The Borders near me closed the other month. Wasn’t surprising. Ditto for Circuit City. Gone. A few years prior to that it was Hollywood Video that rolled its end credits.

The problem is, none of them had to go. They each died of self-inflicted wounds.

Sure, a lot of their CEOs came out and blamed Iraq, the economy, e-commerce, etc., for their failures. But while these external forces may have played a part, they weren’t the death knell. It’s like the guy dying from heart disease blaming the doughnut shop.

With some big retailers biting the bullet, I wanted to delve into it and see what the real cause was, not the press release spaghetti. I wanted to see if there was a pattern that could be discerned, sort of like CSI for Retail. Guess what?

The death spiral in each case was kicked off by the company itself. Let’s back up the story a bit.

Let’s examine the wounds and see if we can determine the weapon.

Even Sears and Kmart went bankrupt before coming back to life by a hedge fund looking for some retail Lazarus act.

How did these three fail? Our handy table shows:

Short Circuit

Example: One of the key advantages of in-person retail is salesperson help. If that salesperson is super-knowledgeable, it goes a long way to making a sale. For instance, I recall shopping in Circuit City years back and getting the lowdown on flat-screen TVs. The sales guy spoke about the failure rate of the gas inside the plasma TV screen vs. LCD. I bought an LCD (also so it could hook to a computer).

However, the CEO of Circuit City, in a move to “cut costs” (translation: impress Wall Street), fired most if not all the knowledgeable sales staff nationwide and hired newbies at a lower wage. Guess what happened? These newbies knew close to zero about any product in the store. And so Circuit City’s death spiral began in about 2003. This was the main cause.

Broken Dreams

Hollywood Video … ah, the days. Netflix (Nasdaq: NFLX) did some damage to video rentals for sure. No question. But the in-store experience is what did Hollywood Video in. Generic video rental display. No imagination, despite the fact that movies are 100 percent IMAGINATION! The in-store experience needed to capture and compel customers like a DVD mailed to you in an envelope could not.

Instead, what you had were clerks standing behind the counter, not helping anyone really find or enjoy the movie world right in front of them. Should have hired film school students who could have taken customers on a cinematic journey right there in-store. Expert insights. Same thing for Blockbuster.

Block Busted

Blockbuster. I have to mention this. Blockbuster made its biggest mistake in relying on late fees to boost its revenue and earnings. In 2000, the company earned about 19 percent of its rental income from late fees — US$795.8 million out of $4.16 billion, and it was sued by customers for doing so. Blockbuster’s response? Basically, We don’t think we’ve done anything wrong. Everything we’ve done has been in our customers’ interest, and we’re not going to change our practices.

In fact, you could argue that Blockbuster’s late fees are one of the main reasons Netflix even exists.

Blockbuster today? About bust.

Border Dispute

Borders. One on every corner. A book paradise. How did they fail? Pundits may blameAmazon (Nasdaq: AMZN). But that’s incorrect. The move to Internet ordering is partly to blame. The biggest reason Borders failed? Not competitive on pricing. I would walk into the local Borders and see a new hardback listed at $24.95. The same title online could be purchased for $16.95. Borders even placed the 30-percent-off sticker on the book. I asked the sales associate if they price-matched and she looked at me like I was speaking Chinese. One click and two days later the book appeared at my door from Amazon.

Borders thought they could cure their declining book sales with coffee sales and free WiFi. What that triggered instead were throngs of college students lingering in the coffee area all day. Great for studying but not a boost to Borders overall.

The amazing thing is, even with all the great business books right there that talked about the Internet and e-commerce, digital books, e-books, etc., nobody at Borders read them or took them seriously. The first book about AOL in the early 1990s could have clued them in: People are going online for information. It was at that time that Borders needed to say “Hey, we’re about selling books, not about selling paper with books printed on them.”

