Lessons From Kmart

Computerworld - Want to take some lessons from Kmart and the biggest retail bankruptcy filing in history last week? Try this: If you cut IT spending in the short run when business is bad, you're cutting off your own air supply. And try this: If you wait until times are good to loosen the IT purse strings again, it may be too late.
Yes, Kmart got squeezed between slightly upscale Target and deep-cut discounter Wal-Mart. Sure, its stores were old. Yeah, it used newspaper ads instead of TV commercials.
All those things hurt Kmart. But what did Kmart in was IT.
Or rather, the lack of IT. And modern logistics and supply chain management. And up-to-date in-store technology.
Want to know how bad things were? In 2000, when Kmart finally decided to invest in IT, the company bragged that the two-year, $1.4 billion upgrade plan was "more money than Kmart has spent in the last decade on IT."
That stinginess cost Kmart three CIOs in the space of five years in the 1990s. It also took away any hope of catching Wal-Mart, which was marching out of the South and into regions where Kmart thought it had already won the discount retailing battle.
Sure, Target was everywhere Kmart was. But Target was really a downscaled Dayton-Hudson department store - it would never reach any farther down. Kmart was an upsized S.S. Kresge five-and-dime store. And 10 years ago, across most of the U.S., Kmart had the low end of discount retailing all to itself.
At least until Wal-Mart arrived in town after town after town. Wal-Mart had cutthroat pricing, supported by solid logistics. And wherever Wal-Mart showed up, complacent Kmart lost. By the mid-1990s, Kmart was in trouble and losing money.
Kmart's response? The IT budget evaporated.
While Wal-Mart was pouring money into IT, Kmart's IT budget got smaller. And not just once, but several years in a row.
So while Wal-Mart's logistics and supply chain management got sharper, Kmart's stagnated. While Wal-Mart's IT staff grew, Kmart's shrank. And while Wal-Mart was able to squeeze ever more value out of its stores and its systems, Kmart lost ground.
In five years, Kmart went from being the IT leader in retail to an embarrassment. Kmart was not just an also-ran - it wasn't even in the race.
But Kmart still might have come back. When management gave the OK for that $1.4 billion systems overhaul in the summer of 2000, it looked possible. When freshly minted CEO Chuck Conaway hired former Deloitte Consulting