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38 THE PRACTICE OF INNOVATION

For almost twenty years after this episode, Macy’s New York con-
tinued to drift. Any number of explanations were given for Macy’s
inability to exploit its dominant position in the New York retail mar-
ket: the decay of the inner city, the poor economics of a store sup-
posedly “too big,” and many others. Actually, once a new manage-
ment came in after 1970, reversed the emphasis, and accepted the
contribution of appliances to sales, Macy’s—despite inner-city decay,
despite its high labor costs, and despite its enormous size—promptly
began to prosper again.
At the same time that Macy’s rejected the unexpected success,
another New York retail store, Bloomingdale’s, used the identical
unexpected success to propel itself into the number two spot in the
New York market. Bloomingdale’s, at best a weak number four, had
been even more of a fashion store than Macy’s. But when appliance
sales began to climb in the early 1950s, Bloomingdale’s ran with the
opportunity. It realized that something unexpected was happening
and analyzed it. It then built a new position in the marketplace around
its Housewares Department. It also refocused its fashion and apparel
sales to reach a new customer: the customer of whose emergence the
explosion in appliance sales was only a symptom. Macy’s is still
number one in New York in volume. But Bloomingdale’s has become
the “smart New York store.” And the stores that were the contenders
for this title thirty years ago—the stores that were then strong num-
ber twos, the fashion leaders of 1950 such as Best—have disappeared
(for additional examples, see Chapter 15).
The Macy’s story will be called extreme. But the only uncommon
aspect about it is that the chairman was aware of what he was doing.
Though not conscious of their folly, far too many managements act
the way Macy’s did. It is never easy for a management to accept the
unexpected success. It takes determination, specific policies, a will-
ingness to look at reality, and the humility to say, “We were wrong!”
One reason why it is difficult for management to accept unexpect-
ed success is that all of us tend to believe that anything that has lasted
a fair amount of time must be “normal” and go on “forever.” Anything
that contradicts what we have come to consider a law of nature is then
rejected as unsound, unhealthy, and obviously abnormal.
This explains, for instance, why one of the major U.S. steel compa-
nies, around 1970, rejected the “mini-mill.”* Management knew that

*On the “mini-mill,” see Chapter 4