Business Model Dead
After 19 years Dick Smith has announced the closure of his Eponymous food brand. Mr Smith is quoted as saying in AFR (27/7/18) “this is terrible on a personal level….I’ve failed, I’ve failed” as he held back tears. Why? His business model is broken and in fact had been for a long, long time. He had just failed to realise it. Dick seems to have blamed everyone else accept himself. Apparently it’s all Aldi’s fault and in particular the reclusive children of the founder Karl Albrecht , Karl Jr & Beatie . Mr Smith accuses them, in an open letter to the CEO of Coles, Woolworths and Metcash, of “extreme capitalism”. He actually encourages Coles & Woolworths to move towards the Aldi system if they want to remain competitive. This would be a disaster for them! Why did Dick Smith Foods fail? Fundamentally they did not have clarity around their value proposition and the market segments they were targeting. It relied on vague and ambiguous notions of national pride. On the other hand Aldi leverage their Germanic heritage of engineering precision in the articulation and execution of their business model. Extreme capitalism Mr Smith, I would say smart capitalism!
Exhibit A in Mr Smiths Prosecution
Please note one is a food brand and the other a supermarket chain.