Why Rite Aid, Moderna, WPP and Starbucks are Flailing
Feedback loops are a bitch.
Less than a year after completing a restructuring that was supposed to turn the troubled pharmacy chain around, Rite Aid Corp. announced yesterday that it has filed for bankruptcy. Again.
The company was unable to secure additional capital from lenders in order to continue operating the business, Chief Executive Officer Matthew Schroeder said in a letter to employees. And in a brief address Monday, Schroeder told employees that all Rite Aid stores would either be closed or sold.
From its press release packaging the garage sale, one that will now liquidate its entire footprint and see the end of a 60-year-old brand:
Matt Schroeder, Chief Executive Officer of Rite Aid, said, “For more than 60 years, Rite Aid has been a proud provider of pharmacy services and products to our loyal customers. While we have continued to face financial challenges, intensified by the rapidly evolving retail and healthcare landscapes in which we operate, we are encouraged by meaningful interest from a number of potential national and regional strategic acquirors. As we move forward, our key priorities are ensuring uninterrupted pharmacy services for our customers and preserving jobs for as many associates as possible.”
Rite Aid operated more than 2,000 locations and had about 47,000 employees at the time of its first bankruptcy filing in October 2023. After shutting down many of its locations, Rite Aid emerged from chapter 11 last year with roughly 1,300 stores, saying at the time that it had become a stronger company with “significantly less debt and additional financial resources.”.
Over at Moderna, its stock crumbling as the ‘system of markets’ currently locked in orbit around the word “vaccine” evaporates (retail pharmacies, including Rite Aid, are part of that system, as immunizations are/were once seen as one the biggest growth area for pharmacies), the company is “starting to sweat” at the vaccine climate at the new FDA. It also missed (again) on its Q1 revenue expectations, and has (another) set of plans for $1.5B in cuts.
Facing a “challenging macro environment” problem, strategically-collapsing WPP said yesterday that it’s planning to rebrand GroupM as WPP Media, eradicating a 20-year-old name for a company that long held sway as the world’s biggest media agency network. WPP, once the world's largest advertising and marketing services network, has seen its stock price plummet over the past three years from continuous earnings misses and flat-to-zero guidance, which are signals from something bigger: WPP’s inability to respond to customer/prospect/market demand for a radical change in pitch behavior.
"I think the phrase is ‘radical evolution’," WPP Chief Executive Mark Read said in an interview with Campaign. "We need to move with pace and determination, but not break what we have. The industry overall is growing and we need to grow at or above our peers. You’ll see the evidence over the next few quarters."
That was in 2018.
Feeling Shell-Shocked
“We’re all feeling a little shell-shocked in this part of the world,” Arindam Sandilya, a Singapore-based global FX strategist at JPMorgan Chase & Co., said on a podcast yesterday. He was describing the recent moves in Asian currencies, (Dollar’s Fall in Asia Stuns Investors, Spreads Across Globe), but “the large and synchronized nature” he was describing in the US dollar’s weakening against most major currencies is part of a bigger theme.
Everyone is sitting astride a stark rupture in the historical timeline.
Writes Davide Ritorto in Open Road Ventures, his Substack exploring the boundaries of innovation, this morning (How to Innovate When Nothing is Defensible Anymore):
Scarcity, differentiation, propriety technology: these used to offer protection. Today, they’re hyper-commoditized. AI can reproduce your UX. Startups can replicate your model in weeks. The copy tone you had a “creative” agency craft for your brand? A prompt away from being replicated. The interface you designed this quarter? It’s next month’s Figma template. The sleek funnel you optimized? Already reverse-engineered and commoditized by five competitors. Even your “strategy” feels like a downloadable template.”
Defensibility hasn’t just eroded. It has evaporated. Weak moats are easy to cross by a million barbarians at the gate. All technology-led visions are the short road to parity, at all levels, in all contexts, in all markets, in all industries. Leaders struggle at the narrative layer.
Which is why WPP’s $300 million bet on AI will do little to allow it to compete differently against similarly resourced and AI-enabled Omnicom-IPG, why mRNA-enabled Moderna is lost at the fair, why Rite Aid (and Walgreens) are now extinct.
All technology-led visions are the short road to parity, at all levels, in all contexts, in all markets, in all industries. To wit, via this aggregation of insight from Semafor:
China is increasingly narrowing the gap with — or even surpassing — the US in the tech race, analysts said. Chinese AI models are close behind their American counterparts, Chinese retail and social media apps are popular globally, and Beijing is embracing electric vehicles and humanoids: China “has gone from a ‘copycat nation’ to a juggernaut with world-class products,” Google’s former CEO and a tech analyst wrote in The New York Times. US export controls to rein in China’s AI progress have only fueled its domestic ambitions: Huawei is rapidly expanding its semiconductor facilities, the FT reported. A new US study attributed Beijing’s success in closing the gap with Washington to “unprecedented state funding” through its decade-old “Made in China” policy.
Brand collapse is a slow burn, gradually then suddenly.
The same biological forces that brought around the end of Walgreens after 100 years as a brand, Rite Aid after 60 years, and Group M after 20 years are the same ‘new rules of competition’ that are creating the conditions for the collapse of Brand Starbucks after more than 50 years.
Everyone is trying to squeeze more life from the storylines of the past, swimming against the tides, wondering why we make no progress, why our leaders (and their results) continue to disappoint, entire brands, businesses and markets ‘kinetically trapped’ by the dynamics of destruction, stuck circling the drain, arguing about “heritage” instead of facing reality: complex systems disintegrate, often quickly (for more Blue Spoon thinking on this, see How to Save UnitedHealthcare from Strategic Collapse).
