How Circuit City Lost Its Way

(MoneyWatch)  Having just finished writing a lengthy story about almost-bust, electronics mass retailer Circuit City for a weekly newspaper, I keep wondering about the value of business books.

The one I have in mind is the 2001 work "Good to Great" by business author Jim Collins who studied hundreds of companies before settling on 11 that were able to make the difficult step from "good" to "great." Besides Circuit City, the list included Abbott Laboratories, Altria Group, Kimberly Clark, Pitney-Bowes, Gillette, Fannie Mae, Nucor, Kroger, Wells Fargo and Wal-Green.

Circuit City went into Chapter 11 earlier this month after years of trying to make a comeback. After talking with the son of the founder of Circuit City and long-time CEO, plus a number of others (current management wouldn't talk), I came up with a series of stumbles, some of which dated well into the 1990s before Collins published his book.

These include entering into expensive real estate deals, putting stores in the wrong places and forgetting core values of being the low price seller. The firm laid off its experienced sales staff and then laid off a good chunk of its higher-paid but less experienced sales staff, leaving Circuit City with its lowest paid , least experienced sales staff, not to mention a raft of frustrated customers.

Perhaps the biggest single failing was that in the early 1990s Circuit City came up with a brilliant idea to sell used cars -- CarMax. But the CEO at the time paid too much attention to sexy CarMax. When it was spun off in 2002, he left with it, taking with him some of the most talented Circuit City managers.

Looking backwards, Collins included Circuit City in his gushy book. To him, the firm was a stunning example of remarkable returns that allowed it to make the jump from being merely "good" to "great." Collins wrote: 'From 1982 to 1999, Circuit City generated cumulative stock returns 22 times better than the market, handily beating Itel, Wal-Mart, GE (General Electric), Hewlett-Packard and Coca-Cola."
Indeed, of the list of 11, not many are still "great." Fannie Mae is in such deep doo-doo that it is being rescued by the federal government. Some of the rest like Gillette have been picked off by consistent monster players such as Procter & Gamble (not on Collins' list) and some have simply languished.

I realize that Collins' work, like many business writers, examines historical performance. Criticizing him for what happens seven years after his work comes out may not be fair.

Or is it? Even before his work when to the publishers there were clear signs that Circuit City was heading for the waterfalls. Too bad, he couldn't flag them.

But then, what sells in the business book business are "success" stories told in simple, masculine, sports-writing terms. Or, they are "cult of personality" propaganda tomes not unlike the many written about the eternally wonderful Jack Welch. Serious, nuanced business books need not apply.

This post first appeared on BNET's The Corner Office blog.