If it can happen to Target

It can happen to you.

Joe Castaldo tells the tale of Target’s expansion to Canada. Less than two years after opening its first store, Target Canada filed for bankruptcy and closed. The episode cost the parent company some $2 billion, not counting the damage it did to its reputation.

Why?  Read the article and you’ll have no problem finding the reasons. Lots of them.  But what struck me is that the most critical problems were clear not just in retrospect but to many of the participants at the time.

We’re talking about one of the best companies in retail, with some of their most highly regarded people working their butts off for a couple of years to get ready. It shouldn’t have been that hard: They were cloning a successful business model into a culture as similar to that of the US as you can get, their first stores were closer to Target’s headquarters than many of its American stores, and they used many of the same suppliers.

If I had to single out a cause, at the risk of seeming a little simplistic, it would be that their Schwerpunkt was internal: the need to service the big real estate deal that Target made to jump start their expansion into Canada.  This not only led them into a frantic rush to get the operation up and running as soon as possible but as Boyd forecast, such an internal focus increased confusion and disorder within Target Canada.

But the key point again was that much of this was clear to many of the participants even as events were unfolding. but it happened anyway.  Perhaps Target Canada could be considered as a failure of what organizational psychologist Karl Weick famously called “sensemaking.”  That is, lots of data, but no accurate, shared mental model of what it all meant.  Weick related a gripping example of the phenomenon in his paper on the Mann Gulch Disaster, another situation where a group of highly talented individuals failed to take the available and in retrospect, obvious, steps that would have saved their lives.

While you’re reading these articles, chortling in Schadenfreude and saying to yourself, “What a bunch of idiots,” reflect that in both cases, these were talented people who gave it everything they had (in the case of Mann Gulch, 13 gave their lives) but failed. Imagine yourself in the middle of one of these. Why would you come out any better? Oh, really? Are you doing any of that today? What, specifically, are you doing to ensure that your organization sustains a common, implicit orientation of the situation both internally and externally, and that it is accurate?  Are  your measures working?

What we mean by “accurate,” incidentally, is that your orientation makes predictions that, for the most part, come true.  It should have been clear from early in Target’s Canadian adventure that this was not the case up there.  It was clear to some members of the team but not to the organization as a whole. So, why?

In memorium: The crew of the Challenger, 28 January 1986.

11 thoughts on “If it can happen to Target

  1. A very interesting post. I thought these big box stores just cloned themselves, with the newer ones getting the advantage, over the old, by the way of the newer updates.
    I think you are spot-on in your assessment that it was the land deal(s) that corrupted the process. I also can’t help think that a system that would allow the “strategic corporals”, at the tip of the spears, to override the system, would have made them more resilient.
    I mean, sure, the reordering system was intentionally bypassed, but that didn’t mean the reordering system wasn’t trying to still function correctly. There was a (or a lot of) lost signal(s) that the community knew about, but the focus, nor the tempo, just wasn’t on people, despite the US office knowing better.
    I really have to wonder if there wasn’t a little bit of the US culture that wanted the move into Canada to fail. After all, vertical stovepipes exist for a reason.

  2. I think that what we have here is a catastrophic decision at headquarters (using the new division as a guinea pig for the implementation of a complex ERP system), followed by further goofs in terms of letting green troops try to manage such an affair.

    I have seen SAP implementations ruin careers. The first time we turned it on at CRH, or “went live” in the jargon of the IT world, and I got my first report out of FI/CO (the finance module of SAP) I called my staff in and asked where my 4 million bucks were. Because of bad data input, incorrect material routings, and insufficient material overhead allocations, the program told me that I should have a lot more money at the end of the month than I had. The search for the 4 million bucks soon uncovered these vagaries and the system was put right. After about 4 months. The entire time a smug SAP “consultant” was telling me that this was all my fault because I had not been involved enough in all aspects of the implementation. I asked him what I was paying him for.

    These problems are no secret and it is common knowledge in all industries that an SAP implementation is a considerable undertaking fraught with danger. The headquarters people should have known this, and would have if they had asked anybody with any experience at all in SAP implementation, which they certainly should have done. SAP is a German program, and like many things German, it tends to be over engineered, difficult to operate, and expensive to maintain. These are not properties which easily go with American management styles.

    My other take away from this case study is that the top management of the company compounded their error by throwing a bunch of fresh faced kids at the mission without doing the requisite time in the “flight simulator”. Therefore, everybody was ill equipped to deal with the resulting tsunami of difficulties.

    The system which allowed the logistics problems to be covered up were likewise, the fault of the people designing the system. Which were the headquarters people.

    All of these issues, and this quicksand of failure, are attributable to the people at the very top and it is they who should be held accountable. Many promising careers and lives were destroyed here, and the culpable parties likely walked away. Usually, when one of my people has failed, it has turned out to be my fault for putting them in situations they were not yet equipped to handle. Deming used to admonish us that top management was usually the problem, and that we had better first look there for the source of any issue. I think the old geezer was correct.

