Posted on

Samuel Walton: Retail Giant

Sam Walton founded Wal-Mart, growing it to over a thousand stores. He is a serial early-adopter whose commitment to innovations made them ubiquitous and his investors extremely rich.

Sam Walton

Short Biography

Samuel Walton was born in Oklahoma, in 1918, and grew up on the move in Missouri, during the great Depression, as his father worked at a series of sales jobs. Walton worked too, during his education, pausing to take a degree in Business at the University of Missouri at Columbia.

On leaving, he started working as a management trainee at JC Penney, where he also started learning the management skills that would help him grow his own business in the future. As for many young men of his age, the Second World War put the brakes on his career, when he served in the US Military Police. Returning to civilian life in 1945, he decided not to return to JC Penney, but to open a franchise Ben Franklin store in Arkansas, funded by a loan from his father-in-law.

This thrived, but he was unable to renew his lease, so opened a new one in a nearby town in 1950. Gradually, he bought more and grew his empire, using a light aircraft to get from one store to another and to scout possible new locations.

In 1962, he opened his first Wal-Mart store, on a new model he’d seen in Chicago – a Kmart, owned by competitor Sebastian Kresge. He had started his experiment with bulk retailing. Over the coming years, he experimented further in stock lines and layouts, and opened a second Wal-Mart in 1964. Then, in 1970, he raised $5 million in equity through a stock issue (at $16.50 per share), and opened six new stores and a distribution warehouse. By the time of his death, one of the original Wal-Mart shares had grown in value to $26,000 and the Wal-Mart empire was the biggest retailer in the US, with over a thousand stores.

Sam Walton stood down as CEO of Wal-Mart in 1988, to fight both leukaemia and bone marrow cancer; and finally died of it in 1992.

Five Retail Lessons from Sam Walton

1. The Personal Touch

Walton would get to know his employees (or Associates, as they are known) personally in the early days. He maintained this as long as he could, having gained a pilot’s licence so he could fly from store to store. The use of the term ‘Associate’ was a deliberate choice to create a sense of inclusion and what we would now call engagement. Indeed, he encouraged managers of new stores to take shares in the business to create a sense of their ownership. Walton practised, from his earliest days at JC Penney, a management style that can be called MBWA: Management by Walking About.

2. Rigorous Standards

In visiting stores, Walton set and expected strict quality standards. If he did not find them, he was sanguine about just shutting the store and not re-opening it until the management and staff could get it right.

3. Control your Supply Chain

There is a story about Walton that reminds me of one I recounted about Ingvar Kamprad (founder of Ikea). In the early days (his second Ben Franklin store), when a local competitor sold out of a product – women’s rayon underwear – instead of ordering himself a stock, he bought the distributor. In one move, he deprived his competitor of stock and assured his own supply chain. The money he raised in 1970 from a stock issue was used in part, not to expand his retail base as much as possible, but to fund a distribution centre. Like a good military general, Walton understood the criticality of his supply chain. He invested heavily in warehousing, logistics and, early on, in networking his stores and warehouses to one another.

4. Embrace the New

Less of an innovator and more of an early adopter, Walton frequently saw and rapidly embraced new ideas that would help him grow his business (Jim Collins’ Flywheel principle). I mentioned satellite networking of his stores, above, but other examples abound:  self-service retailing, discounting, and hypermarkets. Each step made him more successful.

5. Experimentation

Walton believed in achieving the best results he could, so he was constantly experimenting to test the effects of different layouts, promotions, and stock lines. Once again, the flywheel principle at work, but the salient lesson for me is test-evaluate-improve – then test something new.

If all this sounds a little familiar, take a look back at the blog on Ingvar Kamprad, which I posted just over a year ago. I cannot help feeling that these two retailers, born only eight years apart, are kindred spirits.

Share this:
Posted on

What’s All the Hype About?

There is a well known model of technology adoption that suggests a small number of us (the ‘Innovators’) adopt a new technology as soon as it is available.  Then enthusiasts called ‘Early Adopters’ get a hold of it and create a real buzz.  This leads to the ‘Early Majority adopting, followed by the ‘Late Majority’.  Finally, when there is no doubt left that this is the new prevailing orthodoxy, the ‘Laggards’ will catch up.

Technology Adoption Model

Diffusion of Innovations

This model has been around since the late 1950s, when it was developed by Joe M. Bohlen, George M. Beal and Everett M. Rogers at Iowa State University, building on earlier research conducted there by Neal C. Gross and Bryce Ryan.  The original authors were interested in how farmers adopted new seed stock.  It was then generalised to all technologies by Everett M Rogers in his book, ‘Diffusion of Innovations’, in which he examined different technologies and different cultures.

This model is widely used, but I recently came upon a newer model that captures something of the flavour of the world of more rapid change we live in.

Gartner’s Hype Cycle

The Gartner Group specialises in analysing technology and technology businesses to provide business intelligence.  They have developed a number of proprietary models, like the Magic Quadrant and the Hype Cycle.  Let’s have a look at the latter.

Gartner's Hype Cycle

This suggests that new technology goes through five stages.

Technology Trigger

Some new breakthrough offers the promise of something good.  The press get hold of it (in any number of ways) and they – or its inventors – start to promote it towards…

Peak of Inflated Expectations

It is now the next BIG thing that will change the world.  Some commentators get carried away and some otherwise rational (or maybe prescient) investors place big bets.  Then reality kicks in…

Trough of Disillusionment

Early promise is unfulfilled or things just take longer than anticipated.  Research and development is like that.

Of course, the technology may well fall off the curve here and never realise the promise of the hype that once surrounded it.  If it doesn’t, it moves on to…

Slope of Enlightenment

Now development is bearing fruit and interest is building again – but now at a more realistic pace.  Products are becoming available at mainstream prices and Early Adopters are jumping onto the Technology Adoption curve.  The rest of us start to follow as the product reaches…

Plateau of Productivity

With mainstream adoption comes a realistic assessment of the products true potential and level of impact on the world.  Has it lived up to the hype?  Few ever do.

See a lot of familiar products charted onto this curve by Gartner, here.

You Might Like…

The Nurturing Innovation Pocketbook

Share this: