How SAM WALMART ruled

How did Sam Walton, the founder of Wal-Mart, overtake retailing behemoths like Kmart, Sears, Woolworths, Service Merchandise and Montgomery Ward?

I think Sam Walton's competitors and his early suppliers underestimated his passion and commitment for his rural retailing discounting strategy. Because Sam Walton started his business by focusing on the underserved customers in rural America he "flew below the competitive radar". Kmart, Sears, Woolworths, Service Merchandise and Montgomery Ward all opened stores in metropolitan areas while Sam Walton challenged the status quo by opening big stores in small towns. It was a commonly held belief at that time that there wasn't enough business in small towns to justify opening "big box" stores. As it turned out the market area for his stores drew customers from a 50 mile radius. That's how attractive his low price strategy was in small town America. Sam Walton intentionally presented himself to the retail world as a small time operator lulling his larger competitors into a false sense of security. As it turns out in the early days his competitors didn't take him seriously. By the time his competitors figured out Wal-Mart was a real competitor it was too late. Sam Walton had already established his Every Day Low Prices (EDLP) Strategy in his rural stores in the southern USA, and by the time he embarked on opening stores in metropolitan areas he had the financial wherewithal to compete very effectively. Sam Walton's focus on low prices, exceeding customer expectations and fanatical focus on controlling expenses allowed him to steal market share from his larger competitors who were slow to change. By the time they figured out that Sam Walton had shifted the traditional retail paradigm his competitors were unable to adapt.

Sam Walton reportedly followed a set of rules to which he has credited his success. What are his 10 rules? Sam Walton credited his "10 Rules" as the secret behind his success in business and in life. Here is the list:


Rule #1:
COMMIT to achieving success and always be passionate

Rule #2:
SHARE your success with those who have helped you

Rule #3:
MOTIVATE yourself and others to achieve your dreams

Rule #4:
COMMUNICATE with people and show you care

Rule #5:
APPRECIATE and recognise people for their effort and results

Rule #6:
CELEBRATE your own and other's accomplishments

Rule #7:
LISTEN to others and learn from their ideas

Rule #8:
EXCEED the expectations of others by setting high standards

Rule #9:
CONTROL your expenses and save your way to prosperity

Rule #10:
SWIM UPSTREAM, be different, and challenge the status quo

As you look closely at his 10 Rules you will see that one of his rules is about commitment as a leader, one is about serving customers, one is about controlling expenses, one is about risk-taking and six are about how to treat people.

Given Sam Walton's regard for his people, this must have had strong implications on your role as Director of People at Wal-Mart's corporate HQ. How did Sam Walton's leadership guide you personally during your tenure with the company?

Sam Walton's high regard for people put a great deal of additional pressure on my role as Director of People. At Wal-Mart Sam Walton called his Human Resources department the "People Division." In actuality, Mr Sam (we all called him Mr Sam out of respect) felt that "managing human resources" was the responsibility of every manager and supervisor in the company. He told me that he wouldn't need a "People Division" if the management team would use "golden rule" values by always treating the employees as business partners or "associates." To this day Wal-Mart leaders refer their employees as associates. While I was there Sam Walton focused the People Division on staffing, training and associate relations. Because he held people in such high regard it placed a great deal of pressure on everyone in the People Division to live up to his expectations. We focused on three areas: Hiring the best, providing the best training and being the best place to work. The cultural mantra at Wal-Mart: "Our People Make the Difference." This saying was emblazoned across the sides of trucks and posted in the break rooms in the distribution centers and stores. Mr. Sam once said, "If you take care of the associates (employees), the associates (employees) will take care of the customers and the business will take care of itself."

Are the challenges that Wal-Mart faces today similar to those you faced when you were Director of People there?

In terms of the sheer size of the company its executives face daunting challenges never faced by a leadership team before. In terms of people and serving customers the challenges remain the same. Wal-Mart teaches its leadership team to simplify everything they do. They are taught to think about one store at a time, one department at a

time and one customer at a time, otherwise the tasks at hand are overwhelming. The key to the Wal-Mart strategy then and now is "simplification." Its leaders are taught to simplify everything they do with its strategy, "Think Small, Start Small and Scale Up." The difference in approach is in keeping with Sam Walton's rule about "swimming upstream" by challenging the approach company leaders take to solve problems. He used to tell us, "If everyone else in business is doing it this way why don't we try doing it the opposite way!" He believed by taking this approach you were likely to find the sustainable competitive advantage.

The world is a very different place today from when Sam Walton came up with these rules. How applicable are they still?

A company could follow all these rules but still not be as successful as Wal-Mart. In fact, we haven't seen another Wal-Mart. What could be the missing ingredients? Rob Walton, who is the chairman of the board and the son of Sam Walton, wrote the foreword for my book: The 10 Rules of Sam Walton. He stated, "As large as Wal-Mart has become, we still find ourselves referring to Dad's 'Rules for a Successful Business,' embodied in this book." The 10 Rules are timeless because they are, for the most part, simple commonsense notions. Sam Walton would be the first to tell you that simple ideas have the best chance of being understood, followed and executed. That's the beauty of the simplicity of his rules. Sam Walton's goal was to make Wal-Mart the best retailer around not the biggest. His idea of success was providing the right products at the lowest price and providing great service. If the leaders at other companies are willing to focus on running an excellent operation, treating their people right and serving their customers they can be just as successful. I know that to be truly successful in any endeavour requires personal commitment on the part of the leader, commitment on the part of the followers and a belief in a dream. The 10 rules are a blueprint for success, which catapulted Sam Walton from a single store owner in the Ozark Mountains of Arkansas to become the most successful merchant in the history of the world. Will any other company or individual business leader achieve what Sam Walton has achieved? If an ordinary man like Sam Walton can achieve the extraordinary, it is possible someone else can too.


Michael Bergdahl is an international speaker, author and business coach. He was Director of People for Wal-Mart's headquarters in Bentonville, Arkansas, where he worked directly with Sam Walton.