RadioShack’s Fatal Failure And Why Didn’t They See It Coming?

Andrea-SimonThere is certainly no shortage of articles recently about the demise of the once-formidable electronics giant RadioShack. WSJ’s February 4, 2015 headline said it all: “Strategic Confusion Put RadioShack at Mercy of Lenders.” Check out this image and the graph below it:


Yes, there was certainly a gross miscalculation. But when you look at the trend from 1999 through this year, there was a steady decline. You have to wonder what RadioShack’s leaders didn’t see. It wasn’t the number of stores or the shift to the Web or commoditization or their failure to satisfy the female shoppers who once were the core of their business. It was their customers.

Customers were telling them what the problem was, loud and clear.

Customers were changing where and how they solved their electronics problems. And RadioShack was no longer where they were going for those solutions.

Yet, RadioShack didn’t see, or hear, any of it.

It doesn’t matter if it is Circuit City or Blockbuster or Borders: How can companies that were once so successful fail so abysmally to adapt to the changes taking place all around them?

As one former fan of RadioShack stated in the WSJ article:

“Evan Koblentz, president of the Mid-Atlantic Retro Computing Hobbyists, said most tinkerers in his group now shop online for parts. People used to go to RadioShack to hang out. It’s almost a place to avoid now. Those of us who are hobbyists have been lamenting RadioShack’s fall for 20 years.”

Why didn’t they see what was happening?

At my firm, Simon Associates Management Consultants (SAMC), we often work with clients who are stalled or stuck. Call it what you will, they are trying to sustain their growth at a moment when growth has just stopped. The past was great. Now the future is uncertain. Why can’t they see what is happening? And why can’t they adapt fast enough to save their business?

The RadioShack story offers some great lessons that could easily apply to our clients’ businesses — and maybe yours as well.

First, their market purpose was changing. As the hobbyist quoted by the WSJ said, customers used to hang out there. No more! Didn’t they see it?

At one time, RadioShack was a leader in the industry.

In the 1960s, Radio Shack made its own computers. They were leaders in an emerging industry. Even as new technology was developed, Radio Shack continued to play an important role. The ubiquitous 94-year-old chain was where people went to buy a tape recorder, desktop computer, calculator…and more importantly, information.

Some of the telling comments on the WSJ articles:

“I was the only one I knew in college that had a pc. Learning how to type, use my Tandy, Dot Matrix printer, and word processing software were more important than anything my teachers wanted me to learn. And that’s a fact.”

Another comment: “As a Northeastern University co op student, I worked for Baird Atomic, a military contractor in the early ‘60s. RadioShack had one big store on Commonwealth Avenue in Boston. (The mall stores came after Tandy bought RS in the mid-‘60s). I was a regular purchaser of transistors, capacitors, wire and solder. You’d call the Shack in the morning, and parts would be delivered in the afternoon.”

And a third: “Circa 1977, my first big consumer product purchase was a pair of RadioShack stereo speakers that were on sale. I had to put them on lay-away to accumulate enough money from several paychecks to pay them off. I’ll always remember the rainy Friday night I drove to the store to make the final payment and collect them.”

To its loyal customers, RadioShack wasn’t merely a store that sold them things. It played an important emotional role in their lives.

Sadly, these customers grew up, and “the Shack” didn’t grow with them. So they moved on. Simply compare an Apple store with its Genius Bar and a RadioShack with its products hanging on racks and it’s no surprise that one is achieving record growth and the other is closing down.

The times changed. Sadly, the Shack didn’t.

As the ‘60s rolled into the ‘70s, ‘80s and ‘90s, new channels emerged and new products changed the very nature of the markets RadioShack was competing for. The Web made buying easier and simpler. Old-style cell phones that RadioShack was betting on were completely upended by iPhones.

And then there was its management. RadioShack had seven CEOs in nine years. While its last new re-branding concept was fresh and might have reinvigorated sales, it never really had a chance to make it out of the box. Ads showing people wanting their old stores back reminded me of the Oldsmobile that wasn’t your father’s.

Lessons learned?

So what can we take away from this? At SAMC when our clients are facing similar challenges, we direct them to a big white board on which they have to draw entirely new business models. They must “see, feel and think” about their business in fresh ways. Why? Because:

  • Their markets are changing.
  • Their customers’ buying habits are changing.
  • Their value is no longer of value.
  • Their old management, rooted in the past, doesn’t know what to do.
  • Their new management has been brought in too late to salvage any inherent value that was there.

Could RadioShack’s demise have been avoided? Maybe. Hard to know. But here are three things I do know:

  1. Times are changing. You can ignore it or leverage it. You can continue to mass market advertise and hope people somehow find you. Or you can capitalize on the growing importance of inbound marketing and capture people who are searching for you. This may mean you need to learn an entirely new way of marketing your business, but you can.
  1. You can assume your customers are just like they have always been. Or you can go out and actually engage with them. Don’t survey them. Go out and watch them. Do some “deep hanging out” and watch them use your products or shop your stores. Listen to their stories and ask them how your product or service could solve their pain points.
  1. Most of all, try some Blue Ocean® thinking. If you haven’t read “Blue Ocean Strategy,” you really must. Another good action would be to delve into our blogs, white papers and videos about Blue Ocean Strategy. The point is that you must get out of thinking that more of the same (but priced cheaper) is a sound strategy for growing your business (or college or not-for-profit). If the times are changing, why do you think doing the same old thing is going to bring you growth?

One last point about adapting to change:

Don’t fear the future. Create your future. Make it happen. And enjoy the journey. The alternative isn’t much fun.

Some of SAMC’s white papers or articles you might find of interest: