Today’s Chapter is based on the book “Good to Great to Gone: The 60 Year Rise and Fall of Circuit City” by Alan L. Wurtzel.
Alan Wurtzel is an American businessman best known for serving as CEO of Circuit City from 1972 to 1986, during which time he transformed the company into one of the best performing Fortune 500 companies over a 15-year period.
Here’s what I learned:
Customer Obsession
"Courteous treatment will make a customer a walking advertisement.”
— J.C. Penney
At the heart of Circuit City’s early success was its unwavering commitment to a customer-centric culture, a principle instilled by its founder, Samuel Wurtzel and carried forward by his son Alan Wurtzel. This culture was not just about selling products but about creating a positive, trustworthy experience for customers, which fostered loyalty and drove word-of-mouth marketing. The company’s “One Face Policy” emphasized honesty and fairness in dealings with customers, employees, and suppliers, creating a foundation of trust that differentiated Circuit City from competitors.
As a matter of fact, Alan Wurtzel explains that to his father Sam, the “One Face Policy” meant “fair and honest dealing with customers, employees, and suppliers. It meant telling the truth, even if it was not convenient. It meant telling suppliers, customers, and employees the same thing. Sam and Hecht believed that it was hard enough trying to keep your stories straight if they were true and impossible if there were different stories for different audiences.”
This policy was more than a slogan; it was a guiding philosophy that shaped every interaction. Sam Wurtzel believed that treating customers well, especially when things went wrong, could turn a negative experience into a positive one. For instance, the company’s approach to complaints was proactive and generous, viewing them as opportunities to build loyalty rather than mere problems to be resolved.
“If you go to a store and buy a shirt that shrinks in the wash, and they give you a new shirt or your money back, they have avoided making an enemy. If, however, in addition to replacing the defective shirt, they give you a tie, they have made a friend.”
— Sam Wurtzel
This mindset translated into practical policies, such as making follow-up calls to ensure customer satisfaction and offering gifts like steak knives or restaurant coupons to resolve issues. Sam Wurtzel believed that word of mouth was the best type of marketing and underscored the idea that a satisfied customer might tell a few people, but a dissatisfied one would tell many more, making exceptional service a strategic imperative.
Alan Wurtzel explains that “Sam believed in disproportional word of mouth. “If a customer was treated well,” he proclaimed, “he would tell two or three people, but if he felt mistreated, he would tell ten.” To avoid bad-mouthing was worth an extra effort and the expense of a gift.”
Later on, Alan Wurtzel implemented the 4-S Policy: Savings, Selection, Service, and Satisfaction in order to provide the best customer service possible. He mentions that: “Savings meant that if, within thirty days, you could find the same item at another store for less, we would refund the difference plus 10 percent of the difference. It was a convincing offer to back up our claim of low prices that we rarely had to make good on, and when we did, we did so cheerfully and at very low cost. Selection meant that compared to any competitor we had the largest selection in the product categories we carried. Customers in the Circuit City stores and the showroom were confronted by a thirty-or fifty-foot-long TV wall with 60 to 120 sets stacked four high and all tuned to the same channel. In the warehouse showroom we initially had refrigerators and freezers stacked on racks two high simply to make an impression. Service meant good service during the sale by a knowledgeable salesperson as well as service after the sale by capable technicians. Finally, we guaranteed Satisfaction, remembering that customers may not always be right, but a complaint is an opportunity to make a friend.”
“At no point did we put profits at the core of our philosophy. Rather, our mission was to give the consumer a better deal and still make money. To be successful, as we said on many occasions, ‘We need to buy it better, sell it better, deliver and service it better, and account for it better than our competitors.’ If we did all those things better, the profits would follow.”
— Alan Wurtzel
This reminds me of what we have learned from Jack Taylor of Enterprise who believed in exceeding customers’ expectations. This is because customers who are completely satisfied are 70 percent more likely to become repeat customers. Why are repeat business so valuable? The reason is simple; studies shows that it costs 5x or 6x more to gain a new customer compared to keeping a current one. Over the years, Enterprise’s management team believe that there are six reasons why people stop doing business:
1 percent die
3 percent move away
5 percent develop other relationships
9 percent leave for competitive reasons
14 percent are dissatisfied with the product
68 percent go elsewhere because of the poor way they were treated by employees of the company
Similarly, according to a survey done by Enterprise, 70 percent of those in the “completely satisfied” category were willing to use Enterprise again the next time they need to rent a car. However, only 22 percent of “satisfied” customers mentioned they would come back.
“Repeat customers are the quickest way to build a solid business.”
— Jack Taylor
It is fair to say that this philosophy of Enterprise of exceeding customers’ expectations in order to gain repeat customers is largely a differentiation between the company and their competitors. While others may be concerned about getting renters in and out of cars as soon as possible in order to increase their bottom line, Enterprise are much more committed in making sure customers have a good experience and will come back.
As Andy Taylor once said, "We derive our success from careful adherence to a common sense approach: We treat our customers well, we give our employees respect and opportunities to grow, and we know that if we stick to these two rules, profits and growth will naturally follow."
Peril of Complacency
“If things are not failing, you are not innovating enough.”
— Elon Musk
Circuit City’s rise was marked by its ability to adapt to emerging market trends, such as the television boom of the 1950s and the discount store revolution of the 1960s. As a matter of fact, the company was never complacent and their ability to reinvent itself in response to new competitive and technological realities is a big reason for its success. Strategic adaptability, knowing when and how to pivot the business model, is a critical lesson we can learn from Alan Wurtzel. As he once explained, “In the multi-decade life of any company, indeed any industry, there are turning points at which the company needs to be ‘reinvented’—moments when the business model needs to be revised to accommodate changes in the competitive landscape, including the economy, technology, customer preferences, and so forth.”
For example, Alan Wurtzel explains that Circuit City’s initial success came from his father Sam recognizing the potential of television and seizing the opportunity to become the first TV speciality retailer in the city. He mentions that “When Sam heard that the South’s first television station had recently opened in Richmond he was curious to learn more. Based on his instincts, he believed that the television business would thrive in the United States. Once he checked out the opportunity, he acted within weeks to become Richmond’s first TV specialty retailer, and he quickly learned what it took to operate a successful mom-and-pop TV and appliance business.”
Similarly, during the leadership of Alan Wurtzel, the company pivoted by adopting the warehouse showroom model in the 1970s, in response to suburban consumers seeking value and selection. In fact, Alan Wurtzel quickly understood that in order for Circuit City to thrive and survive, it was primordial for the company to adapt to the customers’ needs. He genuinely believes that Circuit City started its decline in the 1990s due to the rise of competitors like Best Buy but mainly due to the fact that the management team were not asking the right questions.
“And by focusing only on our competitors’ bottom lines, the plan failed to ask or answer several all-important questions about the world in which the company was operating: Who were the customers of the ‘90s? What type of shopping experience were they looking for? Why were Best Buy’s average store sales two or three times greater than those of Circuit City? What did this portend for the future? The concern was more about how we and our competitors looked to investors than about how we looked to our customers.”
— Alan Wurtzel
Wurtzel mentions that the lesson that can be learned from Circuit City is simple: during its peak, a company is the most vulnerable since success can sow the seeds of its own destruction. Once a company stops questioning and underestimates the ferocity of change and competition, it is not innovating. As such, he reminds us that “The world is constantly changing. Be open and curious and strive to learn from others. Continuously try to understand the market and the changing economic, demographic, and other relevant forces at work that impact your business. Study your competitors. They may have insights and practices worth emulating or refining."
Furthermore, he advises us to be humble and to run scared. He mentions to “Continuously doubt your understanding of things. Business success contains the seeds of its own destruction. Worry about what the competition knows that you do not. Andy Grove, the legendary cofounder of Intel, got it largely right in his book Only the Paranoid Survive.”
As we have previously learned, at the heart of Grove's philosophy is the idea that healthy paranoia is an essential quality for business success. As he once said, "I believe in the value of paranoia. Business success contains the seeds of its own destruction." This notion may sound extreme, but Grove's logic is hard to refute. In fast-moving, hyper competitive markets, complacency is the main reason for the downfall for even the largest companies.
This risk comes from the fact that when companies are doing well, the leadership teams can become complacent as they fail to recognize the warning signs that the industry is slowly changing beneath their feet. Grove saw this dynamic play out time and again, as once-dominant players in the tech sector found their fortunes suddenly in free fall.
Grove illustrates this point by recounting the experiences of his own company, Intel, as it navigated a strategic inflection point in the computer industry, where there are often changes to the rules of the game. He observes that "sometimes these rules change—often in very significant ways. Yet there is no flashing sign that heralds these rule changes. They creep up on you as they crept up on us, without warning."