In other words, Borders needed to realize a “book” is about the words, not the paper. And today Kindle exists. I’ve probably ready two dozen e-books at least on Kindle, and a few with Apple’s (Nasdaq: AAPL) iBooks. Are they still books? Absolutely. Same as a printed book. Held the same story as one written by hand by monks back in the day.

Who’s Next?

The reality is that no “real world” retailer is immune from failing. Not Walmart (NYSE: WMT). Not Target (NYSE: TGT).

The other day I was in a Target and inquired about a video game item, a gift I was looking to buy. The item cost $80 at Target. The same item online costs $65. I asked if the store price matched and got a stuffy glare from the salesperson. By the way, I had spent 10 minutes just trying to locate the salesperson in the first place just to open the video game case, since it was locked. The entire Target electronics department had no sales staff in it. The only guy working was a rep from Radio Shack who sold mobile phones inside the store.

That highlights another problem with in-store retail: Lack of staff and unfriendly staff. A further problem with this Target was that it was out of stock of the item that its website said it had in stock at the store.

Yes, despite the desire for “instant gratification,” the same problems that killed Circuit City, Hollywood Video and Borders cropped up:

1. Overpriced vs. alternative retailers
2. Sales staff absent or uncaring, unknowledgeable
3. No selection or inaccurate inventory online for in-store buying

With the capital, reach, manufacturing, distribution, brand and other relationships that many retailers have, you would think it would be easy for them to win and keep customers.

The In-Store Experience

One last example: the “buy online, deliver to store” notion. Many retailers have this, including Walmart.

It is convenient, to a point, but it also provides an example of the worst of online and the worst of in-store. Either have it in stock, so when I’m there I can buy it, or, if ordered online, ship it to my home. Why make the customer drive to the store? How is that a benefit? Meanwhile, Amazon, Zappos, and dozens of online sellers ship direct and often for free right to my doorstep.

These are the slow suicide moves by big-box retailers as they don’t understand the new world of retail or haven’t embraced the reality that a product now is free to be bought from anywhere without the store experience at all.

The remedy is using the in-store experience to have real experts show and demo products and provide friendly service to make you feel great about the retail “experience.” The in-store experience needs to have available the entire inventory and more truly “exclusive” items available only at the store. Flash sales sites like Gilt and others exist when in-store retailers could have been buying and selling these sorts of items for years. Pricing in-store needs to meet or beat anything available online. In-store warranty needs to be bundled with every purchase, free. If the TV breaks, I’d rather take it to the local store for repair then ship to an online seller.

In the end, that’s what in-store retail has to focus on: the experience. So far it’s been the major failure point for many and will be for more to come who want to believe customers are loyal to their store. They are not. Customers are loyal to price and great experience — in-store, online or on the moon.  (credit-steve harmon , e-commerce times)

Get on a Southwest flight to anywhere, buy shoes from Zappos.com, pants from Nordstrom, groceries from Whole Foods, anything from Costco, a Starbucks espresso, or a Double-Double from In N’ Out, and you’ll get a taste of these brands’ vibrant cultures.

Culture is a balanced blend of human psychology, attitudes, actions, and beliefs that combined create either pleasure or pain, serious momentum or miserable stagnation. A strong culture flourishes with a clear set of values and norms that actively guide the way a company operates. Employees are actively and passionately engaged in the business, operating from a sense of confidence and empowerment rather than navigating their days through miserably extensive procedures and mind-numbing bureaucracy. Performance-oriented cultures possess statistically better financial growth, with high employee involvement, strong internal communication, and an acceptance of a healthy level of risk-taking in order to achieve new levels of innovation.

Misunderstood and mismanaged

Culture, like brand, is misunderstood and often discounted as a touchy-feely component of business that belongs to HR. It’s not intangible or fluffy, it’s not a vibe or the office décor. It’s one of the most important drivers that has to be set or adjusted to push long-term, sustainable success. It’s not good enough just to have an amazing product and a healthy bank balance. Long-term success is dependent on a culture that is nurtured and alive. Culture is the environment in which your strategy and your brand thrives or dies a slow death.

