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Alan Wurtzel helped make Circuit City a great company. And then he set out to learn why it failed.
By Matthew Budman
When a company is cruising along, earnings and share price high, every move seems like the right one, inexorably leading to success, as though it were planned that way. On a downward trajectory, every strategic shift looks disastrous—in retrospect, obviously so.
Circuit City enjoyed a run as a good company before becoming a great company, one worthy of a Jim Collins profile in his 2001 bestseller Good to Great. And then, after fifty years in business, everything went to hell. The reason wasn’t a hostile takeover, an accounting scandal, a class-action lawsuit, or an act of God—it was, simply, that the consumer landscape shifted and Circuit City failed to keep pace, leaving room for Best Buy to become the default place for people to buy TVs and audio cables and DVD players and videogames.
Alan L. Wurtzel was a protagonist in the Circuit City saga from the beginning, as the son of company founder Sam Wurtzel, before being named in-house counsel, CEO for a dozen years, and finally chairman for another fifteen. He retired in 2001, at a turbulent time for the company, for consumer technology, and for the global economy. Less than eight years later, a bankruptcy judge ordered Circuit City to close its 567 stores and liquidate its assets.
Now 79, Wurtzel wanted to find out where it all went wrong as well as why it all went right for so long, and the result is Good to Great to Gone: The 60 Year Rise and Fall of Circuit City (Diversion), a sometimes brutally candid look at top personnel moves, strategic plans and execution, and how decisions were made about everything from store locations to sales incentives to stock-repurchase plans.
He spoke via Skype from his Washington, D.C., home office.
You retired from the Circuit City board just as things were beginning to go wrong. You must have known it would be painful to revisit those last years. Why did you decide to do it?
First of all, I wanted to understand what happened. I thought I understood a lot about the company from its beginnings in 1949; I was still a kid in high school, but I was interested in what my father was doing and had a pretty good understanding of what was going on. And of course, I was deeply involved for the term I worked for Circuit City and stayed on the board. But after 2001, I pretty much severed my ties with the company; I was not an investor and was not privy to what was happening. So I wanted to learn more.
I’ve always been interested in business history, particularly business strategy. And in Circuit City, here’s a company that survived over sixty years in probably the most turbulent and exciting segment of consumer marketing that this country’s ever seen. When my father started, we sold radios and then tiny, black-and-white TVs, and today we’re Skyping! I thought it would be interesting to study the business strategies that the company pursued over that sixty years as the products changed, the economy changed, the market changed, and the competition changed.
And the last reason is that I’m still concerned about the tens of thousands of people at Circuit City who lost their jobs through no fault of their own. I thought they’d like to know what happened to their company. They should be proud of most of what was accomplished.
How did it feel to revisit all those years of business history—annual reports, strategic plans, real-estate deals, executives hired and fired?
It was exciting! I went back and read annual reports from my father’s day, my day, and after that. I found it interesting, challenging, and enjoyable.
Your father co-founded Wards Co., which eventually became Circuit City. What’s it like to run a company with which you literally grew up?
I don’t have any experience running a company with which I didn’t grow up, so it’s hard to make a comparison. I can say that a family business—and this was certainly a family business as long as my dad was alive—has both benefits and challenges. The benefits are loyalty and a sense of common purpose. The minuses are disagreements that become more difficult when family dynamics get in the way of business decisions.
And to be perfectly honest, I’m not sure I would have become the CEO of a multimillion-dollar company if it hadn’t been started by my dad. Obviously, I had a leg up: I became CEO at a relatively young age because he had confidence in me. We were friends when we started and friends when we ended.
Better than your ending up estranged.
That’s happened in more than one business.
In studying the history of Circuit City, was it frustrating to see moves that you and the company should have made and didn’t? to identify questions that you should have asked?
Of course. Clearly I should have challenged my father more in the early days, when we were making a lot of helter-skelter acquisitions. Later, when I was on the board, I should have challenged CEO Rick Sharp more when Best Buy was starting to eat our lunch. I certainly should have built a stronger infrastructure and a stronger team so that staying on as CEO would have seemed more appealing than retiring at an early age. But I did the best I could, and I have no regrets. Hindsight is twenty-twenty.
"Later, when I was on the board, I should have challenged CEO Rick Sharp more when Best Buy was starting to eat our lunch."
Speaking of hindsight: Is it fair to others—and to you—to be so critical of decisions made then?
If this were a private company, I might have a different answer. But Circuit City was a public company. I, and the other CEOs of Circuit City, are subject to analysis, and if that analysis leads to criticism, so be it. My purpose was not to criticize for the purpose of being critical or to aggrandize myself or delegitimize them—it was to understand, in the context of the time, what were the appropriate strategic decisions and what were the inappropriate decisions. I didn’t deal with personal peccadilloes of any of the people who were involved, though if I’d wanted to I could have found a few.
Did you draft any sections that settled personal scores and then go back in and delete them?
There were a few lines here and there that, on rereading, I thought, “You know, that’s not really appropriate or necessary.” I guess I could have put in more scandal—not big scandals, but a few little ones.
Maybe in the second edition.
No, I don’t think so!
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