Monday, March 1, 2010
Advertising holding companies and Sears.
There's a review in today's "Business Week" of a book called "Denial: Why Business Leaders Fail to Look Facts in the Face—and What to Do About It," which primarily focuses on the demise of Sears, once the largest retailer in the world. You can read the whole review here: http://www.businessweek.com/managing/content/feb2010/ca20100225_569590.htm
Reading the review, it struck me how similarly Sears and advertising holding companies behave. Here's a for instance: in 1967, the CEO of Sears, Gordon Metcalf decreed "Being the largest retailer in the world, we thought we should have the largest headquarters in the world." Sears then built the 110-story Sears Tower. Six years later in 1973, Sears' Chairman Arthur Wood decorated his opulent office with works by Degas and Monet. I'm thinking of the enormous offices--the entire holding companies floors--of people who don't make ads.
Starting 1974--36 years ago!--Sears' sales started to decline. Rather than focus on their core business, retailing, Sears bought real estate company Coldwell-Banker and financial broker Dean Witter. Here's the line that nails it for me: "Why the company's CEOs thought they would do better managing businesses in industries they did not understand than they would in general merchandise retailing remains one of life's mysteries." I'm thinking of holding companies buying auto-racing teams, sports marketers, talent agencies, etc.
This is really simple. If you're in the ad business, make ads, sell ads, distribute ads. That's the business you're in. But I've yet to see a holding company have this as their mission statement: "We make ads that make money for the companies who run them."
Posted by George Tannenbaum at 8:37 AM