“The only real battle in life is between hanging on and letting go.” ― Shannon Alder
The final chapter of my book is called the Coconut Trap and begins as follows. “Many years ago, indigenous tribes used a clever technique to catch monkeys. They hollowed out a coconut and placed some fruit inside. Next, they would hang the coconut on a tree frequented by monkeys. In time, a monkey would come to investigate. The monkey would squeeze its hand into the coconut to grasp the bounty. In making a fist to grab the fruit, the monkey was trapped. His clenched fist no longer passed through the small opening. Even when faced with approaching captors, which could spell death or imprisonment, he maintained his grip. All he has to do was let go and letting go would mean freedom.
This week’s Thursday thought is about clinging on too long, it is part one of a three-part series, “quitting too early” and “quitting at the right time”. It is inspired by the latest episode of the Innovation Show with the author of “Quit: The Power of Knowing When to Walk Away by Annie Duke” (links at the end).
Like the monkey holding the fruit, many of us cling to the past with clenched fists. We clutch to painful memories, we hold grudges, and we harbour what-ifs. We defend successes, mental models and the personas we have worked hard to develop. When we dwell on the past, we use up valuable energy that we could use to create our future.
Organisations too cling to “the good old days”, “the way things are done around here” or to dying (or already dead) business models. As a result, they fall prey to “The Coconut Trap”. The late Bob Proctor (who was due to appear on the Innovation Show but sadly passed away recently) said, “You can only move ahead by letting go of old ideas.” There is huge wisdom in that for every aspect of life.
Clinging to the E-Reader Too Tightly — Sony
Cling by Heirii San
On Innovation show episode 284, Felix Oberholzer Gee shared an example of a company clinging tightly to past success and past modus operandi. The case study comes from his book “Better Simpler Strategy” where he compares Sony and the e-reader to Amazon and the Kindle.
E-readers were the hot consumer electronics product of the late 2000s. Sony, the leading consumer electronics company at the time and the first to offer an e-reader, the Librie, a product that offered an unparalleled reading experience on an electronic device. Amazon was keen to enter this fast-growing, billion-dollar market, but its prospects seemed limited.
Sony had adopted the leading technology, was first to market, and spent twice as much on marketing as its rivals. Despite these advantages, Amazon beat Sony handily. Felix tells us, “by 2012, Amazon’s Kindle, introduced in 2007, commanded a 62% market share. Sony’s e-reader stood at a measly 2%.” What made the difference?
Sony customers had to download books to their PCs and then transfer their purchases to the reader. When Sony upgraded its device to make PDF and ePub documents accessible, customers had to send their readers to Sony service centres to update the firmware!
By contrast, Amazon’s Kindle offered free 3G internet access, a feature that turned books into impulse purchases. When it was first launched, the Kindle sold out in five hours. While Sony created a wonderful reading experience, Amazon focused on the customer experience rather than the product.
It was difficult for a product-centric company like Sony to let go of its identity of superior product quality to pay closer attention to the changing needs of their customer. They clung to the product experience too tightly and lost their relationship with the customer. By the time Sony evolved to introduce wireless, it was too late. The market had already tipped in Amazon’s favour.
The Sony case exposes the tendency to cling to identity, the harder fought that identity, the harder it is to let go. A rather tragic case and one
Annie Duketalks about in her book “Quit” is Sears Roebuck, a once-magnificent innovator.
Sears: Clinging to Our Roots
“Stuck in the past” by IDeathhoundI
While the rise and fall of Sears, Roebuck and Co. may be well known, from the publication of the first Sears mail-order catalogue in 1896 to its bankruptcy in 2018, the following nugget is often overlooked. (This is an edited excerpt from Annie Duke’s “Quit”)
Despite its magnificent manoeuvring through various challenges throughout the 1900s, Sears could not quit when it had the opportunity. Sears, which had cultivated and nurtured its image with American consumers since the 1890s, found itself trapped in that image. On the one hand, the spread of low-price retailers (especially Walmart, Kmart, and Target) ate into Sears’s image as the thriftiest place to shop. Sears was too top-heavy to compete on price with the new chains and was fighting a losing battle for that business as the chains grew. On the other hand, more affluent consumers became attracted to the upscale image of department stores like Saks Fifth Avenue, Nordstrom, Macy’s, and Neiman Marcus. Sears found itself in a second losing battle for customers.
