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Retail and fashion executives facing a landscape that’s always in flux might find their own past successes are their worst enemy.
“Many of us rely on our intuition based on our experience,” said Sydney Finkelstein, associate dean for executive education at Dartmouth College’s Tuck School of Business.
“When we’re confronted with new situations that are really, really different, it is possible that our experience can hurt us rather than help us, and that goes completely against the grain of how most people think about experience,” Finkelstein said. “It’s a hard lesson to swallow because your experience got you where you are.”
It’s a situation that more and more executives find themselves in — having come up in a retailing world where growth came from opening stores only to lead at a time when most of the sales expansion comes from e-commerce.
Executives can also fall into the trap of sticking with what worked last time while avoiding what didn’t work, even when the circumstances have changed. That goes for M&A and reinventions.
“All of us have a natural tendency to overgeneralize from small sample sizes,” Finkelstein said. “So if you’ve done something once and it worked well, we tend to believe that we can do the same thing again. I dare say that that could have been part of the downfall of [former J.C. Penney Co. Inc. chief executive officer] Ron Johnson. Was that experience at Apple the right experience to lead a company like J.C. Penney?”
Finkelstein said there’s tendency for the incumbents in a field to not necessarily miss major changes, but not react to them quickly enough, to think that they’re somehow different and therefore immune.
“Being different is no defense,” he said. “I’d hate to say that my strategy to deal with the transformation going on around me is, ‘I’m different.’ That is a losing formula.”
As an example, Finkelstein pointed to bike-maker Schwinn, which waited seven years to put out a mountain bike and missed out on a key trend in the industry.
“It’s not that people are unable to change, it’s that they’re unwilling to change,” he said. “Unwilling means you kind of know something’s going on around you, you know how big digital is, you know about the changes that are going on in different industries, in different countries, but we think, ‘We’re OK for now, we don’t have to respond that quickly.’”
For executives, making changes often means unlearning something picked up over the course of a career, he said.
The solution seems to be, in part, a good hard look within and some colleagues who can offer a counterpoint.
“There’s no replacement for what I like to call intellectual honesty,” Finkelstein said. “We’re all better off facing up to what’s around and dealing with it.”