Take your eye off the ball long enough and you will slip up. This is especially true of several once vibrant industries. Fueled by innovation, technology, fantastic design and out of the box thinking, many industries reaped rich rewards. They helped the economy grow and were known the world over for their superior products. Then they grew complacent. They lost focus and left the door open for competition from other countries. Once the pillars of the economy, they have either started their downward spiral or are already at the bottom.
The U.S auto industry shined the brightest in the 40s when the engineering excellence of GM, Ford and Chrysler helped America win the war. American cars were high on style and performance. As gasoline prices rose and the public favored smaller compact cars, the big three stayed oblivious. The unions bargained for higher wages pitting one competitor against the other. Japanese car manufacturers adopted leaner workforces, with a high focus on safety and performance. The American auto industry lost its core strength of engineering perfection and focused on frills. Global players from Japan, South Korea and China are benefiting with lower labor cost in their countries. They are better at implementing lean production technology.
Industry biggies like Intel's Andy Grove have been foretelling bad times for the tech industry in the U.S. Industry watcher Eric Openshaw, vice chairman and U.S. Technology, Media & Telecommunications leader at Deloitte LLP says:
"Successful tech companies will need a much higher degree of integration of their engineering and research and development departments into their mainstream business, as well as accountability for outcomes and frequent progress milestones."
America has traditionally been the tech hub of the world. Bill Gates working in his garage and scaling up to make Microsoft is the stuff of tech lore, as is Steve Jobs' obsessive eye for detail. The American tech industry seems to be less in the news for innovation and more for patent wars. Patents were earlier used for licensing purposes, with tech companies competing with each other to develop better technology products. This focus has now shifted to tech companies treating patents as products that are traded like instruments of investment rather than copyright. Many people in the tech industry are urging the government to levy a tax on offshore labor. Peter Cohan, venture capitalist and author, disagrees and says that these taxes would result in higher-priced products for consumers in America. A better approach would perhaps be to improve facilities, provide cost-effective labor and keep the innovative juices flowing in the tech community.
Local stores provided local flavor, sourcing goods from nearby markets and producers. These stores showcased the skills and products of those within the community. Then stores like Walmart changed the retail landscape, and over time there were only a few large consolidated retail players.
Walmart's Sam Walton opened a dime store where the attraction was lowest prices available. He hoped to profit through volumes. This value proposition won the public over. Pretty soon he was opening stores across America that kept costs to a minimum. Walmart brought about revolutionary management techniques like cross-docking which further cut costs. Pretty soon Walmart was overtaking other retailers like Sears and K-mart. Walmart was mining user consumption patterns and offering them the best prices possible.
Unfortunately, it led to the closure of several thousand smaller retailers. Walmart started to dictate to manufacturers and demanded the lowest prices. In her study on Walmart, economist Emek Basker notes that when a Walmart opens three other retailers fold up within two years. Walmart is putting pressure on manufacturers, and in many cases manufacturers are moving jobs out of the U.S. to keep costs low. Walmart has changed the retail landscape by being one large retailer, with over 100 million shoppers. However, the recession has seen a big change in consumer buying behavior. Consumers are paying through cash and visiting local stores more often according to the New York Times. They are making less big shopping trips, which Walmart is known for. This has resulted in a decline in sales of 1.8% at stores in the United States. The decline has been occurring for the last seven quarters in America. It is time for Walmart to look deeper and keep its customer base. If it doesn't, it may go the way of K-mart.
The Bottom Line
Focus determines leadership positions and staying power for any industry. It is important for industry players to keep their ears to the ground and assess their strategies from time to time. Hubris, seen through all the above examples, can be very disastrous for an industry's health.