Too big to learn?

WalMart is an amazing company.  From a small rural store a behomoth of retailing emerged in just a few years.  No one seems able to compete with WalMart in discounting.

Despite its success, WalMart is now struggling to grow.  Poor revenue growth has stalled the share price.  Now, more than at any previous time, WalMart needs to find new ways to grow.  Its Success Formula has worked so well that no one can outperform WalMart at being WalMart.  But, it's unclear that there's a need for more WalMarts.  And foreign markets aren't nearly as excited about WalMart as Americans.  So, how is WalMart to grow?

WalMart needs White Space projects that can launch new revenues.  Just as Sam's was once a new project that became large.  But WalMart has become so focused on its retail store strategy that it's lost the ability to do new things.  Last week WalMart gave up on its effort to rent videos on-line, handing that business to NetFlix.

Amid the announcement WalMart pointed out that its stores sell more in one day than NetFlix does in a year.  But the real story is that WalMart can't figure out how to compete on-line.  At WalMart, it's all about the stores.  How to drive more revenue to the stores.  And that's getting increasingly difficult.

There was another retailer that never rose to this challenge.  Once the biggest innovator in retail, they were the first to capture the rural customer (with mail order) and they became a powerhouse across the country.  But, when they couldn't adapt to changing times and learn to do new things they fell to an acquirer's axe.  That company was, of course, Sears. 

So, it may seem silly to think that WalMart's failure to sell videos, or anything else, on-line is a serious concern.  But people thought Sears' on-line failures were no big deal 6 years ago.  It's actually a very, very big concern when any company becomes so locked in that it can't undertake new projects.  It portends very bad things ahead.

What goes up will come down

HP's stock is destined to jump in the next few weeks.  What will benefit short-term investors is bound to cost long-term employees, suppliers and investors. 

HP's new leader is indicating HP will benefit from deep layoffs and cost restructuring. The CFO is publicly stating that there will be no change in strategy nor business direction.  Investment analysts and traders are cheering.  Deep cuts are sure to provide short-term P&L improvement.

But at what cost to long-term growth and viability?  HP's businesses are highly competitive in all areas.  They are fighting battles on all fronts, with little in the way of new fighting materials.  Reducing the army size will lower the demands, but how will they win?  Where's the White Space for new growth initiatives when the focus is on draconian cost reductions? 

Traders are buying, but these actions look about as sustainable as floating a cardboard balloon.

Shoot at the big target

Poor GM.  When you're a big target, lots of people find it easy to take their shots at you.  No doubt GM is in trouble.  But there are few pundits offering solutions for GM's woes.  And no one knows what Mr. Kerkorian is likely to do.

The most prevalent thinking across the press is that GM needs to retrench.  Kill products, and whole brands.  Never mind that killing Oldsmobile cost GM more than keeping it alive, and that killing Oldsmobile simply made GM smaller as those customers switched to competitors rather than other GM cars.  The overwhelming view is GM needs to cut, cut, cut.  Remember, GM is not short of cash.  It has enough cash to last years and years.  So why does it need to do all this cutting and/or selling?  Is GM supposed to save its way to prosperity?

GM needs to grow if it wants to remain a vital company.  In the short term, this probably means selling more cars.  Longer term, it probably means doing lots more than cars (look at GE, no longer just an electric production company.) 

Amidst all these calls for belt tightening, busines jettisoning and head lopping we need to remember that GM needs to grow.  Last Sunday's Chicago Tribune interviewed the head of marketing for GM, and for the first time I heard a glimmer of what might turn around GM.  He's out to sell more cars.  To compete with those stealing GM's share.  He hears this crisis as a call for GM to change the way it does business and become more customer focused.

That's a plan that might work.  It's not without risk.  But the plans to simply shrink GM have no future.  GM needs to turn loose the folks in the divisions to find better ways to compete for customers.  Less corporate purchasing and corporate consolidations and more white space for those divisions to do something new.  You never know, there might be another John Z. DeLorean somewhere in the giant GM with the next GTO on her mind just waiting for someone to give her the permission and resources to make something new happen.