Think about it like a nurturing habitat for success. Culture cannot be manufactured. It has to be genuinely nurtured by everyone from the CEO down. Ignoring the health of your culture is like letting aquarium water get dirty.

If there’s any doubt about the value of investing time in culture, there are significant benefits that come from a vibrant and alive culture:

• Focus: Aligns the entire company towards achieving its vision, mission, and goals.
• Motivation: Builds higher employee motivation and loyalty.
• Connection: Builds team cohesiveness among the company’s various departments and divisions.
• Cohesion: Builds consistency and encourages coordination and control within the company.
• Spirit: Shapes employee behavior at work, enabling the organization to be more efficient and alive.

Mission accomplished

Think about the Marines: the few, the proud. They have a connected community that is second to none, and it comes from the early indoctrination of every member of the Corps and the clear communication of their purpose and value system. It is completely clear that they are privileged to be joining an elite community that is committed to improvising, adapting, and overcoming in the face of any adversity. The culture is so strong that it glues the community together and engenders a sense of pride that makes them unparalleled. The culture is what each Marine relies on in battle and in preparation. It is an amazing example of a living culture that drives pride and performance. It is important to step back and ask whether the purpose of your organization is clear and whether you have a compelling value system that is easy to understand. Mobilizing and energizing a culture is predicated on the organization clearly understanding the vision, mission, values, and goals. It’s leadership’s responsibility to involve the entire organization, informing and inspiring them to live out the purpose the organization in the construct of the values.

Vibrant and healthy

Do you run into your culture every day? Does it inspire you, or smack you in the face and get in your way, slowing and wearing you down? Is it overpowering or does it inspire you to overcome challenges? It’s important to understand what is driving your culture. Is it power and ego that people react to, and try to gain power, or a culture of encouragement and empowerment? Is it driven from top-down directives, or cross-department collaboration? To get a taste of your culture, all you have to do is sit in an executive meeting, the cafe or the lunch room, listen to the conversations, look at the way decisions are made and the way departments cooperate. Take time out and get a good read on the health of your culture.

Culture fuels brand

A vibrant culture provides a cooperative and collaborative environment for a brand to thrive in. Your brand is the single most important asset to differentiate you consistently over time, and it needs to be nurtured, evolved, and invigorated by the people entrusted to keep it true and alive. Without a functional and relevant culture, the money invested in research and development, product differentiation, marketing, and human resources is never maximized and often wasted because it’s not fueled by a sustaining and functional culture.

Look at Zappos, one of the fastest companies to reach $1 billion in recent years, fueled by an electric and eclectic culture, one that’s inclusionary, encouraging, and empowering. It’s well-documented, celebrated, and shared willingly with anyone who wants to learn from it. Compare that to American Apparel, the controversial and prolific fashion retailer with a well-documented and highly dysfunctional culture. Zappos is thriving and on its way to $2 billion, while American Apparel is mired in bankruptcy and controversy. Both companies are living out their missions–one is to create happiness, and the other is based on self-centered perversity. Authenticity and values always win.

Uncommon sense for a courageous and vibrant culture

It’s easy to look at companies like Stonyfield Farms, Zappos, Google, Virgin, Whole Foods, or Southwest Airlines and admire them for their passionate, engaged, and active cultures that are on display for the world to see. Building a strong culture takes hard work and true commitment and, while not something you can tick off in boxes, here are some very basic building blocks to consider:

