. So now, when it needs to innovate, WalMart doesn’t have the right people to do the job. To paraphrase an old southern expression "even if the mind is willing, the flesh is weak."
WalMart desperately needs to change. But to do that the company needs to implement White Space. It needs to first own up to its Challenges. It needs to tell employees, vendors, investors and customers that they see a need to change and fully intend to. Then management needs to put in place a team that has the permission to develop a new Success Formula, reporting directly to the CEO (outside the existing management system), and fund that team with enough resources to really try something different. All these piecemeal ideas are getting lost in failed implementations by an organization too massive and tightly directed to do anything more than run the old Success Formula. The White Space group needs permission to develop a new store concept. To test things their own way and prove out the new Success Formula – not just a new tactic here or there. And then, instead of trying to push the tactic into the massive WalMart the company must migrate the traditional stores toward what works in the new Success Formula.
WalMart has done this right before. Sam’s Club is a huge success – a pioneer in the club store concept. There WalMart followed all the rules of White Space and created a Success Formula that worked.
If they will hire some new managers, and give them the kind of White Space they gave the Sam’s Club team, WalMart could migrate toward a more successful future in a matter of months. But if management keeps doing all these tactical actions they’ll only succeed in confusing everyone. Much to all of our dismay.
Well, the whole story with Wal-Mart really worries me too. Looking at the financials we can see that they are getting lost. Like Adam said, they don’t have Success Formula any more, they are loosing they edge.
For a very long time low-cost strategy worked very well, but now… somebody has to think creatively quickly.
I don’t know what are they trying to achieve by signing contract with Metro 7, which only got them into the contract and it is too late to cancel the latest orders.
Do they really want to become competition for GAP, Banana Republic or other large cloth companies? Would that work, would people go and spend money for something what doesn’t have any brand recognition and may not be attractive to them. This is huge risk. They may focus on clothing industry and in mean time the whole business may slip away.
They need to find they edge again. For me personally it doesn’t look like they know what they are really doing. Like Adam said, maybe completely new management, more creative, with better idea, would be able to manage the find a golden formula.
In a mean time, let’s watch and see if the focus on remodeling and trying to attract people to buy Metro 7 clothes would do anything good to company except huge investments. K-Mart used to be “big” one day too, but somebody forgot what strategy they really had. Results we all know.
Walmart has been very successful takng a formula and implementing it ruthlessly but they have created lemmings for management. They know the “Walmart Way”, but that is no longer enough to stay in the lead.
While the white space store stimulates ideas, the creativity is too focused. Walmart needs to get ideas from all managers. Create whitespace within every store for experimentation. The practice will also allow Walmart to BEGIN the training of their management to think and take action.
Something not mentioned in this article but in the vein of being innovative, Walmart is adopting their mega-stores to be more environmentally freindly. They are employing solar power, water collection and water treatment into newer stores. Perhaps they should start branding “environmentally friendly” Walmart products? If the only benefit from the new construction methods is fewer law suits, local protests and less bad press….it may be worth it financially.
Mr. Mucha and Mr. Mullen’s commentaries raise some interesting & legitmate points that can open the door to even further white space exploration beyond the physical box.
I agree that Walmart needs to seek more innovative products and services to set themselves apart from competitors, but they also need to take serious innovative steps toward changing and improving their overall brand image. To become a solid participant in the market, the almost daily press regarding neighborhood protests, harsh vendor practices and poor employee benefits must shift to a more positive and less ruthless image.
Mr. Mullen has the right idea with the “environmentally friendly” approach. The same can be extended to their HR and community efforts that would result in far more appeal to customer loyalty and higher regard. Be it fact, fiction or merely journalistic opinion, much of Walmart’s press is directed at the negative.
Using a white space theory for improving Walmart’s “human factor” could result in an increased and more reliable share of the market business. The Walmart “greeter” isn’t cutting it for them any longer. It appears to be a cheap, glossy facade on a decaying structure.
I also agree that Walmart needs white space. This company has seen its glory, but did they think that it would last forever????
Walmart was a great concept when they were founded, but times are changing and so must Walmart. They need a new fresh idea an concepts that maybe have never been thought of, or bringing back some old concepts.
I think that Walmart’s way of bullying people and what I mean by people is corporations into giving them or selling them product at low cost is over. I think that customers and corporations have found other ways to market their product and make a profit.
If Walmart fails to make a change they will be out of business, because of their lack of change and concepts for their stores. Great examples are Kmart, Venture, Turnstyle for those who remember, grante some of these places are still in business, but the question is for how long.
I think you raised an excellent point when you stated Wal-Mart needs to own up to the challenges ahead. I would hazard a guess that most managers at Wal-Mart still go to bed dreaming of ways to extend their power base over suppliers, in the continued search of lowering costs (as fits the culture).
Changing such a culture will require an amazing change in mindset that will have to be driven from the top of the pyramid. And this won’t happen until Wal-Mart executives own up to the weaknesses in their current strategy.