Don’t bet the business on conventional wisdom
- October 12, 2009
There are just some things that you don’t do, some ideas that you don’t challenge. That’s conventional wisdom.
As the late Jim Croce put it:
You don’t step on Superman’s cape,
You don’t spit into the wind,
You don’t pull the mask off the old Lone Ranger,
And you don’t mess around with Jim.
Those things aside, there are times when conventional wisdom is dead wrong. I can think of three good examples from the past 25 years.
No. 1: The Sears superstore
When I began covering business news in the mid-1980s, Sears. Roebuck was held up as the model for the future of retailing. Already the owner of Allstate Insurance, Sears, then the nation’s largest retailer, acquired the stock brokerage Dean Witter and the real estate broker Coldwell Banker before launching a new national credit card, the Discover Card. Many observers thought Sears would be become the perfect one-stop superstore for customers. But somehow the mix of dishwashers, stocks, real estate and auto insurance didn’t work. Sears lost its spot as the top retailer first to Kmart and then to Wal-Mart. The company divested itself of its financial, real estate and insurance subsidiaries to focus on traditional retailing. However, it has never regained the prominence symbolized by the Sears Tower in Chicago, at one time the tallest building in the world. Now Kmart and Sears are lumped together in one company, and the Sears Tower is the Willis Tower.
No. 2: The Japanese juggernaut
In the late 1980s, Americans were deathly afraid of Japanese competition. Japanese companies were gobbling up market share in autos and electronics by focusing on continuous improvement in quality. American companies were awed by Japanese business practices and scrambled to adopt them. But still there was this sense of impending doom. Japanese billionaires were buying up chunks of real estate in Hawaii, California and New York, including landmarks like Radio City Music Hall. Some thought it was only a matter of time before they took over America’s leading companies. What happened instead is that Japan slipped into a decade-long slump in the 1990s. Japanese companies remained highly competitive but American companies of all sorts vastly improved their quality and productivity.
No. 3: The death of coffee in America
Believe it or not, there was a time when some experts believed that coffee drinking would die out in the United States. In the early 1980s, case studies in graduate marketing classes posed the problem. Young people seemed to be spurning coffee for other drinks. Fearing the loss of an entire generation of customers, some companies began promoting coffee in a variety of sweet flavors. Things began to change in 1987 when the owners of a roasted coffee bean company reconsidered an offer to turn the Seattle business into a chain of Italian-style coffee houses. Howard Schultz bought Starbucks and adopted the name for his existing coffee bars. That began a growth spurt that eventually saw Starbucks opening a new store every day of the year. Meanwhile, American culture was changed. Far from shunning coffee, young people now yearn for their next latte.
Of course, conventional wisdom isn’t always wrong. Nonetheless, you have to wonder what business ideas we accept today will be proved false tomorrow. I’ll place my bet on the notion that everyone will turn to Twitter as a marketing tool. When a group of young people recently were polled about Twitter, a majority labeled it a passing fad. I wonder how many would have said the same thing about Starbucks in 1987?