RadioShack recently announced that it will file for Chapter 11 bankruptcy. Though the announcement isn't surprising to most, the message to businesses is loud and clear: pivot or perish.
At 94 years old, RadioShack is an American institution. In recent years, however, its mere existence was amazing to American consumers. Very few people really knew why RadioShack was still relevant, and that should have been a clear message to its leadership to change or face the consequences. Small businesses can learn three important lessons from the one-time technology retailing titan:
1. Fix a problem at first sight
Being a "traditional" business isn't bad in most industries, but it might as well be a death sentence in tech. RadioShack was not known as being cutting-edge in recent decades, and the company knew it. The electronics chain's 2014 Super Bowl commercial even made fun of its reputation for being stuck in the 1980s. RadioShack paid a pretty penny for the spot, but their only reward for doing so was a wave of nostalgia and many puzzled consumers, wondering why RadioShack still mattered.
Steps to modernize shouldn't have relied on one ad in 2014, but rather on full-force strategic changes in 1987, when Best Buy went public, and again in 1997, when Amazon went public. Though it's easy to say this confidently with the help of 20/20 hindsight, there were clear signs that these new businesses would be strong competitors. Best Buy was a trendy new player at the end of the '80s, with open showrooms and a different breed of salespeople. The style quickly caught on with young buyers who would become decades-long customers.
Amazon was a different animal entirely, but one that should have been a signal to traditional brick-and-mortar retailers of the importance of e-commerce in the coming years. Within two months of its founding, Amazon was doing $20,000 in sales a week, a sure sign of its future success.
Small business owners should note that this is where RadioShack needed to do a complete pivot. With two new competitors quickly gaining favorability and large profits, it was a critical time to compare current offerings against those of the new entries to market. It should have been clear that without a change to current operations, RadioShack would fail to meet the customer needs Best Buy and Amazon easily fulfilled. Instead, RadioShack relied on its history and reputation, and waited until 2009 to do a half-hearted rebrand, calling itself "The Shack.'' Most people scratched their heads, debating whether "The Shack" was really better branding.
In 2013, then-CEO Joe Magnacca made another attempt to win back the customer when he opened 40 "high-touch" concept stores, with interactive areas to allow customers to play with the tech on display. While the concept might have been interesting, the implementation missed the mark, and most consumers weren't even aware of these new concept stores.
Neither of these efforts made the impact necessary to keep the chain relevant, and RadioShack continued to struggle, unable to implement any strategy that made a difference.
2. Write a plan that can be broken
RadioShack wasn't always a company stuck in old ways. Originally founded in Boston in 1921 to sell materials for radio officers aboard ships, RadioShack initially flourished, but fell on hard times in the 1960s after opening nine stores, building an extensive mail-order operation, and creating its own private-label products brand. The store expanded too quickly and did not have the capital and resources to implement every new strategy.
RadioShack was acquired by the Tandy Corporation in 1962, which quickly turned the company around. Excessive products were wiped from shelves, large stores were sold in favor of smaller rented outposts, and brand names were replaced with private label offerings. The Tandy Corporation saw tremendous growth and success with this complete overhaul and focus on the bottom line through the early '90s.
That success, however, didn't mean an additional pivot wasn't necessary. RadioShack's strategic plan needed to adapt to an increasingly fast-paced market. For decades, their target customer was a hobbyist who tinkered with radio and electronic parts in his or her spare time. But once companies like Dell and Apple changed the way people bought computers, RadioShack lost its touch. It's nearly impossible for owners to fix an Apple product, which generally require professional service, and those hobbyist materials that remained useful were more easily researched and bought online. It wasn't until 2006 that RadioShack even entered e-commerce, and even then they offered only a sparse collection of goods in comparison to Amazon and Walmart's already expansive selections.
And let's not forget the younger generation that has never really seen or used a radio except in a car. Millennials in their 20s now never used radios, and so the name RadioShack was a sign that this store was for old people, not them. The attempted re-branding in 2009 to "The Shack" was too little too late, and even then it tried to hold on to a past that was not relevant. Who wants to buy the most cutting edge new technology from a "shack?"
As a business owner, it's easy to become immersed in your business and wear blinders to competitors and market conditions. Even though knowing the competition is important to success, business owners sometimes get lost in the smallest details of an existing plan. Or worse, they have no plan at all and fail to see the bigger picture. Business owners should regularly assess the competitive landscape in comparison to their offerings. With a better understanding of how a business fits into the industry at large, it's easier to identify areas where a company can shift its focus to continue to be successful.
3. Offer what your customers aren't getting from the competition
The audience for RadioShack was small initially, but gradually increased with time. When the Tandy Corporation took over, stores shifted to carrying only best-selling products and added new products based solely on customer demand. When the market changed its focus to personal computers and cellular phones, RadioShack tried to keep up, and at one point they were even considered the largest electronics chain in the U.S.
RadioShack did successfully adapt to the needs of marketplace when the Bell System evaporated in the '80s, by offering 20 different types of home phones. They also re-imagined their stores as helpful expert centers that offered out-of-warranty repairs, a concept Best Buy would later adopt with its Geek Squad.
What didn't happen, however, was a pivot that truly differentiated RadioShack from competitors while remaining attentive to the needs of their regular customers. RadioShack could have catered to their aging customer base with classes on how to use their new electronics and product maintenance. Or they could have emphasized their small store size to become the mom-and-pop electronics shop of every neighborhood, a place where customers were well-known and recipients of targeted and thoughtful marketing. Instead, RadioShack made multiple half-done attempts to meet the competition that did not have customer needs in mind.
It's easy to see in hindsight where RadioShack went wrong, and it's important for small businesses to learn from its mistakes. With regular planning and strategic forecasting, a business can make sure it is headed in the right direction and more easily pivot when its plans are not working or implementation of the plans doesn't happen the way management assumed. Plans are not about being right, but instead about laying down assumptions and making implementation easier. If implementation isn't easier and your assumptions are wrong, plans help you know where changes are necessary, and what parts of the business need to be re-evaluated.
Even though the outpouring of positive memories of RadioShack across social media is an appreciated goodbye, you need to make sure your small business doesn't end up with a similarly public eulogy.