Why Sears failed: Lessons from Winston Churchill

The news that Sears Canada is going under will come as no shock to anyone who walked into a Sears store in the past decade or two. I shopped at Sears as a kid, but I can count the number of times I visited in the last 20 years on one hand: twice to buy a Kenmore vacuum cleaner and probably twice more to buy replacement filters and bags.

Many other consumers had similar shopping patterns. It is why Sears Canada Inc. formally asked the Ontario Superior Court to begin insolvency proceedings.

Retail analysts will offer insight into the nuts-and-bolts failures of Sears: niche competitors who carved away at Sears' general store model, a failure to adapt to changing consumer tastes.

All of that is true, but here's another way to view the fall of Sears: It is closing down for the same reason that any organization fails, be it a company, non-profit or even occasionally a state. Because they lack one or more of the following critical ingredients for success: The right ideas, individuals and aligned interests. (Think of the formula as "the three I's.")

To grasp how this combination works, and to use a familiar example to make it clear, think of Winston Churchill. Ponder how he and others were key to Allied success in the Second World War.

Churchill, to note the obvious, had the right idea early on. It was one grounded in a realistic appraisal of the world around him; he viewed Nazi Germany and Adolf Hitler as a mortal threat to Great Britain. That idea was not initially shared by many in the 1930s; it grew only after repeated attempts at blunting Hitler's aggressiveness failed. But even after Britain declared war in September, 1939, a supplementary idea, the notion that Britain could win a war, was in doubt.

To wit, even Churchill's laudable, reality-based ideas were never enough. Two other factors were critical to eventually winning the war: individuals and the interests of others.

As Churchill historian John Kelly points out, the notion that Britain should, with the assistance of the Commonwealth, fight on against Germany was not universally shared. This was true even after Churchill ascended to the position of prime minister in May, 1940. For example, Lord Halifax, then foreign secretary, was of the view that the United Kingdom may not have sufficient military strength to continue the fight. Halifax leaned to informal talks with Italy as a precursor to possible negotiations with Nazi Germany.

While the leadership of Churchill was consequential, so too were the efforts of other individuals. For example, the Canadian-born newspaper publisher and magnate Lord Beaverbrook was appointed by Churchill as minister of aircraft production in May, 1940. As another historian Roy Jenkins writes, Beaverbrook's "ruthless improvisation" fortified Britain's aircraft production. His success also led to his full appointment to the war cabinet in August, 1940, where Beaverbrook was a key ally of Churchill.

Thus, Churchill the individual – his ability to lead his caucus, cabinet and country, including the appointment of other critical officials – mattered to Great Britain's survival early on.

Lastly, for national or even organizational success, one needs to ally with the interests of others. Churchill understood this critical factor. It was why he constantly wrote, lobbied and cajoled U.S. President Franklin Roosevelt and other Americans to support Britain.

Plainly, once the Japanese attacked the Americans at Pearl Harbor and the United States joined the war against Japan and Germany, it was finally clear to the American public that their interests were the same as those of Great Britain, Canada and other nations already in the war. All of this – the idea, the individuals, and the aligned interests – mattered to the eventual Allied victory.

Back to Sears: The downfall of a department store chain is hardly akin to the existential threat to Great Britain in the Second World War. But the dynamics of failure or success are the same: Ideas grounded in reality (threat recognition) plus individuals who understand such threats and can capably organize against them, as is identifying and working with those who have joint interests.

Sears failed because apparently no one in the executive suite or at the board level had the right ideas about the new retail environment; that means for some time, Sears was led by the wrong individuals.

A failure of ideas and individuals meant Sears Canada failed to align its interest as a company – survival and profitability – with the interests of consumers. Failure was inevitable.

The Globe and Mail, October 12, 2017

Mark Milke is a regular contributor to the Globe’s Report on Business and president of the Sir Winston Churchill Society of Calgary.