This week, Canada’s Liberal Party won a remarkable victory in the country’s national elections. The leader of the Conservatives, Pierre Poilievre, lost in part because of his association with U.S. President Donald Trump, who has antagonized many Canadians with his introduction of tariffs and attacks on democracy. Meanwhile, Mark Carney, the election’s victor, campaigned on the idea that Canada should not only stand up to the United States but also stand in for Washington on the international stage. “If the United States no longer wants to lead,” he said, “Canada will.”
The idea that traditional U.S. allies could fill the void left by the United States was raised during Trump’s first term, too. In a 2018 essay in Foreign Affairs, Ivo Daalder and James Lindsay lamented the fact that Trump was abandoning the international order that Washington had painstakingly created over 70 years.
The authors called on Australia, Canada, France, Germany, Italy, Japan, South Korea, the United Kingdom, and the EU to form the “G-9,” a group dedicated to maintaining global rules “based on collective security, open markets, and democracy.”
The countries included would have to learn how to work without the United States —“and, if necessary, around it” — to “supply the leadership that the Trump administration will not.”
Everyone is vulnerable, including Brand America as a leader of the free world.
The Next Competitive Layer
Today, most markets are saturated. Interfaces are intuitive. Deliveries are fast. Features are polished. In this context, performance alone — i.e., technical potential — doesn’t differentiate. Urban light is now so cheap and so abundant that many consider it to be a pollutant. The same could be said about AI. If anything, technology is more irrelevant than ever.
The next competitive layer is interpretation — how can you help people make sense of what you do and why you exist. It’s about an intentional process for sense-making and storytelling centered on creating and leading innovation of meaning with entirely new industry narratives, completely different storylines of value. (For more Blue Spoon thinking on this, see Why the Pharmaceutical Industry Needs to Think Like Quentin Tarantino).
Rather than solving existing problems more efficiently, ‘modern strategy’ is about reframing the problem itself, and proposing new interpretations of what product or serve represents in people’s lives.
Starbucks faces challenges in reviving its business, CEO Brian Niccol said on his earnings call last week, after posting disappointing sales (again); they have fallen for four straight quarters.
“Our financial results don’t yet reflect our progress, but we have real momentum with our ‘Back to Starbucks’ plan,” CEO Brian Niccol said in a video posted on the company’s website. “We’re testing and learning at speed and we’re seeing changes in our coffeehouses.”
My optimism has turned into confidence that our Back to Starbucks plan is the right strategy to turn the business around and to unlock opportunities ahead. We're relentlessly focused on the customer and we're continuing to invest in a green apron service model that enables throughput and connection with our customers. We're also re-establishing our coffee houses as a third place where customers spend time and build community.
Looking ahead, Starbucks plans to improve its cafes with better seating and “premium touches” in the hopes of enticing customers to linger, according to Niccol. That also includes plans to overhaul its innovation process.
And Starbucks is planning on getting into healthcare some time in 2025 — “We're exploring how to lead in health and wellness with a new platform that resonates across demographics, which we expect to launch later this year, and we're looking at new beverages that create an entry point to our craft coffee and drink experiences” — which only proves the general point: healthcare is the economy, not something statistically separate from it (Starbucks-as-healthcare brand feels the same to me as Goldman Sachs-as-consumer brand: a bridge too far).
“If you take away anything from today's call, let it be this. We are putting the customer back at the center of all we do, we're setting our green apron partners up for success with the best job in retail, we've got the right team in place to lead, we're confident we have the right strategy and are making the right investments to unlock opportunities ahead, and we see evidence of progress from the work we're testing and scaling, which we believe will lead to improvements in our financial results.”
I wouldn’t bet on the smiley face.
The resolution of a runaway process often happens outside the process.
This is why you can’t “fix” an embedded economic system — like the $5 trillion system of markets roughly defined as "healthcare", or the $17 trillion system of markets roughly defined as "oil and gas exploration", or the $29 trillion system of markets roughly defined as "the economy" in the United States — in a way that is anything beyond an operational tweak at the edges, a technical input or automation here or there to “optimize” the current operating model, the same one that’s been operating the same way for years, if not decades.
The capacity to ‘see, say, sell and sustain’ with system vision is a rich vein to mine for originality. No magic wands, hyperspace missions, moonshots to save humanity from itself, generative AI capabilities from technology vendors promoting access to galaxies far, far away. Just a different brand of imagination, the kind with the power to punch through and persuade.
Narrative Matters
The era of linear solutioning is over.
And while avoiding ambiguity and shying away from complexity is understandable, pretending it doesn’t exist is foolish at best and fantasy at worst. It’s time to break the Standard Model of inaction, the place where too many pilots die because they test utilitywithout validating relevance.
It all starts with a brick through the window of convention and cliché.
Ritorto again:
Instead of asking “Does it work?”, companies should ask “What does this mean in our context, and to our users?”
Use co-creation sessions with users to explore alternate interpretations of existing trends. Frame pilots around provocations, not just features. Ask: What tension does this touch? What narrative does this unlock?
Moderna and Starbucks and the United States all have the same Big Innovation problem that bedeviled Rite Aid and Walgreens, and will bring about if not the end of WPP as a brand, then certainly the tenure of its current leadership team: strategic collapse is coming. It is inflaming itself with its own sparks, breeding upon itself more wildness than is beyond the Standard Model of thought to control, much less understand, to say nothing of managing in a way that delivers and sustains “a strategic and value-maximizing process” (quoting Rite Aid’s press release yesterday).
It’s how The System works.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry ecosystems.