DIGITCOOL

Theo: ‘Let Businesses Fail’

Interesting video here from Theo Paphitis, one of the stars of Dragon Den. Speaking today on the BBC’s Working Lunch program (this show baffles me as anyone in business is actually working!) says business failure actually helps the economy.

Now I’m no expert on the intricate workings of the economy so I will not pass comment, however Theo raises an interesting point about many businesses that fail often do so simply because of poor management. This I agree with wholeheartedly and will comment on. It is all too easy to blame the economic downturn when a company goes into administration, but more blame needs be put on the organisation’s management.

If you look at all the big high street brands that have closed so far in the downturn, with the exception of Zavvi, most have had a problem that existed way before the ‘credit crunch’. MFI is a good example of this. Why would I possibly go into an MFI store and order furniture that I have to wait 6-8 weeks for to have it delivered (which of course I would have to pay for). Instead I will head to the nearest IKEA and take my purchase home with me the same day. IKEA understand the modern consumers lack of patience - MFI didn’t.

USC the clothing chain, again was no surprise. They targeted young people and students with MID-premium products, in NON-premium outlets at PREMIUM prices. They tried to bridge the gap between high street and high end, and failed because there is no in-between. If someone has enough disposable income to pay for designer clothing, they certainly wouldn’t go to USC. On the flipside, there items were too overpriced compared to what retailers such as ZARA could offer.

The most high profile of high-street collapses so far has undoubtedly been the 99 year-old chain store, Woolworths. The reason I say ‘chain store’ is because I, like many, have absolutely no idea what they actually sold! Years ago they had a clearly defined USP - music. When internet downloads arrived, rather than extend their offering to downloads and capitalise on the brand loyalty that existed in the music market, they instead waited till May 2008 to launch this service, over 4 years and 6 billion downloads later than iTunes Music Store who now globally have a 70% share of the market. What an incredible lack of foresight and wasted opportunity.

Back in the summer of 08 I met with members of the Woolworth’s marketing team, and their reluctance to use a new advertising medium (mobile in this case) reflected the wider values of a Woolworth’s management team that did not like change. This ultimately is why there is now 757 stores sitting empty in the bleak surroundings of the British high-street. Sadly the victims of this is not only the 27,000 staff, but also a thriving business like Zavvi that relied too heavily on a Woolworth’s owned company as a main supplier.

Businesses must adapt to an ever changing market or run the risk of getting left behind. This doesn’t necessarily mean you always have to be the first to do something - John Wooden said it best “It is not so important who starts the game but who finishes it.”