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For more than a decade, I’ve been reading the annual reports of several major corporations. With thoughtful analysis and a little reading between the lines, you can learn a lot about business operation, corporate culture and management philosophy.
This year I was intrigued by the contrast in comments from two top executives. Floyd Hall of Kmart and David Glass of Wal-Mart took very different approaches to communicating the past year’s success to shareholders.
However, it took reading between the lines to grasp the contrast. On the surface, both men’s comments sound positive and upbeat. Both used the terms “continuous improvement,” “innovation” and “change.” Both executives discussed their company’s success and lauded the commitment of their management teams.
So where is the contrast, you ask? The contrast is in the execution. Many are good at talking about success ... few are truly talented at getting the job done.
Let’s roll back the calendar to 1990. It was during this dramatic year that a new retail sales leader emerged. Long-time leader Sears was passed by the up-and-coming Kmart. But then Wal-Mart swept by both Sears and Kmart with a sales surge of 26 percent. Wal-Mart’s sales for the fiscal year that ended in January 1991 were nearly $33 billion.
And therein lies the basis of the contrast. In the decade that followed, Wal-Mart performed while the other two powerful retailers — Sears and Kmart — languished. While Sears and Kmart talked about continuous improvement and made only small advances, Wal-Mart made giant strides toward serving customers more effectively. While Sears and Kmart revised, revamped and tried new approaches, Wal-Mart continued to execute its skillfully crafted plan.
The proof is in the year-end results. In fiscal year 2000, Kmart rang up retail sales of $35.9 billion, Sears came in at $41 billion and Wal-Mart became the second largest company in the U.S. with sales of more than $165 billion.
Keep in mind that these giant retailers were at nearly equal sales levels in 1990. All had the same economy to grow in and all had the same buying clout. All three had hundreds of stores and were present in virtually all major U.S. markets. How did Wal-Mart grow to be four times the size of Sears and four and a half times the size of Kmart?
I believe these key lessons I’ve learned from the annual reports spell out the performance differences:
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Do more with less. Wal-Mart has always held expenses in check. It focuses on taking costs out of the business in all areas. Of all the annual reports I received this year, the company with least profit produced the biggest and fanciest annual report.
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Focus on improvement instead of growth. Wal-Mart has always been motivated by the idea of getting better, not getting bigger. Serve your customers well and growth will come naturally.
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Develop a team of dedicated people. Several Wall Street experts predicted a period of decline following Sam Walton’s death in 1992. The decline never came because Walton built a talented, dedicated team, prepared them well and empowered them to work the plan.
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Never resist change. Wal-Mart has had three CEOs in its 38-year history: Sam Walton, David Glass and newly appointed Lee Scott. Walton and Glass pushed for changes that made the company better. I’ll bet Scott will continue in the same way. The companies of yesterday are different today — to compete and survive, you must change.
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