Before Walmart, there was A&P – a sprawling grocery chain with 150,000 stores across America at its peak.
They went bankrupt in 2015 with fewer than 300 stores.
A&P is a story as old as time. They confused fancy and “novel” with true structural innovation. It’s a mistake all of us have made (although not to the same degree). And it’s what happens when you add, add, add but never hit “delete.”
“No company is invincible. Those that come closest are the ones that constantly reinvent themselves in the face of disruption. These companies manage a portfolio of existing business models that they exploit and continuously improve.”
Alexander Osterwalder
Sam Walton figured out disruptive innovation.
Here’s one of the lesser told truths about Walton: he learned from everything (all at once).
One of his favorite “pastimes” included traveling to other grocery stores and observing as a customer. He’d take what worked well and integrate it into Walmart.
For the internet marketers reading this post, this means that Sam Walton (not Russell Brunson) was the first “funnel hacker.”
Nothing was off limits and he was shameless about it. The truth is more nuanced than that… another way to write it would be:
He cared so much about the customer that he didn’t care where the idea came from.
If it worked, he would pass along the benefits to his customers.
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his/her money somewhere else.”
Sam Walton
At one of my firms, The Wealthy Consultant, we spend valuable (and expensive) time every week assessing what deserves to stay and what is no longer relevant.
If a client isn’t using a service, we will reinvent it. There is no such thing as an “untouchable” idea. Anything and everything is open to being removed except this: the client is why we exist. In layman’s terms, don’t f*ck with the client.
I see a lot of brands today reeling from the economic uncertainty.
Their businesses are not as profitable as they once were. The old strategies do not work and they are balancing a tightrope: slow, steady decline on one side and instant insolvency on the other.
In 2022, a trend became troubling to me. I noticed that my portfolio of brands was exclusively dependent on acquisition to maintain profitability. I didn’t like this. It represented insane concentration risk, so we switched gears.
Acquisition would be secondary.
Retention would be primary.
If we acquired business and they left a few months later, it represented a business offering that would not make it through the impending storm. We figured it out and today boast 80-90% retention metrics across companies.
Old school marketers used this retention metric as a way to go out and spend more money on acquisitions. I believe it was Dan Kennedy who made it famous, “Whoever can spend the most to acquire a customer wins.”
But that is a one-sided take.
Client retention is about balance. There are two ends of the spectrum, not one.
The more clients you acquire, the more you have to focus on retention. If you can retain 10 clients, you might not be able to retain 100 clients. The system wants to get complicated as it scales.
Complexity isn’t bad.
Complicated is bad.
They are nowhere near the same thing.
Think about it this way: an ecosystem is necessarily complex. You have all these different plants, animals, vegetation, resources, and seasons. They all interact with each other. But the plant itself isn’t complicated. It needs sunlight, carbon dioxide, and soil.
Not that complicated.
That’s because one piece of a complex organization is not complicated — one person does their 2 or 3 jobs well and the entire wheel turns the right way.
A business is no different.
Instead of plants, animals and seasons — you have models. These models fit together in a complex ecosystem. A business is basically just an ecosystem. This is why you can’t fix a dying business with a better “funnel.” It’s not going to fix the ecosystem, it’s just puts a bandaid on whatever isn’t working.
A great acquisition system can cover up retention issues for a season. But that season is going to end, and you’re going to run out of cash eventually.
Last week we held our mid-year event for a group of clients and one of the biggest takeaways was this: funnels are out, flywheels are in. Why is this true?
Ecosystems.
A lot of clients used to do just fine using one video sales letter and spending ad dollars. But that doesn’t work predictably through the changing of seasons. It’s a tree that only grows when it’s hot outside and dies when it gets cold. Not a good plan…
Your business must be set up to deploy different models at different times interchangeably. I’ll talk more about this later.
For now, know this: to build sustainably build slowly.
Model NATURE.
Slow off the draw. But durable beyond belief.
-T
P.S. Charleston event! If you’re interested in our events, go here for itinerary.