    It is upper management’s responsibility to put people in a position to succeed, and this includes preparing the team for the mission. These people clearly failed their subordinates here. They were not equipped to handle everything that came at them and they were overwhelmed. I also found it interesting that it was clear that they had collapsed morally before they collapsed physically. What was that that Boyd used to say about the importance of esprit de corps and the moral component?

    • Dean — many thanks.

      The first SAP implementation I was involved with ended by writing off an undisclosed sum. A source in a position to know told me it ran in the “high tens of millions.” Senior management had no experience with — and thus no Fingerspitzengefühl for — MRP systems, and God only knows what predictions their orientation was making.

      As a result, they made many of the same mistakes as Target Canada, including doling out top leadership positions as perqs.

      Our consultants had done successful SAP installations, but I don’t know whether their warnings were ignored. They certainly didn’t play any great role in correcting orientations. Our company was run by engineers, so it isn’t like the mathematical complexity of MRP overwhelmed them. Fortunately, the existing manufacturing system kept chugging along.

      It was also a defense contractor, so I’m going to guess that the taxpayer ended up footing the bill.

  3. After seeing some large corporate SAP deployments … I was told that it is heavily pushed by (SAP) consultants because they can get tens of millions in consulting fees … and it tends to be ongoing (a tinge of “success of failure” theme … the more problems, the more money they make).

  4. Target didn’t understand the Canadian mainstream and discount retailing environment either.
    Walmart is there and firmly established, they have done well.
    Their failure is born out in “every battle is won or lost, before it’s fought”
    A Target executive rented parking in my building, I spoke with him a few times,
    he’s long since returned to Chicago.

    • “Target didn’t understand the Canadian mainstream and discount retailing environment either.”
      While it might be true that: “Every battle is won or lost, before it’s fought”, but the people at the tip of the spear would have known the environment pretty well, in a short amount of time. So adaptability is also important, if you are actually serious about winning, and not protecting yourself from outsiders, and the authority for change is not back at home office. May be those at the tip would have given those in the US time enough to adapt, if they could have backfed into the system with some authority, aka, the strategic Corporal.

  5. “but the people at the tip of the spear would have known the environment pretty well, in a short amount of time.” Makes sense, however my impression was one of very top down
    centric “management knows best” culture. Did I mention morbidly ridged ?

    • I don’t know if these are accurate or not, but they are attributes that would be difficult to detect by the people involved. And typically, outsiders who point it out would not be invited back.

      • “I don’t know if these are accurate or not, but they are attributes that would be difficult to detect by the people involved.”
        Having been a copy-boy/IT contractor for a large government organization in charge of natural resources, and my cross-departmental experience in the private sector as well, I couldn’t agree with you more about the handling of outsiders.
        As for accuracy, I am not sure that, even if they were accurate, such structural and cultural settings would have been relevant to the situation and lack of success. After all a top-down structure and a culture of “management knows best”, if true, has given them success so far.
        I think it was Chet who said that he believed the attribute of failure was in the land deal, and I agree with that assesment totally.
        I think, when the amount of the resources were given a clear image in the deal, the deal represented an organisational shift in position, for the culture at the top. Those at the top had the advantage of a clear view of the situation and saw their position splitting.
        In strategy, it is not only the way something is structured, nor the means the culture has available for moving forward, but the position at the beginning of the end and the difference in time and distance that both positions take at the end of the project.
        The time it takes for the new position to maneuver in its OODA loop and the distance the old position feels from the action can be enviable.
        So not understanding that there will be two positions, one at the beginning and the other at the end of a project, can make a strategy winning or not, in denial.
        Those positioned at the top of the Canadian project could see a massive amount of resources forming and, as they were forming, creating another position. Possibly to them it looked to be a position with more advantages than the one they were in, instead of adding to their advantage. At least the land deal potentially represented where company growth was coming from in the long term.
        So a little case of insecurity took hold, and long-term vanished.
        Which, handling a case of insecurity in a position is something an outsider can accomplish, and possibly better than an insider.
        Better not only because of a more accurate and long distance view, but because the outsider would be dealing with something that all can see. Of course that is, if they, and the outsider, are given an opportunity for viewing.
        And, with today’s social media and big data, the outsider has a good opportunity for viewing the positions of a company.
        I also have to say, having started and finished many small projects in my life (some winning and some losing), the attitude (of all) at the beginning is often the most important aspect in determining if a project ends up being a winning or losing proposition.

  6. All of which of course exacerbates the entire situation. We’re seeing similar unfold
    at Yahoo, perhaps and for sometime, HP, and AIG it seems, is back in the early stages of trouble again, and that has very grave implications.

    • As I tried to imply, I am not sure it does exacerbates the entire situation, but it sure doesn’t help. Where would a person start–attitude?

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