At its height, Sears was the Amazon.com of its day.
The 125-year-old retail giant amassed a catalog audience of more than 25 percent of the U.S. population — without using the internet or modern technology. It achieved the extraordinary feat of fulfilling more than 105,000 orders a day by changing the way business was done with the use of railways, the U.S. Postal Service and its network of headquarters, stores and distribution centers.
But things can and will change, and even giants can fall.
What should concern today’s retailers is not that change happened or that this once thriving company is now in bankruptcy. The lesson companies need to realize is that the pace of change is speeding up greatly, and executives have to act faster to compete in today’s economy.
According to research from Washington University’s John M. Olin School of Business, an astounding 40 percent of companies in today’s Fortune 500 rankings will be extinct in a mere 10 years.
What does this mean for these companies, as well as those aiming to take their places? First, it means they have a bigger challenge to compete. Second, they must pay closer attention to the external forces impacting their businesses.
Evolving consumer preferences, technological advances, changing climates, global politics and economic forces are all key variables that impact even the most established industries. Disruption is happening in every industry. Those that can leverage clues and signals from external forces will have the advantage.
In the retail industry, there's a major shift affecting all levels of business — convenience of the consumer. Consumers are all looking for companies to make it easier to get what they want, immediately when they want it. The key to surviving is finding out what customers want ahead of competitors.
To stay ahead of the curve, companies need to ensure they're not overlooking crucial information. It's ironic, then, that the company that invented home shopping couldn't see until it was too late how online shopping was altering the retail landscape. Sears failed to understand the external forces.
Today, most decisions in the corporate world are made using internal historical data coupled with gut feelings and assumptions to direct how businesses should move forward.
For example, many traditional CPG and retail companies have teams or consultants whose job is to perform analyses of the impact of marketing spend and pricing adjustments to predict future results. What they're missing — but is available — is data on what drives consumers to purchase in the first place. Factors such as global economic volatility, changes in consumer buying preferences, weather, or industry supply and demand factors all impact consumer decision making.
With the rise in availability of global data and extremely fast, cost-effective cloud computing, analyzing only internal data is short-sighted. At Prevedere, we found that between 60 percent and 85 percent of changes in demand and financial results can be explained by movement in these external business drivers.
Think about it: No matter how low Sears adjusted its prices or how much it spent on advertising, consumer preferences have shifted. Sears’ go-to-market model stopped working, and it's too late to make adjustments.
The world has changed. The way companies plan, act and make decisions must as well. It's a matter of sink or swim. We need to be certain we're looking at all the information available on what impacts our industries every day, and incorporate it into our decision-making processes.
Every company has the opportunity to evolve their analytics to include data outside their four walls so that they can thrive in the decades to come.
Rich Wagner is the CEO of Prevedere, a cloud-based business intelligence solutions company.
Related story: Sears Files for Bankruptcy, Lampert Steps Down as CEO