Pets.com became a publicly traded company on Valentines Day 2000. Overnight it raised 82.5 million big ones. In their Prospectus, they listed 7 keys to their strategy and over 30 risks related to their business. While the risks were significant, the real problem was that none of their 7 keys represented any type of sustainable advantage. There was nothing unique about Pets.com and so they tried to compete on price – actually selling products for less than what they bought them for and offering free shipping. Imagine that… shipping heavy bags of dog food for free and for less than what you bought it for. Doesn't sound very sustainable. On Election Day, just 268 days after Pets.com's IPO, George W. Bush would become the 43rd President of the United States and Pets.com would go out of business. That's like losing just over 307 thousand dollars a day! While investors lost millions, at least some of their money was spent on memorable commercials.
Acumen in Action™
Share the YouTube video in your next team meeting. Discuss the following:
- In the video, did you notice the dates? Point out that in just 268 days Pets.com went from IPO to liquidation.
- Have someone divide 82.5 million by 268. Talk about what your team could do with $307 thousand dollars a day.
Pass out the Pets.com Strategy & Risks PDF: Download Pets.com Strategy & Risks PDF
- What do you think it means to have a sustainable advantage?
- As you look at Pets.com's strategy can you identify what would make them unique or different from other pet supply stores? Discuss how Pets.com tried to compete on price and talk about why that would be a challenge.
- Point out that there were 4 online pet stores in 2000 and lots of brick and mortar stores to complete against. How hard would it be for competitors to implement parts of Pets.com's strategy?
- What do you think our company's sustainable advantage is? What makes us unique in the marketplace? What would our competitors say was their sustainable advantage?
- As you look at Pets.com's risks how well do you think their strategy addressed those risks?
- Which risks do we share as a company? Some of the bolded items in the list are common risks many companies face.
- What has our executive team done to mitigate some of our risk?
- What is our team's strategy and how well does our strategy align with some of the risks that our company faces?
Seeing the Big Picture
As a team, write down some of the risks you need to plan for. You can refer to Pets.com's risks to help brainstorm some ideas. For example, an HR team might share this risk with Pets.com: HIRE AND RETAIN PERSONNEL An IT team might share this risk: SYSTEMS FAILURE OR DATA CORRUPTION Discuss the relationship between risks and a sustainable advantage. What would happen to your company's sustainable advantage if these risks were taken lightly? Challenge your team to use their business acumen to improve processes that mitigate risks and ultimately help your company maintain or achieve a sustainable advantage.
If you and your team have the book Seeing the Big Picture (Greenleaf, 2012) turn to page 10 and read the section: Influencing the Whole
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