white letters, S – E – A – R – S, atop Sears Canada’s flagship store in one of the country’s largest and busiest shopping centers.
Throughout our lunch, I found myself glancing out the window to track the progress of the two workers as they painstakingly pried loose each letter. As the letters came off, I could see the imprint of the company’s name that remained on the brown building’s façade due to decades and decades of sun exposure. These phantom letters were a sad reminder of a once-great company, one of the most enduring retail brands that the world has ever known.
What I witnessed that afternoon was more than just a sign coming down. To me, it signaled the massive unraveling taking hold in the retail industry. That’s why that moment felt so important to me. That moment also underscored the kinds of challenges that leaders face today. Fast-forward to January of 2018. All the Sears stores in Canada would close. Sixteen thousand employees would lose their jobs. Their pensions would be at risk. By the end of 2018, the company in the United States would face a similar fate, only to be saved at the eleventh hour.
In many ways, the story of Sears is not unique. In the world of business, there has always been an understanding that the companies and leaders who can’t adapt, can’t spot opportunities, or can’t change quickly enough, end up paying a severe price. The graveyard of once-great companies is full of examples of organizations that have not been able to sustain their relevance and are now long extinct. In the end, they were unable to see the need to adapt in a changing environment. Harvard Business School Professor Clay Christensen shared a terrific insight at a recent conference when he said, “The new game begins even before you can tell anything is wrong in the old one.”1 This is a brilliant idea that to me captures a fundamental challenge leaders must be mindful of when leading. All leaders must be accountable for leading their organizations through change, and this is what we’ll explore in the rest of this chapter. To get us started, we’ll examine the story of Sears in more detail to show what can happen when leaders fail to see the new game emerging.
The Story of Sears—a Once Great Company
What I find fascinating about the story of Sears is that from the time it first incorporated in 1893, the company was a disruptor. There was the Sears catalogue. Sears was one of the first department stores. Sears’ amazing brands, like Craftsman tools and Kenmore appliances, inspired confidence, lasted forever, and gave consumers value for their money. The company was one of the first retailers to establish an online presence in early 2000. Sears found a way to innovate throughout most of its 125-year history. Despite all of this, the company struggled to survive in a dynamic and shifting retail landscape. This is a reality all leaders must embrace. Success doesn’t last forever.
The problems for Sears, according to many industry analysts, started in 2005 when it merged with Kmart, a strategy designed to boost two struggling retailers.2 At that time, Sears and Kmart had 3,500 stores in the United States. By 2018, they were down to just about 700 stores between the two brands.3 That’s an 80 percent erosion of the company’s footprint. From 2003 to 2018, the company lost 96 percent of its value, while its key competitors doubled in value.4 The company was missing the mark. Many argue Sears’ downfall was also the result of a failure to shift to digital.5
The leadership angle to this story is also interesting, for at the center of it all is CEO Edward Lampert, a successful hedge-fund manager with extensive experience in the retail world. He took over management of the retail chain in 2013. He launched a series of moves designed to both modernize the company’s operations and compete online while cutting overhead.
In addition to his vigorous restructuring plans, Lampert put nearly $1 billion of his own money on the line for the struggling company in loans or letters of credit. However, even that wasn’t enough to spare him from widespread criticism. The media regularly chastised him about his leadership style and the way he led the company.
He rarely made personal appearances at the company’s headquarters, preferring instead to do most of his work from a vast Florida estate. He would hold daily video conferences with Sears’ executives toiling in the company’s Illinois head office. He only traveled to the head office once a year for the annual shareholders meeting. The video conferences reportedly would get quite heated and emotional. Lampert defended his tone and approach to leadership as a way to “drive decision making and accountability at a more appropriate level.” Most would agree that this was a strange way to lead a company in the throes of gut-wrenching change. In 2016, Lampert was named the most hated CEO in America based on his employee rating on Glassdoor.6
It would soon become clear that Sears was in a death spiral. In late 2018, Sears filed for bankruptcy protection in the United States.7 Then in early 2019, Lampert’s hedge fund bought the company for $5.2 billion, avoiding liquidation and allowing the company to keep some stores open and save an estimated 45,000 jobs. Lampert said he planned to step down as CEO, which he did.8 About a year later, he also stepped down as chairman.
In April of 2019, the company lodged a lawsuit against Lampert and a string of its high-profile past board members for allegedly stealing billions of dollars from the once-storied retailer.9 Unsecured creditors of Sears argued that Lampert was the cause of the company’s downfall, not its savior. They asserted that Lampert, along with some of the company’s most significant shareholders, unduly benefited from deals that occurred under Lampert’s watch. The lawsuit alleged that Lampert caused more than $2 billion of assets to be transferred to himself and other shareholders, putting those assets beyond the reach of Sears’ creditors.
Then in May 2019, Lampert asked a federal bankruptcy judge to release him from his obligation to compensate former Sears workers with an estimated $43 million in severance costs.10 Lampert argued that the company had not lived up to its obligation to sell him most of its assets. As a result, he believed he was not obligated to pay the severance costs.
The World in Which Leaders Are Leading Today
In the end, Sears is a story of a once-great company unable to keep up with the ravages of gut-wrenching change in its industry—referred to by many as the “retail apocalypse.” Sears joined hundreds of other companies facing similar struggles. Like Sears, many would be unable to adapt to the forces that have shifted the industry’s landscape.
Many industry analysts assert that the claims of a retail apocalypse are overblown. While some companies have struggled and have gone bankrupt, many others are thriving in an industry that continues to grow. These analysts blame the demise of individual companies on poor leadership, not some external apocalypse. For many leaders, the world can appear to change right before their eyes. However, that isn’t really the case. Signs of change and even opportunity do arise, but leaders don’t always see them. Alternatively, by the time they do, it is too late. This points to the need for leaders to be both externally and future-focused to understand the world in which they lead. However, in practice, I find the opposite to be true. Many leaders are too internally focused, stuck in old thinking patterns or are simply too arrogant, believing their past success will drive future success.
Consider the example that comes from Blockbuster and Netflix. In his book That Will Never Work, Netflix co-founder Marc Randolph recounts the story of a meeting with Blockbuster senior brass.11 Netflix was struggling and in debt. After months of trying to get Blockbuster’s attention, they finally secured the ever-important meeting. Blockbuster could have bought Netflix for $50 million, but they chose not to. Blockbuster’s CEO, John Antioco, didn’t believe it was an idea worthy of consideration. You know how the story ended. Netflix went on to become widely successful. Blockbuster went bust.
As an accountable leader, leading in a time
