We had a very interesting business strategy professor teach us the subject of corporate strategy some years ago. He taught us many things but the one that stuck with me was how in the real world the practice of management always happens before the theory. Basically, people decide how they want to run their business. Then years later some professor, author or academic writes about it. Usually they write as if management’s intentions were preplanned and obvious. Sometimes, the company receives accolades for how strategic, forward thinking or effective in how it executes its strategy. Sometimes management are derided for any poor decision making or missteps they have made in the past.
A good example that is playing out at the moment is the continued growth of the Shoprite Group who seem to be able to consistently execute the right decisions compared to other retail competitors within the South African market. As of November 2024, the Shoprite Group has achieved market share growth for 58 consecutive months in its core South African supermarket business. This equates to approximately 19 consecutive quarters of uninterrupted market share gains.
A consequence of this incredible performance is that we are now being bombarded by articles by financial journalists, academics, business strategy consultants and all other varying “gurus” as they try to get explain theoretically why The Shoprite Group has done so well. Some of the articles seem to suggest that all companies need to do is exactly what Shoprite did and they will be successful. The reality of course is that in the case of this remarkable success story, the practice happened in the real world first. Everyone now spends their time theorising about it after the fact.
There are numerous business success stories all over the world which highlight how management was able to deliver incredible results for their businesses. However, in every one of these cases they achieved the success first. People write about them after the fact. It therefore, seems counter intuitive that many business decisions these days are made the other way around. Some organisation (usually a global consultancy), comes into an organisation and tells them…in theory, the benefits that should accrue from following the steps in their million dollar PowerPoint deck.
Are we as business people preoccupied with finding theoretical evidence that will support our actions in the real world? And should we rather be focussed on making great decisions in the real world first? There definitely is something around studying the theory of how the world should work, however, I fear that we gain more from understanding how it works in reality.
Another great example is that of a global consumer goods company who declared to the market that it wished to make sustainable living commonplace. This noble goal would contribute to a better society while at the same time, they had theoretical evidence that companies with this social first agenda grow much faster than those that don’t. Unfortunately, in this case the real world did not end up matching the theory as this business grew at a much slower rate than its major competitors. Ultimately, this culminated in activist investors being appointed to the board and the management team being gradually replaced. At the time of writing this company had announced global job cuts of over 7500 jobs. Just under 1 in 3 of its employees losing their jobs. Disastrous for employees but spectacular for shareholders as the business started to generate profits last seen over a decade ago. Imagine the impact on other businesses that tried to emulate this theoretical social approach vs those that remained grounded in the reality of what it actually takes to survive and compete.
My last examples are of the locally founded businesses we see operating in the most difficult economic environments across the developing world. Many of these are single owner or family owned. In theory many of these should not have survived. In reality their owners are extremely wealthy and these businesses are thriving. Some great examples include Chicken Licken which is a fast food chain that has consistently been able to grow and hold its own in the South African market. Even while competing against well resourced global competitors. Another example of home grown success is the Tata group of companies in India. In theory consumers in India should be ignoring these locally made vehicles in favour of more well-known international brands. In reality the international brands are barely surviving while Tata is thriving.
So next time you see an article telling you the absolute reasons why Shoprite is winning in South Africa. Ignore it. Someone would have just tried to match the practices they see with some sort of theoretical framework in order for it to make sense. If you want to really know why they are winning, play attention to what they do. Don’t pay attention to why 3rd parties think they do it.
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