One interesting thing that happened while I was on vacation was the news that Wal-Mart is test-marketing imitations of the two best-selling Girl Scout cookies, Thin Mints and Tagalongs. To get a "flavor" of the reactions to this move, check-out the post that CV Harquail did on her blog Wal-Mart Knocks-Off Girl Scout Cookies. And see CV's follow-up post Thin-Minty Gate. Over 150 people commented on the first post and this news has spread far and wide. As regular readers of this blog know, I am biased in this matter because my wife Marina Park is CEO of the Northern California Girl Scouts. My view (and I am not speaking for Marina, in fact, I didn't tell her I was writing this post) is that -- holding things aside like ethics, financial damage done to the Girl Scouts, and other things that harm outsiders -- this is a dumb business decision for Wal-Mart, and the real mystery is how the smart people at Wal-Mart (and they are smart and decent human-beings) could do something that:
1. Further fuels their reputation as one of the most heartless and greedy companies on the planet (true or not, they are seen this way in many places).
2. Damages their relationships in communities where they already have stores. In many of those communities, Wal-Mart works closely with Girl Scouts to provide a place to sell the cookies in front of the store. The weird dynamic of having very similar cookies sold inside Wal-Mart at a lower price may or may not hurt the cookie sales (because most of us realize that, after all, they are going to a good cause -- allowing girls to go to camp, on trips, buy equipment for learning projects, supporting programs for inner-city girls and those in juvenile detention facilities, to pay remarkably dedicated and modestly compensated staff members, and on and on). But it clearly hurts Wal-Mart, creating the perception that they are going into direct competition with those girls and are acting out of pure greed.
3. Makes it harder to open new stories. It turns out that when Wal-Mart wants to put a store in a community, there is organized resistance in about one third of cases and that, when it happens, this resistance is highly effective: the store is stopped about two-thirds of the time. So, roughly, Wal-Mart fails to get stores where it wants in over 20% of cases as a result of resistance from communities. And even when they do overcome the resistance, the fight costs them serious time and money. In light of these facts, going toe-to-toe with Girl Scouts is sheer idiocy because it provides a compelling rallying cry ("Wal-Mart isn't only going to be competing with the local merchants, they are also going to undercut the Girl Scouts") that increases both the likelihood of resistance and the success. I have no access to the numbers, but I am willing to bet that if Thin Minty Gate results in the failure of even one store opening for Wal-Mart, any profits from the knock-off will not offset the cost of losing that one store.
Perhaps the most interesting question here is how such smart people could do something that is so dumb. It sounds more like an Onion story that a real story. I don't claim to have deep or extensive knowledge of Wal-Mart, but we did work with some fairly senior executives from Wal-Mart several years back in one of our d.school classes (see here and here), and I was quite impressed with their action orientation and focus on cost-saving and efficiency. The brilliance --and the Achilles heel -- of Wall-Mart is that they talk and act as if the answer to every problem is to use their scale, bargaining power, and speedy implementation to tackle any problem by driving down the price they pay and pass it along to consumers. This is great, for example, when they use their bargaining power to bring down the cost of environmental friendly LED lights in their refrigerators so that they become cheaper than traditional lights. But when "everyday low prices" is the solution to every problem and -- despite lip service to other constraints -- almost nothing else drives your behavior even when it hurts you badly (as in this cookie caper), your core cultural values can hurt you badly.
As far as I know, Wal-Mart hasn't announced that they are stopping the knock-offs. My prediction is that they will come-up with some bullshit business reason to do so. If they were smart (and there is research on this, on how to deal with mistakes, which we talk about in Hard Facts and I touch on here and here) they would: 1. Confess it was a mistake, that they should have been more sensitive to the importance cookies to Girl Scouts; 2. Explain this episode has made them more sensitive to how pure business decisions need to be considered in light of community relationships and their corporate image; 3. Announce and take formal steps to show they have learned this lesson.
Let's see what happens. My experience with Wal-Mart is that these are good people who mean well, they are extremely competent, but sometimes are blinded by their culture -- this appears to be a case where they suffered from a severe knowing-doing gap that could have been averted by simply asking a few objective outsiders to react to what they were doing. But asking others for honest feedback and listening to them is something that we human-beings often fail to do, despite the best of intentions.