I noticed in the news that The Sharper Image went bankrupt this week. The gadget retailer who gave us Razor Scooters, Ionic Breeze air purifiers, Nautilis home stomach-abdominal trainers and little gizmos like the TurboGroomer (a nose hair trimmer) had been losing money for three years and was involved in some expensive litigation on one of its core product lines. They gave up the fight this week with $250m in assets and $199m in debt.
Not a pretty picture. But the financials only tell a small part of the story.
You may have shopped at a Sharper Image. You may even own a few of its products (I do). If you have and you've been following a bit of what we've been writing about here, you'll probably say what I did ... "that was bound to happen at some point". Why? Because the store was chalk full of things that I have no earthly idea who they were designed for and what useful purpose they serve. Often I'd look at some of the products and after studying them to figure out what they did (some days I DO have patience), I'd say to myself, this one is for a market of one.
In fact they were.
Turns out founder Richard Thalheimer started the company to serve people like himself: men who like gadgets. Only the problem that seemed to develop is that the opinion of what gadgets were interesting enough and relevant enough to manufacture and distribute across their network of stores pretty much came from him. He decided on things he liked and then mass produced them.
Of course he had some successes along the way. You don't build this big of a company without being able to identify a hot market opportunity and exploit it with a product. But ultimately he and the company fell victim to the kind of inside-out thinking that often occurs when a company scales. The founder still operates they way they did in the early days but because they are spending less and less time on really studying market problems (the natural tendency toward management tasks as you scale almost always create this imbalance), they begin to trust their instincts and start making mistakes. Expensive mistakes that take longer to recognize and are much harder to fix once the operation has scaled. Thalheimer was replaced last year as CEO but it was probably too late to save the company.
When people have asked us how we were able to determine whether a company was tuned in or tuned out, we told them it was easier to discern than you would think. When you find a company that's spending time on the things that matter more to them than to their buyers, they're tuned out. It strikes us that Sharper Image must have suffered from exactly that issue. It's a very simple but hard premise that tuned in leaders follow:
Your opinion although interesting is irrelevant!
