Target’s Failure in Canada is a Failure in Intrapreneurship
Target, the giant US retailer with over $50 Billion in sales in 2014, announced last week that it calling it quits in Canada, less than two years after its grand opening in March 2013. It will have lost an estimated $2 Billion in the process and will be closing all of the 133 stores it opened. Intrapreneurship (corporate entrepreneurship) is the launch of a new business or line of business by an existing corporation. This perfectly captures what Target was trying to do in Canada. In this definition, a giant retailer aiming to enter a new country, as Target attempted to do, is counting on intrapreneurship to succeed.
To succeed at intrapreneurship, an organization must be able to master five activities: (1) managing the innovation process and generating and validating ideas, (2) matching core competencies to new market opportunities and developing a business model, (3) successfully launching new businesses, products or services and adapting to the market, (4) learning from lessons in entrepreneurship and leveraging best practices, and (5) mastering intrapreneurship and overcoming obstacles created by the corporation itself. Assuming that the decision to enter Canada and compete against established players such as Walmart Canada and Canadian Tire successfully passed trough activities (1) and (2) above, it leaves one wondering where did the main failure occur?
Did Target Canada’s failure lie in (3) and the poor launch of its retail offering to the Canadian market? Was it in (4) by not properly following entrepreneurial practices of ensuring early success by properly validating that the retail offering met the customers’ needs, creating the right engine of growth to drive sales and profitability, and then scaling when the model has been validated? Was it in (5) by over-estimating the support that the Target Corporation would need give to Target Canada and the ability and willingness of the corporation to adapt its existing corporate systems, processes, and metrics to the needs of the intrapreneur? While it is too early to reach a judgment and establish the true cause of failure, I can postulate that future business cases on this business story will conclude the following.
The cause of Target’s failure in Canada is due to a series of misteps that include several factors, and central to this is the corporation inability to succeed at intrapreneurship. Some of the intrapreneurhsip mistakes made include the following five:
Lack of intrapreneurial learning and validation. Successfully intrapreneurship includes an important learning process that gives the intrapreneur some time to test and validate the new business’ product offering in its new market place before the corporation gives the intrapreneur the go-ahead to turbocharge its investment in growing the new business. Target’s error: Going full throttle across Canada and opening 133 stores in record time without having first validated the offering that would appeal to Canadians and the regional differences across the country.
Ill-suited metrics and KPIs for a corporate startup. Intrapreneurship also requires that the metrics of performance to track the progress of a corporate new business initiative be modified to match the early phase of a startup’s growth and not simply mimic the KPIs of the established corporation. Target’s error: I suspect that the Canadian operations were being measured using Target’s well established business metrics around retail and the opening of a new store or growing within an established region. Opening a new store in a known region is simply incremental growth, entering a new country with the goal of winning it over, is intrapreneurship and this requires different metrics of performance.
Unqualified intrapreneur. Intrapreneurship requires a qualified intrapreneur capable of leading the new business venture, acting as an intreprenur within the corporate structure, and holding off the corporation’s natural instincts to instill controls and enforce systems and processes that are perfectly suitable for a large established business, but not suited for a corporate startup. Target’s error: Did Target’s corporate executive properly evaluate the candidates for the intrapreneur role and ensure they understood the qualifications needed to lead a corporate startup. Or, did it take the easy road and simply assume that an existing leader that had been successful had managing and growing one of their established businesses should be able to take on this intrapreneurship challenge.
Enforcing corporate systems and processes. Intrapreurial businesses require systems and processes that suit their startup business environment. Standard systems, processes around reporting, forecasting, and tracking market penetration must be adapted to reflect the startup environment of validation, trial and error, and frequent customer validation. Target’s error: It is highly likely that Target simply enforced its existing management systems and processes onto Target Canada. Doing this would have forced the Canadian startup to behave like an established business instead of like a corporate startup.
Rigid adherence to strategy. Central to any startup’s success is the ability to adapt and modify a strategy as more knowledge and insights are gained from the new market. This has also been referred to as the ability to pivot. In my experience, executives in large corporation are very uncomfortable with pivoting because it requires modifying a strategy that was sold to a CEO, CFO and a board of directors. The danger is that the intrapreneur business leader remains blind to the one approved strategy and in doing so drives the new business to fail. Target’s error: refusing to adjust the strategy when it was clear very early on that many of its stores were not succeeding. This, in turn, resulted in more money being thrown at making the original strategy work, instead of pausing and looking for the right pivot.
I am very passionate about intrapreneurship (corporate entrepreneurship) and have written a book, The Twelve Labours of the Intrapreneur, that deals with the challenges of succeeding at intrapreneurship, which will be published in April/May 2015.