Silly Big Business, Faith Is For Startups

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Two very large companies went through a spate of trouble recently, directly related to executive moves that were, well, "faith-based" (and this coming from a religious guy).

  • In November 2011, Apple Retail wiz Ron Johnson took over JCPenney, where same-store sales had fallen by a few percentage points. The following 3 quarters, same-store sales slid by 18% or more, all the way up to 27% in the quarter ending 27 Oct 2012. Unsurprisingly, Ron Johnson was not long for his job.
  • Just this week, Sears, the largest retailer of appliances in the United States, reported that its critical appliance market share had slid from 40% in 2002 to 29.9% last year. In other words, it gave up a full one-fourth of its market share, with a solid footprint and well-known and respected brand.

How did these two giants stumble so badly?

While each did something different - JCPenney tried to end discounting, dump low-end / low-price merchandise and move upmarket, while Sears cut ties with its almost-century-long relationship with Whirlpool - both had something in common: they bet the business on faith.

When you are a 3-person startup, and no customers as yet, you can afford to bet the company on faith, try it, and fail. When you are a multi-billion-dollar behemoth (Sears: $7.5BN in 2012, JCP: $17BN in 2011), you don't bet the entire company on a "belief" that a completely different strategy will simply work. You test it. Today's startup founders, even the youngest and most inexperienced, have learned from Eric Ries and his mentor Steve Blank that you test your assumptions about everything from product to market to sales channels.

Louis D'Ambrosio (Sears) and Ron Johnson could have saved a lot of pain and embarrassment, and their investors a lot of lost capital, by just taking Steve Blank's class. It is even available for free on Udacity. Or perhaps they just should have called a good consultant.