Start with why

PART 5
THE BIGGEST CHALLENGE IS SUCCESS

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11
WHEN WHY GOES FUZZY

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Goliath Flinched
“A lot of what goes on these days with high-flying companies and these
overpaid CEOs, who’re really just looting from the top and aren’t watching out
for anybody but themselves, really upsets me. It’s one of the main things wrong
with American business today.” This is the sentiment passed down from the
founder of one of the most vilified companies in recent history.
Raised on a farm in America’s heartland, he came of age during the Great
Depression. This probably explained his predisposition for frugality. Standing
five feet nine inches and weighing only 130 pounds when he played football in
high school, Sam Walton, the founder of Wal-Mart, learned early the value of
working hard. Working hard leads to winning. And as the quarterback on his
high school football team, he won a lot. In fact, they went on to become state
champs. Whether through hard work, luck or just an unflappable optimism,
Walton got so used to winning all the time that he couldn’t fully visualize what
losing looked like. He simply couldn’t imagine it. Walton even philosophized
that always thinking about winning probably became a self-fulfilling prophecy
for him. Even during the Depression, he had a highly successful paper route that
earned him a decent wage for the times.
By the time Sam Walton died, he had taken Wal-Mart from a single store in
Bentonville, Arkansas, and turned it into a retail colossus with $44 billion in
annual sales with 40 million people shopping in the stores per week. But it takes
more than a competitive nature, a strong work ethic and a sense of optimism to
build a company big enough to equal the twenty-third-largest economy in the
world.
Walton wasn’t the first person with big dreams to start a small business. Many
small business owners dream of making it big. I meet a lot of entrepreneurs and
it is amazing how many of them tell me their goal is to build a billion-dollar
company. The odds, however, are significantly stacked against them. There are
27.7 million registered businesses in the United States today and only a thousand
of them get to be FORTUNE 1000 companies, which these days requires about
$1.5 billion in annual revenues. That means that less than .004 percent of all
companies make it to the illustrious list. To have such an impact, to build a
company to a size where it can drive markets, requires something more.
Sam Walton did not invent the low-cost shopping model. The five-and-dime
variety store concept had existed for decades and Kmart and Target opened their

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doors the same year as Wal-Mart, in 1962. Discounting was already a $2 billion
industry when Walton decided to build his first Wal-Mart. There was plenty of
competition beyond Kmart and Target, some of it much better funded and with
better locations and seemingly better opportunities for success than Wal-Mart.
Sam Walton didn’t even invent a better way of doing things than everyone else.
He admitted to “borrowing” many of his ideas about the business from Sol Price,
the founder of Fed-Mart, a retail discounter founded in Southern California
during the 1950s.
Wal-Mart was not the only retail establishment capable of offering low prices
either. Price, as we’ve already established, is a highly effective manipulation.
But it alone does not inspire people to root for you and give you the undying
loyalty needed to create a tipping point to grow to massive proportions. Being
cheap does not inspire employees to give their blood, sweat and tears. Wal-Mart
did not have a lock on cheap prices and cheap prices are not what made it so
beloved and ultimately so successful.
For Sam Walton, there was something else, a deeper purpose, cause or belief
that drove him. More than anything else, Walton believed in people. He believed
that if he looked after people, people would look after him. The more Wal-Mart
could give to employees, customers and the community, the more that
employees, customers and the community would give back to Wal-Mart. “We’re
all working together; that’s the secret,” said Walton.
This was a much bigger concept than simply “passing on the savings.” To
Walton, the inspiration came not simply from customer service but from service
itself. Wal-Mart was WHAT Walton built to serve his fellow human beings. To
serve the community, to serve employees and to serve customers. Service was a
higher cause.
The problem was that his cause was not clearly handed down after he died. In
the post-Sam era, Wal-Mart slowly started to confuse WHY it existed—to serve
people—with HOW it did business—to offer low prices. They traded the
inspiring cause of serving people for a manipulation. They forgot Walton’s
WHY and their driving motivation became all about “cheap.” In stark contrast to
the founding cause that Wal-Mart originally embodied, efficiency and margins
became the name of the game. “A computer can tell you down to the dime what
you’ve sold, but it can never tell you how much you could have sold,” said
Walton. There is always a price to pay for the money you make, and given Wal-
Mart’s sheer size, that cost wasn’t paid in dollars and cents alone. In Wal-Mart’s
case, forgetting their founder’s WHY has come at a very high human cost.
Ironic, considering the company’s founding cause.
The company once renowned for how it treated employees and customers has

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been scandal-ridden for nearly a decade. Nearly every scandal has centered on
how poorly they treat their customers and their employees. As of December
2008, Wal-Mart faced seventy-three class-action lawsuits related to wage
violations and has already paid hundreds of millions of dollars in past judgments
and settlements. A company that believed in the symbiotic relationship between
corporation and community managed to drive a wedge between themselves and
so many of the communities in which they operate. There was a time when
legislators would help pass laws to allow Wal-Mart into new communities; now
lawmakers rally to keep them out. Fights to block Wal-Mart from opening new
stores have erupted across the country. In New York, for example, city
representatives in Brooklyn joined forces with labor unions to block the store
because of Wal-Mart’s reputation for unfair labor practices.
In one of the more ironic violations of Walton’s founding beliefs, Wal-Mart
has been unable to laugh at itself or learn from its scandals. “Celebrate your
successes,” said Walton. “Find some humor in your failures. Don’t take yourself
so seriously. Loosen up and everybody around you will loosen up.” Instead of
admitting that things aren’t what they used to be, Wal-Mart has done the
opposite.
The way Wal-Mart thinks, acts and communicates since the passing of their
inspired leader is not a result of their competitors outsmarting them either.
Kmart filed for Chapter 11 bankruptcy protection in 2002, and then merged with
Sears three years later. With about $400 billion in annual sales, Wal-Mart still
sells more than six times as much as Target each year. In fact, looking beyond
discount retailing, Wal-Mart is now the largest supermarket in the world and
sells more DVDs, bicycles and toys than any other company in America. Outside
competition is not what’s hurting the company. The greatest challenge Wal-Mart
has faced over the years comes from one place: itself.
For Wal-Mart, WHAT they do and HOW they are doing it hasn’t changed.
And it has nothing to do with Wal-Mart being a “corporation”; they were one of
those before the love started to decline. What has changed is that their WHY
went fuzzy. And we all know it. A company once so loved is simply not as loved
anymore. The negative feelings we have for the company are real, but the part of
the brain that is able to explain why we feel so negatively toward them has
trouble explaining what changed. So we rationalize and point to the most
tangible things we can see—size and money. If we, as outsiders, have lost clarity
of Wal-Mart’s WHY, it’s a good sign that the WHY has gone fuzzy inside the
company also. If it’s not clear on the inside, it will never be clear on the outside.
What is clear is that the Wal-Mart of today is not the Wal-Mart that Sam Walton
built. So what happened?

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It’s too easy to say that all they care about is their bottom line. All companies
are in business to make money, but being successful at it is not the reason why
things change so drastically. That only points to a symptom. Without
understanding the reason it happened in the first place, the pattern will repeat for
every other company that makes it big. It is not destiny or some mystical
business cycle that transforms successful companies into impersonal goliaths.
It’s people.

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