1. Dynamic and engaged leadership
   A vibrant culture is organic and evolving. It is fueled and inspired by leadership that is actively involved and informed about the realities of the business. They genuinely care about the company’s role in the world and are passionately engaged. They are great communicators and motivators who set out a clearly communicated vision, mission, values, and goals and create an environment for them to come alive.
2. Living values
   It’s one thing to have beliefs and values spelled out in a frame in the conference room. It’s another thing to have genuine and memorable beliefs that are directional, alive and modeled throughout the organization daily. It’s important that departments and individuals are motivated and measured against the way they model the values. And, if you want a values-driven culture, hire people using the values as a filter. If you want your company to embody the culture, empower people and ensure every department understands what’s expected. Don’t just list your company’s values in PowerPoints; bring them to life in people, products, spaces, at events, and in communication.
3. Responsibility and accountability
   Strong cultures empower their people, they recognize their talents, and give them a very clear role with responsibilities they’re accountable for. It’s amazing how basic this is, but how absent the principle is in many businesses.
4. Celebrate success and failure
   Most companies that run at speed often forget to celebrate their victories both big and small, and they rarely have time or the humility to acknowledge and learn from their failures. Celebrate both your victories and failures in your own unique way, but share them and share them often. (credit to shawn park ,FAST COMPANY)

LOS ANGELES-“From the beginning, our attitude and leadership style was that culture was critical and we knew of no successful businesses that didn’t have a culture,” said Sam Zell, chairman ofEquity Group Investments at the Americas Lodging Investment Summit. “The optimum scenario is total access. My door to my office has never been closed. As an entrepreneur, the biggest risk I have is getting surprised and if the people that work for you don’t have access and don’t tell you what’s going on, then you get surprised.”

Zell sat down with moderator Dale Anne Reiss, senior consultant at DLA Piper/Artemis Advisors, and Bill Marriott, chairman and CEO of Marriott International, at the three-day conference, to discuss the current business environment, reinvention and leadership style. “Have really smart people and listen to them,” said Marriott. “Encourage them and help them grow in what they do. Take good care of our people and take good care of the customer and the customer will come back.

Marriott, who said that he believes in “the relentless pursue of excellence” talked about the company’s reinvention over the years. In 1964, when he became president, the company had five hotels and was in the food service management business among other things. Today, after having its hand in theme parks, restaurants, airline catering, Marriott is completely focused on lodging. “We continue to establish our brand and reinvent ourselves. You have to keep changing and looking for opportunities,” said Marriott, pointing out that you can’t be scared to make decisions on different opportunities. But he pointed out that it is important to five up on the things that aren’t working for you, “and focus on the things that you do best, and for us, that’s lodging.”

Zell says that his company never really started with a particular focus. “We are in all kinds of different things, but what is important is to set the goals and make sure everyone’s hungry,” he said. “You have to be in a position where the people you depend on are predictable.”

In terms of innovation, Zell said that innovation covers different terrain. “In 1990, we looked at the world and saw that the world as it was structured couldn’t continue the way it was structured and in 1990, we got focused on the public markets,” he said. “We got a lot of blow back on that.” The answer to that, he said, was that “it was the right idea at the right time and it was executed correctly and that is what innovation is all about…you have to not be afraid to take the risk and you have to understand what the risk is.”

For Marriott, the word “innovation” takes him back to 1980 when the company was just building big box hotels in its hotel division and decided to try reaching out and doing some smaller hotels. The company developed the Courtyard Marriott to answer the demand for “a better room at a better price,” and now has more than 925 of them. “That experience helped us explore a bunch of other brands over the years,” he said. “We realized there was a need out there and that the lodging market was changing.”

In terms of lessons learned over the years, Zell said it in only a few words: “Liquidity equals value.” According to Zell, “we all came out of this last few years with a real focus that everything comes down to liquidity, exit strategies, and knowing before you come in, how you are getting out.”

In today’s environment, Zell said, “Although everyone feels better, there has been a very limited solution to the overleveraged industry. There is an enormous amount that has to be done in 2012 and 2013.” But the good news, he said, is that real estate comes down to a simple concept: supply and demand. “Because we aren’t creating supply, we are filling up our existing stuff.”

According to Zell, the real opportunity in the US is to figure out where the demand is. “You make money in real estate by servicing existing demand,” he said. “The good news is that there is very little under construction and I think there will be very little for the next few years, which will result in continuing occupancy in real estate. As we have gone around the world and invested in different markets, our criterion comes down to where the demand is.” (credit, n, dolce, globe st)