Added On: Saturday, January 19, 2008

Great Walmart Reads


In the late 90s, Bill Marquard worked deep inside Wal-Mart as a strategic thought-leader. Besides his first-hand Wal-Mart experience, Bill also spent 17 years at Ernst & Young, did a stint as the EVP/Chief Knowledge Officer at Fleming, and served eight-years as an adjunct professor of finance at Northwestern’s Kellogg School of Management. (So, he has some business chops to speak of.)

Bill has written a brilliant book, WAL-SMART, which sheds new light on Wal-Mart’s business DNA and how companies can profit in the Wal-Mart world we live in.

Marquard reasons Wal-Mart has changed the business landscape not just now — but forever. And if competing businesses fail to recognize how Wal-Mart has changed the rules of doing business, then Marquard says these businesses are choosing to lose. Businesses choose to lose because they fail to address how Wal-Mart has conditioned expectations from competing businesses, suppliers/distributors, employees, and local communities.

Wal-Mart has conditioned competing businesses to focus on executing competitive advantages besides the strategy of low prices.

Wal-Mart has conditioned suppliers/distributors to expect relentless pressure to continuously reduce costs so that lower prices can be brought to market.

Wal-Mart has conditioned employees to be content with meager wages, meager benefits, meager recognition, and meager growth opportunities.

Wal-Mart has conditioned local communities to expect the promise of new jobs and the need to give tax concessions in order to have mega-companies setup shop in their community.

To profit in this Wal-Mart world, Marquard argues, businesses must design and execute a comprehensive strategy that addresses competitive advantage, suppliers/distributors, employees, and local communities.

Competitive Advantage
According to Marquard, businesses today must choose to differentiate, emulate, and then dominate.

Differentiate by saying “yes” to areas that the dominant player in your category says “no” to. Meaning, choose to sell more local products, deliver better customer services, find ways to be more convenient to customers, bring niche products and services to market, and enhance the in-store customer experience in ways the dominant player doesn’t.

Emulate by choosing specific areas from which to plug ‘n play from the dominant player. For example, JetBlue emulated Southwest’s low price strategy but differentiated themselves by enhancing the customer’s in-flight experience with leather seats and free Direct TV.

Dominate by establishing yourself as the obvious number two player in your category. Distance your business from every other competing business striving to take your place as the number two business behind the leading big dog business.

To thrive in the Wal-Mart world, Marquard says vendors must make specific choices on what to leverage, how to invest, and where to diversify as it relates to supplying big dog businesses.

Suppliers/distributors must decide which strengths to leverage from the dominant player. For example, the most successful vendors leverage Wal-Mart’s huge terabytes of sales data to better understand sales movement trends at store, regional, and global levels.

Marquard advises vendors to invest in building strong brands to rebalance the scales in favor of the vendor so that the big dog businesses need you more than you need them. Instead of the vendor having to “push” products through the dominant player’s pipeline, a strong brand can flip this relationship to where the giant retailer “pulls” your products through the pipeline.

Vendors must make the important decision of deciding where to diversify so they do not face the problem of relying on sales from one big dog business. Suppliers/distributors who are reliant upon any one business for a significant percentage of sales are running a major risk of placing too many eggs in one basket. To diversify, Marquard advises vendors to develop and/or acquire unique products to supply businesses in different markets and different channels.

Marquard contends for businesses to profit in the Wal-Mart world, they must serve employees by knowing how to reward them, impassion them, and grow them.

Rewarding employees through compensation should differ depending on the go-to-market strategy of your business. If your business requires employees to have extensive product expertise and superior customer service skills, then these employees should be rewarded with higher wages. Conversely, if your business strategy requires employees to have fewer skills then their wages should be lower.

All companies wanting to succeed in the Wal-Mart world must also impassion employees by offering inspiring perks beyond strict paycheck compensation. Businesses need to go beyond fulfilling financial needs of employees to also fulfilling their emotional needs.

Growing employees is about also fulfilling their intellectual needs by offering programs that encourage education to help them during their life at work and their life away from work.

