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Could Stuttafords’ Demise Have Been Prevented? The Example of Kodak

“Arguments are often why family-owned businesses don’t make it to the second generation."

"Stuttafords had a great business model." "They created a wonderful experience. But things have changed."

"Stuttafords is South Africa’s Kodak."

"Focussing on a niche lends itself to a very successful click-and-mortar business."

The Money Show’s Bruce Whitfield interviewed Aurik Business Accelerator founder Pavlo Phitidis. Listen to the interview in the audio here http://ewn.co.za/2017/06/23/stuttafords-dies-on-1-august-the-159-year-old-icon-failed-to-evolve-lessons-for-small-businesses

Stuttafords was once the go-to department store in the country, much like Bloomingdale’s in New York and Selfridges in London. But its star began to wane in at the turn of the century, along with other department store formats. Stuttafords’ problems were exacerbated in 2008 when management, led by former CEO Marco Cicoria, repositioned the high-end retailer from its profitable house brands to showcasing international brands including Gap, Ben Sherman, Ted Baker, Banana Republic and Tommy Hilfiger at its large format stores at Sandton City in Johannesburg, Durban’s Gateway Mall and Cape Town’s Canal Walk. The global financial crisis hit in 2008, darkening Stuttafords’ fortunes with cash-strapped consumers trading down to lower-priced goods. The push of international brands at Stuttafords has since flopped and market share has been lost to its peers Woolworths, The Foschini Group and international counters Zara, Cotton On and H&M.

To turn its fortunes around, underperforming stores were shut but its efforts have been futile.

What are the lessons that Kodak’s demise has taught?

Eastman Kodak Co. is often cited as an iconic example of a company that failed to grasp the significance of a technological transition that threatened its business.

Kodak was acutely aware of the approaching storm. Management was constantly tracking the rate at which digital media was replacing film. But several factors made it exceedingly difficult for Kodak to shift gears and emerge with a consumer franchise that would be sustainable over the long term. Challenges were also affecting the ecosystem it operated in and its organizational model. Ultimately, refocusing the business with so many forces in motion proved to be impossible.

“Lessons from Kodak? Every situation is different, but the experiences of Kodak suggest some sobering questions for managers in industries undergoing substantial technology-driven change. Among them are:

  • Is the core technology converging to the point of being replaced by a general-purpose technology platform? If so, the company could lose manufacturing scale and early-mover advantages — such as being far down the legacy manufacturing learning curve.
  • Is the technology that underpins the business likely to shift to a digital/modular platform that will lower barriers to entry? If so, commoditization pressure will be inevitable, and the company must prepare to live on much lower margins.
  • Do you have a capital-intensive legacy business? If so, can you develop a strategy for scaling down production volumes that is both capital efficient and keeps production costs from rising excessively? This is key to maximizing cash flow while trying to execute a transition. It will involve using older equipment or repurposing production assets to make alternate products.
  • How does the balance of power in the ecosystem change as technology shifts impact different parts of the value chain differently? Will the interests of partners cause the company to do things that are contrary to its long-term interests? This requires thinking about how ecosystem partners will manage the transition and adjusting strategy accordingly.” Read more detail here: http://sloanreview.mit.edu/article/the-real-lessons-from-kodaks-decline/