Survival of the fittest?

This is an update and correction of the previous post.


The English naturalist, Charles Darwin first published his theory of evolution in 1859 in his classic book, On the Origin of the Species.  In his book, which was based upon evidence gathered during his voyages on the HMS Beagle, Darwin proposed that populations evolve, or change over time, through a process of natural selection, commonly referred to as the "survival of the fittest".  "The use of the phrase, "survival of the fittest" is perhaps an oversimplification, for Darwin also reportedly said, "It is not the strongest species that survives, nor the most intelligent, but the one most ready for change."  In other words, the species that do ultimately survive are the ones that adapt.  Evolution then, is about perpetual change.

What's good for biological species is also good for organizations.  To paraphrase Darwin, "It is not the biggest or richest organizations, nor the ones with the most talented leaders that survive, but rather the ones that are most ready to change."  Change is good.  Overreliance on your past successes is not. 

If you need evidence, look no further than how the companies that comprise the Dow Jones Industrial Average have changed over time.  Since its inception on May 26, 1896, the companies that have comprised this overall barometer for the New York Stock Exchange have changed 54 times.  That doesn't sound like all that much until you consider that these companies are considered some of the most stable performers over time (which is one of the reasons why they are included in the DJIA metric).  Just take a look at some of the companies that have been recently dropped from the DJIA - General Electric, AT&T, Alcoa, Bank of America, Hewlett-Packard, Kraft Foods, Citigroup, and General Motors - and that's just in the last decade! 


Do you need more evidence?  Just read any of the books by the management guru, Jim Collins.  I think his book, "How the Mighty Fall" is particularly relevant to the present topic of discussion.  We'll talk more about this book later in another post, but the overall message from all of Collins' books is that companies that fail to change with the times don't last for very long. 


If you are still not convinced that change is important, consider the case of the retail chain, Kmart.  Kmart was one of those companies that I grew up with - we used to shop there all the time.  Kmart sold just about everything - clothes, home appliances, automotive parts, shoes, and electronics.  I remember that we even bought our first home computer (a Texas Instruments personal computer) there!  Kmart even had an in-store cafeteria.



Kmart was founded by S.S. Kresge and was first incorporated in 1899 as the S.S. Kresge Corporation.  The company was renamed the Kmart Corporation in 1977.  Throughout the 1980's and 1990's, Kmart was one of the largest discount retail chains in the United States.  At its peak in 1994, Kmart operated over 2,400 stores around the world. 


Kmart was known for its "Blue Light Special", an in store promotion in which a rotating blue light (similar to the ones found on the tops of police cars, fire trucks, and ambulances at the time) was placed for a short period of time (usually only a few hours) near special on sale items that were significantly discounted.  The sales promotion was announced throughout the store over the public address system with the phrase, "Attention Kmart shoppers..."


I can still remember when Kmart sponsored the Newman/Haas Racing Indy Car racing team (co-owned by the actor, Paul Newman and former race car driver, Carl Haas).  Kmart's drivers included Nigell Mansell (who won the overall championship for Kmart in 1991 and 1993) and one of my favorite drivers, Mario Andretti.


Unfortunately, Kmart failed to change with the times.  Kmart's brand became synonymous with poor quality.  As a result, Kmart lost customers to other department stores, such as Walmart and Target.  The company tried (unsuccessfully) to rebrand its image by offering exclusive merchandise lines by Martha Stewart, Kathy Ireland, and Jaclyn Smith.  Kmart even changed its logo, but it was too late.  Kmart's profitability and sales peaked in 1992 and continued to decline and never recovered.  Kmart filed for Chapter 11 bankruptcy on January 22, 2002.


Kmart continued to close stores in order to cut costs.  The company re-structured and emerged from bankruptcy a year later, at which time the new management announced a decision to purchase Sears for $11 billion (more about Sears later).  The merger of two failing department stores, at least in this case, only made things worse.  The new company continued to close stores at a number of locations throughout the U.S., eventually declaring bankruptcy again in 2018.  More stores are scheduled to be closed, and by 2020 (assuming Kmart is still around), the number of stores will be reduced to only 54 locations in the United States. 


Kmart failed to adapt its business model to compete with other stores, such as Walmart and Target.  Kmart couldn't convince consumers that cheap prices didn't mean cheap quality.  Later on, Kmart failed to change its business model as consumers shifted preferences away from brick-and-mortar stores to online shopping.

Companies and organizations "die" because they fail to recognize when it's time to change.  Perpetual change.  Continuous improvement.  "Skating to where the puck is going to be".  Call it whatever you want.  The survivors are the ones most ready to change.