There was a way out, a chink of light, but it would mean Sears would need to walk away from its long-fought identity. Could they let go of the past? You know the answer, but the details hold important lessons.
A Way Out?
Back in 1899, Sears opened a banking department and in 1911, they began selling to customers on credit. In 1931, Sears saw another opportunity to sell auto insurance to its patrons. Next, they founded Allstate, whose insurance products were initially offered through their catalogue and, three years later, at locations inside Sears retail stores. Allstate became a thriving business in its own right.
In the 1970s, the Sears in-store credit card was more popular than Visa or Mastercard! Nearly 60% of American households had one. Allstate had established itself as one of the nation’s largest casualty insurers. In 1981, Sears bought Coldwell Banker, the nation’s largest real estate brokerage firm and Dean Witter, one of the largest securities brokerage firms.
In 1985, Sears followed up these acquisitions by creating a new general-use credit card to compete with Visa and Mastercard, the Discover card. By the beginning of the nineties, Allstate, Dean Witter, Discover, and Coldwell Banker were successful, growing, profitable subsidiaries of Sears. Those assets had a combined market value at that time of more than $16.6 billion. They were, and (excepting Dean Witter) still are, household names that you likely didn’t know Sears once owned.
This leads one to wonder, given that Sears owned such enviable brands, how could they possibly have gone bankrupt?” Well, the title of today’s post gives it away really.
Part of the problem is the fact that you likely only knew Sears as a retail company. “Sears” and “retail” are synonymous. Retail was their identity and they could not let it go, even if it meant possible death. Just like the monkey and the coconut trap, it held on tightly at the expense of its future.
When it had the chance to jettison the retail business and focus on the real jewel in the crown, the finance empire, management chose the wrong eject button. Trapped in its identity as a retail company, Sears divested itself of all those profitable assets.
With the sale of those profitable assets, Sears could “get back to its retailing roots. It sold 20% of Allstate in an IPO raising over $2 billion. It also distributed the remainder of Allstate’s value to shareholders in a stock dividend valued at $9 billion. It divested itself of Dean Witter Discover in the same two-part process, raising $900 million in an IPO and distributing the remaining stock (valued at approximately $4.5 billion) as a dividend. Finally, it sold Coldwell Banker outright for $230 million.
Those successful financial services businesses it created, wisely acquired, and skillfully operated went on to thrive. It is hard to read, but this was a sliding door moment.
Allstate’s October 2021 stock market valuation was nearly $40 billion. It is the largest publicly held insurer of personal lines, insuring about sixteen million households.
Less than five years after Sears spun off Dean Witter Discover, Morgan Stanley bought the company for $10 billion in stock, representing 40% of the combined entity’s value. By October 2021, Morgan Stanley’s stock market valuation was over $180 billion.
That valuation does not include the value of Discover, which became a separate public company in 2007 (Discover Financial Services). Discover’s stock market valuation in October 2021 was almost $40 billion.
Coldwell Banker merged with some other real estate companies and went public as Realogy Holdings in 2012. Realogy was involved in 1.4 million home transactions in 2020 and had a stock market valuation in October 2021 in excess of $2 billion.
If Sears had sold off its retail business, that’s the moment it would have ceased to be Sears. That was too painful a decision. As
Annie Duke tells us in episode 403 below, “When it comes to quitting, the most painful thing to quit is who you are.”
These are tough decisions, but as the business environment continues to evolve so must we, the people who make decisions. That goes for leaders of organisations and each one of us with our own careers.
THANKS FOR READING