Local Communities
Successful companies in the Wal-Mart world find ways to endear themselves to the communities they do business in by knowing where to belong, which local activities to align themselves with, and how to engage local citizens.

Belonging is about finding the right places within a community to participate in order to do the greatest good. It’s about finding the right charities and causes to align with that sync, in some meaningful way, with the values of your business. And, it’s about finding the best ways to invite citizens to join the business in making the community stronger.

I’m guilty of overly simplifying the smart thinking of Bill Marquard’s WAL-SMART book. Hopefully the above summary intrigues you enough to wander over to the WAL-SMART website to learn more.

If you are responsible for managing business activities of any retailer or any supplier/distributor, I implore you to read WAL-SMART. It’s chock-full of smart strategy musings which will help you better compete against any big dog dominant company in your competitive set. WAL-SMART is a worthwhile read!

The DNA of Wal-Mart

I’ve already gushed about Bill Marquard’s business strategy book, WAL-SMART. In the book, this former Wal-Mart executive explains because of Wal-Mart’s unbridled success, this mega-retailer has forever changed the game of business from sourcing to distribution to pricing to inventory methods to merchandising. It’s now up to companies today (and tomorrow) to deal with doing business in the world that Wal-Mart has created and redefined.

Since Marquard spent time at Wal-Mart in the late 90s responsible for developing the company’s strategic planning processes, he has a very unique understanding of the company’s DNA. In the book, Marquard shares five key cultural underpinnings that make Wal-Mart the company it is. (Good stuff!)

“No firm of Wal-Mart’s scale has ever applied the energies of so many people to so narrowly defined a project: discount merchandising. Unlike other large firms, Wal-Mart executes a single-business strategy and executes it across four store formats [Wal-Mart, Wal-Mart Supercenter, Sam’s Club, and Wal-Mart Neighborhood Market]. It doesn’t confuse people by launching many strategies for many businesses. Other companies hoping to succeed in the Wal-Mart economy need to develop the same genetic compulsion.” (WAL-SMART, pg. 91)

“Wal-Mart’s correction-of-errors philosophy stands in stark contrast to the habits of most corporate cultures. Correction of errors isn’t aimed at placing blame. Correction of errors focuses on the problem, not the person. Correction of errors is all about identifying ways to improve customer experiences, merchandise, processes, cost structure, and the company from within—before competitors beat Wal-Mart to it.” (pg. 92)

“This is an intentional attitude to avoid smugness and complacency. As remarkable as it seems in such a successful organization, the assumption by people at Wal-Mart is that the monster of defeat lurks just around the corner. They have good reason to make this assumption, or course. In the world today, the durability of competitive advantage is measured in months, not years. If no outside challenge shakes the complacency of Wal-Mart managers, DNA dictates that the company create its own constructive paranoia.” (pgs. 95-96)

“Frugality was one of the most enduring and unmistakable imprints Sam Walton left on Wal-Mart. The most important way that Wal-Mart perpetuates this gene is by modeling thrift from the top. In the home office, employees buy their own coffee and use both sides of sheets of paper. On the road, employees bunk two to a room. They stay in budget hotels with free breakfast buffets, not luxury accommodations. The company, not the employee, keeps frequent-flyer miles.” (pgs. 97-98)

“Whereas correction of errors focuses on Wal-Mart’s own internal performance improvement, ‘we can make it better’ focuses on other companies’ ideas—that is, imitating them and going one better. Like other companies, Wal-Mart has often succeeded through a fast-follower strategy. Believe it or not, Wal-Mart has never actually created a new store concept. It followed Kmart into discount stores, Price Club into warehouse club stores, Meijer and Carrefour into supercenters, and combo supermarket and drug stores everywhere into Neighborhood Markets. It did them all one better.

Sure, Wal-Mart innovates, too. But deep in its DNA are genetic instructions to borrow the best of everything elsewhere.” (pg. 100)

source: WAL-SMART (Bill Marquard)


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