Culture clash claims JB WOW factor

Australian retailers have a shining warning beacon about the risks involved in a merger of disparate corporate cultures. It was called Coles Myer. CML was a marriage that lasted twenty years, but was really never healthy.

While the rumoured takeover of JB Hi-Fi by Woolworths is not quite the marriage of equals that Coles and Myer attempted, it should ring alarm bells.

Recently we have a stunning result from JB Hi-Fi. It is the latest episode in a great story about a company that has bucked the retail trend and found ways to turn a profit in difficult times. The company lifted profit by more than 60 per cent, driven by a successful cost model and sales of flat screen televisions and video games in an environment where discretionary spending should be falling.
That success is a product of strategy and culture.

Woolworths is a highly controlled organisation. When faced with pretty much any contingency, a Woolworths manager can go into his or her office, take a manual off the shelf, and read how to handle the issue. The company is run by rules.

The governing culture was best evidenced when Woolworths recently sacked a manager for drinking two light beers with a colleague during a lunch break. The manager was trying to dissuade the colleague from resigning and was fired for breaching company policies. An organisation focussed on outcomes would have applauded the manager's attempts, while perhaps suggesting that he not come back to work after drinking. But Woolworths has rules, and woe betide any who bend them.

On the other hand, JB is one of the lowest cost consumer electronics retailers. Their cost model not only drives profit, but has customers convinced that JB is the place for a bargain, driving footfall and sales.

JB has grown from a standing start to become a two billion dollar business by focussing on outcomes rather than rules. The JB culture has played a big part in producing a great result. The company knows where it is going and retains the flexibility to respond to changing markets.

A union between JBH and WOW would involve a significant cultural shift for one of them, and it probably would not be the acquirer. If the culture of JB is subsumed by Woolworths, much that produced what we know of JBH will be lost.

Of the big retailers, the JBH culture is most closely aligned with Wesfarmers, not Woolworths. But as WES is still digesting the Coles acquisition, it is far from ready to take on a new retail business.

Rob Lake publishes Brandish - Retail Intelligence, a fortnightly newsletter about all things retail.