What can you learn from #DickSmith’s time bomb?

If you are an Australian business owner or executive, you know what it’s like to stay awake at night worrying about your competitors. And today you would be right to be wincing about the administrator’s findings within the report into the Dick Smith collapse.

I know I am.

The forensic look inside the Dick Smith collapse by administrator McGrathNicol while disturbing, is essential reading for any Australian business owner.

This report reflects back to us what appears to be a lack of core values within a business that touched our daily lives. It impacts us deeply to learn that as either shareholders, customers or suppliers we were possibly mislead or in the case of the business media, we just didn’t see the reality for the camouflage.

Despite the overwhelm of business content available to the media, many editors, of which I am one, missed the vital signs of a business power outage. I experienced this despite regular contact with former Dick Smith CEO, Nick Abboud during the last six months of the life of that retail business.

During my recent role of editorial consultant on the appliance industry magazine Appliance Retailer, I was re-engineering the print and digital platform for its owner. My job also involved rebuilding relationships with retailers such as Dick Smith, Harvey Norman, JB Hi-Fi, Bing Lee and many others which had, for one reason or another, gone astray. Not an easy task.

The consumer electronics industry has traditionally been a tight one, where it can take years for manufacturing executives from outside the industry to be accepted by retail heavyweights.

This means that long-term executives regularly move within the industry from post to post. This lack of fresh blood has contributed to making the critical supplier/retailer relationship fragile and dependent. This symbiosis can be deadly for retailers who, focusing too intently on the daily bottom line, don’t see the dysfunctional practices spreading throughout their business until it is too late.

Many of these young executives on the move within their careers (which usually involves regular business class business trips around the world) take well honed but flawed business practices, into their next roles. In good times these behaviours don’t pose a problem. In fact, they can (falsely) be perceived as the “glue” which can hold a vital retail account together. However in disruptive, uncertain periods such as those faced by the consumer electronics industry since 2012, these can turn toxic.

The demise of the once mighty Australasian Retravision chain was an example of this (but that’s for another post).

So, in 2012 we saw the appointment of retail industry executive, Nick Abboud to run Dick Smith. This followed the acquisition of the business from private equity firm Anchorage Capital, from Woolworths Ltd for $94 million.

Abboud was young, charismatic and quintessential example of an executive who had been successful in the boom years of Australian retail. He had worked his way up the ranks at Myer from the shop floor, eventually serving as an executive general manager of stores and director of national store operations.

In these positions, Abboud had nurtured close relationships with global suppliers. Some of these distributors we now know were now operating on the fringe of the technology industry and, given the speed of technology growth and the pressure to deliver profits, would have been struggling to develop and navigate paths of ethical business practices.

Anchorage had also named Rob Murray as chairman. At the time Murray was CEO of Lion, and had no direct experience of working within the Australian consumer electronics industry. Nevertheless, we were to quickly learn that Anchorage, Murray and Abboud had big plans for the Dick Smith brand within the now highly volatile Australian retail market.

Tomorrow, I will reveal what Nick Abboud told me in August 2015 that made me concerned about the viability of Dick Smith.

Claire Moffat has reported on the consumer electronics industry for 20 years and pioneered the disruptive B2B online channel ConnectedAustralia. Today she advises executives on the power of social media to transform their business at www.themicrocelebriti.com.au.

Claire Moffat

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