There are no ceme­ter­ies for cor­po­ra­tions, but per­haps there should be. Such bur­ial grounds for those who were once mighty in the mar­ket­place might force man­agers to think hard­er and to focus fur­ther out. It might help reduce the com­pla­cen­cy that per­vades so many firms. And it might just gen­er­ate a new pri­or­i­ty inside com­pa­nies to nextsense.

Hop to Eli Radke’s (@eradke) post from last Feb­ru­ary: “86% of the 1955 For­tune 500 have failed” [link]. It’s pow­er­ful stuff, even if you now are part of a small­er enter­prise. Con­sid­er this stat: Rad­ke notes that in the Unit­ed States each year, some 500,000 busi­ness­es are cre­at­ed. He then reports that 50% fail in the first year; in the first five years, anoth­er 56% fail.

Circuit City ClosingI just read a pow­er­ful three-page syn­op­sis pub­lished in Econ Focus by Jessie Romero of “The Rise and Fall of Cir­cuit City” [link-PDF]. Haven’t heard of the once-mighty elec­tron­ics firm? Just to whet your inter­est, here’s how the short arti­cle begins:

One of the great suc­cess sto­ries of Amer­i­can retail­ing, Cir­cuit City got its start in 1949 as a tiny store­front in Rich­mond, Va. From that mod­est begin­ning, founder Sam Wurtzel quick­ly built the com­pa­ny into a nation­al chain, and his son Alan turned it into a house­hold name. By 2000, Cir­cuit City employed more than 60,000 peo­ple at 616 loca­tions across the Unit­ed States.

Cir­cuit City is also one of Amer­i­can retailing’s great fail­ures. In Novem­ber 2008, the 59-year-old com­pa­ny filed for bank­rupt­cy. With­in months, it closed its stores and liq­ui­dat­ed more than $1 bil­lion worth of mer­chan­dise, and on March 8, 2009, the last Cir­cuit City store turned off its lights for good. Today there are few reminders of the ground­break­ing retail­er; the company’s 700,000-square-foot head­quar­ters com­plex out­side Rich­mond is fill­ing up with new ten­ants, and the emp­ty stores have been tak­en over by new retailers.

Not attract­ed your inter­est yet? Well, let me also cite that “Cir­cuit City was so suc­cess­ful that man­age­ment expert Jim Collins fea­tured the com­pa­ny in his 2001 book Good to Great, a study of the country’s most prof­itable com­pa­nies.” No one has a lock on future success.

Romero’s three-page arti­cle is pow­er­ful sim­ply because it com­press­es this sad sto­ry into such short space. There is at least one, longer case study that you can read. A team of six peo­ple stud­ied the com­pa­ny and deter­mined what went wrong [link]. Yet, per­haps the best resource for you to read is by Alan Wurtzel him­self, who wrote Good to Great to Gone [link]. Mar­ket­place inter­viewed Wurtzel, which you can also view [link].

I share all this because it is too easy — far too easy — to think that nextsens­ing is only an aca­d­e­m­ic exer­cise. Yet, one quick­ly realis­es that, in the sto­ry of Cir­cuit City, thou­sands of real-life work­ers, sup­pli­ers, investors and com­mu­ni­ties took a hit. Romero asks, at the end of his arti­cle, “If Cir­cuit City had done things dif­fer­ent­ly, would it still be around today?” It’s much to Romero’s cred­it that the arti­cle ends with this ques­tion essen­tial­ly unan­swered. There are too many variables.

But it is for sure that, when a major com­peti­tor appeared, Cir­cuit City did not ask the essen­tial ques­tions it should have. Nextsens­ing was the fur­thest thing from its mind. Says Romero:

But Cir­cuit City didn’t see Best Buy as a threat. “We thought we were smarter than any­body,” says Alan Wurtzel, who remained on the board of direc­tors until 2001. “But the time you get in trou­ble is when you think you know the answers.”

As I’ve not­ed before, extinc­tion is for­ev­er [link]. Cir­cuit City was once a might cor­po­ra­tion; now, it’s just a case study. Don’t let it hap­pen to your company.

(Pho­to from Tough Times Blog)

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