His solution was to encourage a guardian attitude among his management team, where vigilance against potential threats was the default mindset.
"I believe that the prime responsibility of a manager is to guard constantly against other people's attacks and to inculcate this guardian attitude in the people under his or her management."
— Andy Grove
This is especially true considering middle management are often the first to sense the shifting winds of change. He explains that "middle managers—especially those who deal with the outside world, like people in sales—are often the first to realize that what worked before doesn't quite work anymore; that the rules are changing." Heeding the insights of these frontline employees can be instrumental in anticipating and adapting to the new realities of the market.
The lesson here is that business leaders cannot afford to be passive observers, waiting for the next crisis to emerge. Instead, they must be actively scanning the horizon, stress-testing their assumptions, and empowering their teams to voice concerns without fear of repercussion.
Built By The People
“My job is to serve and support the next layer “above” me so that the people on that layer can then serve and support the next layer “above” them, and so on. Ultimately, our cooks, servers, reservationists, coat checkers, and dishwashers are then in the best possible position to serve our guests.“
— Danny Meyer
Circuit City’s success was built on a foundation of employees who embodied the company’s values. Sam Wurtzel understood that in a competitive retail environment, where products were often identical to those of competitors, the quality of people was the key differentiator.
As a matter of fact, Wurtzel explains that “From the first day he opened the doors, Sam understood that management means getting results through the efforts of other people and that if he wanted to get the best from others he had to treat them with respect and provide an opportunity for them to advance. He believed that most people are inherently honest, willing to work, and want to be successful. All he had to do was give them the training and the opportunity to move ahead.”
“Building a company is all about hiring the right people.”
— Alan Wurtzel
Furthermore, Alan Wurtzel mentions that “There is no doubt in my mind that this [people] was the key to the company’s success. Like almost every retailer, Wards [predecessor of Circuit City] had no patents or trade secrets of any consequence. The TVs and refrigerators it sold were the same brands and models offered in a dozen or more stores in any city in which it operated. Therefore, Wards could succeed only if it bought the products better, advertised them better, sold them better, and delivered, serviced, and accounted for them better than the competition.”
As such, Alan Wurtzel mentioned that his father Sam understood that he needed highly motivated and better-trained employees to carry these functions. He also recognized that in order for the company to grow, Sam had to set a standard and he had to teach. Luckily, Alan explains that “Unlike most of his peers, Sam made systematic sales training the cornerstone of his business strategy. He was a born teacher and was able to dramatize the training with personal stories or examples that made the lessons both enjoyable and memorable.”
But more importantly, Sam Wurtzel created an environment where employees can have opportunities to grow and learn from mistakes. In fact, one of the basic philosophies at the company was that “if something goes wrong, the person who supervises must start off with the premise that the fault is his own. Something has gone wrong here. It’s my fault because I either didn’t provide adequate staff or enough income or adequate authority to do the job.”
“Sam believed that it was wrong to fire someone for making a mistake, even a big one. People needed to learn from their mistakes and not make the same mistake again. However, he believed that too much pressure not to make any mistakes would cause employees to not make decisions.”
— Alan Wurtzel
This reminds me of the importance of delegation and of training employees in order for them to be ready for leadership roles. One company that does these things well is Kiewit. In fact, Peter Kiewit encouraged his employees to train and mentor a successor. He once said, “Before you can go on to a position of greater responsibility, someone must be trained to do your job, unless the job you are doing is not an essential one. If any of you fellows wants to admit that your job is not essential, you do not need to do anything about trying to see that anyone else is trained for your job.”
Furthermore, as Kiewit has always been a company that focused on their employees, Peter Kiewit mentioned that people and their talents are the company’s most valuable asset. As such, he preferred to promote from within rather than hiring from outside of the organisation.
“In some organizations, top jobs are reserved for relatives. I would like to say again that this is not the case in our company. It has always been our policy, and will continue to be our policy, to promote on the basis of their ability to perform. It has also been our policy to fill vacancies by advancing qualified [employees] whenever possible. I'm happy to say that the number of occasions when we have had to bring [people] in from the outside for a particular job is negligible, and this should occur even less frequently in the future because of the fact that we are making headway in developing more and better [employees].”
— Peter Kiewit
Beyond the Book
Read "Andy Grove and the Value of Facing Reality" by Farnam Street
Listen to "Andy Grove: Only The Paranoid Survive [Outliers]" by the Knowledge Project
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