Wal-Mart: Tech King?

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Source: http://biz.yahoo.com/fool/050415/111359590027.html?.v=1

Wal-Mart: Tech King?
Friday April 15, 4:11 pm ET
By Chris Mallon

Trying to identify the supreme technology company of the past 25 years is no easy task. It could be Microsoft (Nasdaq: MSFT - News), whose ubiquitous operating system and marketing savvy guided the adoption of desktop computing. I could easily make a case for Intel (Nasdaq: INTC - News), whose pursuit of faster microprocessors drove computing costs down to where all of us can have a PC on our desk. I could list many others.
But although these companies played major roles in the advancement of technology throughout the past quarter-century, another company combined myriad technological resources to change the entire paradigm of American business: Wal-Mart (NYSE: WMT - News). In my opinion, Wal-Mart stands out as the world's premier technology company and arguably the most important company of the past 25 years. Its relentless pursuit of efficiency through technology changed the face of retail shopping, turning traditional business theory on its head.

Wal-Mart's tremendous efficiency is driven by the innovative use of technology. The gigantic retailer was one of the first companies to recognize the importance of technology in controlling the flow of information among manufacturers, distributors, and retailers. Adopting UPC (Universal Product Code) technology in the early 1980s was the first step toward dominating this information flow, through which Wal-Mart has developed an unrivaled information database that tracks every item it sells throughout the value chain, giving it tremendous power over suppliers. Using this information allows it to wring cost savings from these vendors, savings that it then passes on to the consumer in the form of lower prices.

Like any great competitor, Wal-Mart is always looking for more efficient ways of doing business, and the company believes it has found one with Radio Frequency Identification, or RFID, technology. The company made adoption of RFID by January 2005 a requirement for its top 100 suppliers, though I suppose every vendor will eventually have to use it.

Wal-Mart created the model of the dominating retailer and changed the industry dynamic from one in which manufacturers pushed product downstream to retailers, to one in which the retailer pulls product from manufacturers and distributors only when needed. Other industry leaders have adopted this same business model, with Dell (Nasdaq: DELL - News) being the most successful example.

Operational efficiency is defined by Wal-Mart, whose use of technology has forced everyone in its industry to improve or die (think Montgomery Ward). Some claim it's Wal-Mart's scale that gives it power over the supply chain, and I don't disagree. Yet Wal-Mart was smart before it was huge, and the company's size is simply a result of intelligent process innovation through technology.
 
It IS interesting that the technology king would be not a manufacturer or a seller of tech products (though you can buy a computer or DVD burner from Wal-Mart, if you are so inclined) but a user.

We always assume that Wal-Mart became a dominant force by being ruthless. Maybe they got there by being smart.

Conversely, many of us assume we never quite achieve our business goals because we're too nice/generous - to customers, to employees, to vendors. Maybe we're just not smart-enough.

Anyone think I should move this to the business forum?
 
I think that would be a great idea, Ron. However my comments are not technologically oriented.

My grandfather started custom framing in 1911. His mission statement read (and I paraphrase since I don't have the archives here):

"To provide good service and a valuable product...
etc...not to become wealthy, but rich in the esteem of our customers and friends."

First everyone must define their own personal business goals. Many may disagree, but money is only one facet of a successful business. (is the richest attorney the best attorney?) My grandpa obviously achieved his goals as I even now, almost 100 years later, still benefit from his philosophy of business. He never became wealthy by today's standards. Yet this Polish hard working immigrant started a legacy that is the most valuable thing I now own and I can think of nothing that adds more richness to my life.

In my eyes, money is just a necessary part of my business. I need to be paid in order to live and continue all the other things I enjoy about custom picture framing. Thankfully I don't have to answer to shareholders or even ex-wives.

I think Wal-Mart got to the top of the retail pyramid not by ruthlessness. Their customers obviously benefit from their innovative applications of technology and, from what I understand, Wal-Mart is one heck of a good place to work.

Many Wal-mart vendors have built fortunes by being a supplier. Just as many (if not more) have lost everything by being sucked into total dependency.

Many small retailers died because they did not have the vision to see how they could benefit from the impending coming to town of a Wal-Mart.

Wal-Mart received many underserved "black-eyes" due to sour grape feelings from these casualties or from residents not wanting to change their ways of life.

I'm in a small town now. I like it. Growth is quickly coming and it is inevitable that this community will change. Responsible developement is the best anyone who doesn't want change can hope for. Ship-shod irresponsible development is what results from poor planning by community leaders.

Wal-Mart is a class act and you must acknowledge that whether you like them or not. They have raised the standard for all retailers and continue to be the yardstick other large retailers are measured by. They can not be blamed for change. They are like the responsible developer and they continue to have vision and will lead for many years to come.

Like one of my by-lines says...

"You can't change the direction of the wind, but you can adjust your sails"

Substitute "sales" for "sails" in the above and the imagery of a skipper, one hand on the tiller and the other on the mainsheet, constantly making the smallest and largest of adjustments and racing decisions reminds me so much of how we must run our businesses. Constant attention to detail but with an objective attention to the changing conditions. We must also always be aware of those around us and where the mark is.

If a sailboat skipper lets go of the tiller and mainsheet, the boat will go into the wind and be blown downwind with a loud flapping of luffing sails and tipsy unsteadiness.

You don't win any races this way.

Dave Makielski
 
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