Target Stores – A 50 year-old Strategy to Not Compete in the Status Quo | by Azure Corporation and Rotman Information Solutions

Blair Severn, Azure Corporation
Heather Wilson, Rotman Information Solutions

Knowing how did they do it, how Target Stores became the success they are today, begins with understanding Target’s fifty year-old strategy to “not compete” in the status quo. In May 1962 when the first Target store opened its doors, competing in the status quo meant figuring out how to be the better department store or be the better discount store. The founders of Target chose neither and chose both, ‘putting an end to the status quo’.

Fifty years ahead of their time, Target’s success was set in motion by their decision to put aside the binary limits of either-or. In his book The Opposable Mind: How Successful Leaders Win Though Integrative Thinking, Roger Martin, Dean of the Rotman School of Management, popularized his contemporary view of management thinking advocating, “there is a way to integrate the advantages of one solution without canceling out the advantages of an alternative solution”.

Before Target Was a Breakthrough Success

Before Target was Target, it was the Dayton Company, a family-owned Minneapolis-based operator of 3 department stores. Not particularly remarkable or competitively advantaged and, with growing pressure from the burgeoning discount segment, the Dayton Company like many of its contemporaries was looking to create a discount format as a complement or alternative to their core business. It was, however, an insightful Dayton vice-president John Geisse along with Douglas Dayton, a key executive member of the Dayton Company controlling family, who asked the very powerful question: why does it have to be either-or? They intuited that perhaps there was a place for something not defined by each current model.

Geisse and Dayton proposed a third and new choice. Their concept was to avoid competing as another discount store using the same competitive levers (off-price items, irregulars, cheap goods) as everyone else but also to overcome some of the limitations of their department store model. They didn’t accept the status quo of what a department store was supposed to be or what a discount store was supposed to be. They married Dayton’s department store heritage with discount store positioning to launch the first successful upscale discounter.

Planting the seeds for Target’s fashion-forward strategy today, they had an attractive shopping environment and higher priced merchandise more consistent with what you would expect from a department store. And they had lower-priced merchandise that you’d expect from a discount store but with one very smart difference by having their lower-priced merchandise in-line with current trends.

Roger Martin, in his book The Opposable Mind, interviews A.G. Lafley the former renowned Procter & Gamble (P&G) Chairman and CEO. Asking Lafley how he drove P&G to such heights of success Roger Martin quotes Lafley as saying, ” We weren’t going to win if it was an ‘or’, everybody can do ‘or'”.

Often It Takes an Outsider

In setting up the new venture, only a few Dayton executives staffed Target. The parent company felt that department store people were “too wedded to that type of operation and that Target could do better by developing its own people trained for discounting”, a 1967 Harvard Business School study of Target stated.

At Azure Corporation, when counseling executives on enabling a growth breakthrough, we regularly advocate the power of an outsider. It’s important to invite participation not just from a company outsider but, more importantly, an industry outsider, particularly at the early conceptual stage. The challenge with company and industry incumbents is they are often too fixed on what they “know” to be true about industry best practices that they are blind to what “could” be true to change the status quo to a completely new way to win. It’s about asking outsiders and insiders the right questions. You first ask an outsider what could be possible as they have an un-invested view of the company or industry. Once having a direction on what could be possible, you then turn to company and industry insiders and ask, how do we (not can we) make this new possibility a reality in our industry?

Target Today

Now fifty years later Target continues to own the third choice not tied to the binary limits of either-or. This is demonstrated in their well-aligned strategy imbedded throughout all aspects of their execution. Emotional dimensions, wit, humor and popular music are all used in their advertising, showing Target as “slightly smarter and slightly more stylish”, according to Patrick Barwise, professor emeritus of management and marketing London Business School. This is reinforced in their positioning statement “expect more, pay less”, delivered in their merchandising of upmarket style and design at discount pricing and supported by their house brands of private labeled exclusive deals with designers. And as we look into Target’s future, they are continuing to set aside the status quo of what a discount store is supposed to be by integrating premium brands with plans to add 25 Apple centers in 25 retail locations.

Further reading:

  1. Bullseye: Target’s Cheap Chic Strategy, by Barwise Patrick and Sean Meehan, Harvard Business School Working Knowledge (August 16, 2004)
  2. In a Test, Target Plans to Add an Apple ‘Store’ Inside 25 Stores, by Clifford Stephanie, New York Times (January 13, 2012).
  3. 1962-1992 Dayton’s dream is on Target, by Halverson Richard, Lisanti Tony, Longo Don, Markowitz Arthur and Lettich Jill, Discount Store News (April 20, 1992).
  4. Target at 40 – 40th Year in Business, by Heller Laura, DSN Retailing Today (April 8, 2002).
  5. The Opposable Mind: How Successful Leaders Win through Integrative Thinking. by Martin Roger, Boston: Harvard Business School Press, 2007.

How Did They Do It

Pablo Picasso has been attributed to saying “good artists borrow, great artists steal”. Not that we are advocating stealing ideas from others but we are advocating what we believe is the intended truth in this statement: to learn, apply and expand upon the intelligence gained from others’ successes. Each month How Did They Do It will showcase how an idea became a success and offer valuable intelligence and insight that may resonate with you as you face similar challenges.

The enabling ideas® How Did They Do It feature is brought to you as a collaborative effort from Azure Corporation and Rotman Information Solutions, Rotman School of Management at the University of Toronto.

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