(Article Originally Appeared on Forbes.com, Feb 12, 2017. Author: Bryce Hoffman)
Whole Foods Market is shuttering its store in Davis, California, today — one of nine the high-end grocery chain is closing after posting six consecutive quarters of declining same store sales.
The Austin-based company is becoming a victim of its own success. The organic food business it had a big hand in creating is exploding. Yet most of the growth is benefiting not Whole Foods, but its competitors.
This is a teachable moment for a lot of companies: Success can prove as big a business challenge as failure, if you fail to plan for it.
But how do you do that? By figuring out how success could change your business environment and making sure your company can capitalize on those changes before your competitors do.
A lot of companies spend a lot of time thinking about how to avoid failure — which is certainly a good thing. But businesses also need to think about how to avoid the pitfalls of success.
Let’s look at what happened with Whole Foods.
When my wife started shopping there as a college student at the University of Texas, it was a hippy co-op with a lot of self-serve bulk-food bins and little thought given to packaging, or presentation or marketing polish. Fast forward three decades, and Whole Foods stores are über-chic temples devoted to the religion of natural and organic foods. Hipster mommas feel guilty for not shopping there — at least they did until traditional grocery chains such as Kroger and even Wal-Mart Stores began offering their own rival organic offerings. In fact, discount chain Costco Wholesale is now reportedly the largest organic seller in the United States.
The products offered by these other retailers may not match Whole Foods’ quality, but they definitely beat it on price. And therein lies the rub: Whole Foods may have created a new market segment, but once it did, the immutable laws of the marketplace took over.
Could Whole Foods have seen this coming?
In retrospect, it’s easy to say yes. CEO John Mackey certainly set out to take organic foods mainstream, so it’s only fair to ask why he and his team did not develop a better plan for what do once the traditional grocery business decided it wanted a bite of that pesticide-free apple, too.
But that is easier said than done, and Whole Foods is hardly the first company to risk being left behind in a market segment it helped create. Think Palm or Polaroid. How many of us think through what could go wrong when our plans succeed?
Red teaming, a system developed by the military and intelligence agencies to help stress-test strategies and improve plans, offers an array of tools for helping organizations do just that.
One of the most powerful is called Alternative Futures Analysis. This technique looks at what might happen if a plan unfolds in different directions. An organization can then expand its strategy to account for these future developments.
If Whole Foods had done an Alternative Futures Analysis in the late 1990s, it might have realized its success would make it the envy of the grocery business and recognized the ways in which rival retailers might respond. Armed with that knowledge, Whole Foods could have more quickly rolled out its own lower-cost store brand organics line and more aggressively combated the notion that its products were overpriced.
While it would still have to slog it out in the marketplace, that would at least have made it more difficult for its competitors to enter the fray.
(Full disclosure: I own stock in Whole Foods.)
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