The rise and fall of the T. Eaton Company of Canada: lasting lessons on leadership and strategy.(management research)(Statistical Data Included)

Executive Summary

The success of individual firms in similar industries varies greatly. Two factors appear to be central to explanations of such firm-level differences in performance--leadership and strategy. Much can be learned about leadership and strategy by studying rich case examples of success and failure. This article profiles one such example, the T. Eaton Company of Canada. Eaton's was founded in 1869 and rose to prominence as Canada's greatest retail store. Some 130 years later Eaton's was reduced to bankruptcy leaving Canada bereft: of an icon. The lessons in leadership and strategy that contributed to Eaton's stunning early success and eventual demise are outlined.

"The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather in a lack of will." (Vince Lombardi)

It has been generally recognized that an individual firm can perform much better, or worse, than other firms in the same industry (e.g., Ghemawat, 1999, McGahan & Porter, 1997, Rumelt 1991). For example, small Nucor continued to perform well at a time when other firms in the United States steel industry performed poorly (Mintzberg, Ahlstrand, and Lampel, 1998; McNish, 1999).

How a firm can do well while others in the same industry do poorly, or outright fail, remains unexplained by findings that some firms are stronger than others. For example, a firm that has done well does not always continue to do so. Sears Roebuck enjoyed outstanding results in some periods and disappointing performance in other periods, and the T. Eaton Company of Canada performed exceedingly well when most other firms in Canada's retail industry performed miserably--only to fail when other retailers did well overall. The question is, why?

Two concepts are considered robust enough to capture reasons for such firm-level differences in performance: leadership and strategy. Hackman and Johnson (1996) write about the importance of leadership:

We all have a personal stake in the success of leadership. Even if we never personally seek to be leaders, our lives will be affected by those acting in leadership roles. Followers prosper under effective leaders and suffer under ineffective leaders whatever the context (p.4).