Walmart and the Psychology of Disruption

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Retail giant Walmart recently announced the $3 billion acquisition of Jet, an online grocery start-up in the US with less than $1 billion of gross sales. The move is Walmart’s latest attempt to keep up with Amazon, which it has belatedly recognised is a disruptive threat to its core grocery business. The high-risk play, one of several large e-commerce investments by Walmart, reflects its urgent need to seriously compete with Amazon after ignoring the threat from online grocery shopping for several years.

The ongoing disruption of store retail by online shopping is usually viewed as a business challenge and analysed using frameworks from business literature, such as Clayton Christensen’s theory of disruptive innovation. I recently read Carol Dweck’s classic book Mindset: The New Psychology of Success. It led me to reflect that the different approaches to online retail over the past 25 years also reflect our psychological mindsets.

Dweck, a Stanford University psychologist, revealed two underlying mindsets in her research that describe how we, as individuals and groups, look at the possibility of achievement and success. She argues that people fall into either a “fixed” or a “growth” mindset. I see a clear application of Dweck’s psychological mindsets to the recent history of retail and online.

Individuals and groups with a fixed mindset treat the world and our individual capabilities as fixed traits, with little potential for growth or development beyond a given level of innate ability. Contrasting this are those who possess a growth mindset and see human abilities as flexible and improvable through dedication and hard work.

The theory of fixed and growth mindsets captures well the different perspectives we have seen among retailers towards online shopping. Some have consistently looked for opportunities to improve and adapt their models to a different future, demonstrating a clear growth mindset. Their attitude goes along these lines: “Home delivery looks like it would be great for our customers; let’s see if we can find a way to make it work and make money.”

Retailers with a fixed mindset, on the other hand, focus more narrowly on the situation right now. The attention of this group has been on the low profitability historically seen in online shopping and the many inconveniences for customers in the online operations of today. They extrapolate that this will always be the case and this leads them to refrain from boldly attacking the opportunity. Walmart was a retailer that for many years had a fixed mindset towards online retail, only realising its potential when new entrants such as Amazon had made responding to the new reality unavoidable.

The problem with a fixed mindset is that it inherently limits innovation and experimentation, which is exactly what is needed in an environment undergoing disruption.

Walmart must now be wishing its leaders had operated from a growth mindset in the early days of Amazon. The CEOs and executive teams of all retailers would do well to hold the mirror up and ask whether they are truly operating from a growth or a fixed mindset.