Bloomberg Businessweek recently ran an article that described the disappointing results of Wal-Mart’s website. It is generating $6 billion of sales annually, while Amazon does $34 billion. It represents only 2 % of Wal-Mart’s sales. The article focused on why.
First and foremost, Wal-Mart store managers feared online would cannibalize in-store sales, depriving them of their bonuses. They refuse to acknowledge the existence on www.walmart.com anywhere in their stores, on grocery bags, etc. Hence, the awareness of the site is low.
Second, the person in charge is the former head of retail stores for Wal-Mart. Let’s face it, humans tend to leverage their prior expertise and experiences, making it challenging to put those things aside when faced with a new situation.
Third, Wal-Mart tried to apply their store-focused retailing know-how, such as keeping turnover high and inventory low by stocking only fast moving items. For example, Amazon has 2,016 different digital camcorders to choose from, and Wal-Mart has 96. Clearly Wal-Mart folks had not read The Long Tail. Amazon actually prices lower than Wal-Mart on those 96 fast moving items, and makes very healthy profits on the more obscure items that a small number of people are willing to pay a premium for.
So…if you are pursuing innovation or major change, the lessons are obvious:
1.) Select key people to lead the effort who don’t have experience in your core business, but do have experience in the new area.
2.) If your innovation has a competitor, don’t let it beat you on any dimension of your offering, and make sure to stand out on some unique dimension.
3.) Protect the group from the constant attack internally by the status-quo/ going-business folks.