Sears was America's largest retailer. In the early 1980s, while their retail operations were already struggling, management made what seemed like a smart move. They diversified into financial services.
Between 1981 and 1992, they acquired Dean Witter stockbrokerage, Coldwell Banker real estate, Allstate Insurance, launched the Discover card, and created "Sears Financial Centers" combining all services in 312 stores. The thinking was clear, spread risk, create new revenue streams, save the company.
Here's what actually happened. During the diversification era, retail operations performed 49% worse than the industry median.¹ Management attention shifted to financial services while retail fell off. On October 15, 2018, Sears filed Chapter 11 bankruptcy with $11.3 billion in liabilities.²
The pattern? A struggling core business tries to rescue itself by adding services. The result? Accelerated decline.
I've talked to many laundromat owners/operators who are following a very similar playbook to Sears. Self-service revenue is either dropping or not high enough, so they consider adding these other services or they've already added them in hopes of improving their revenue. Then maybe they get some revenue from one, and then they hear someone else or they go to an industry event or they see something online, and it's like "Maybe I should add another line now to bring in even more revenue." Basically, looking for that silver bullet.
Each addition feels like progress. Each one accelerates the fall.
The Innovation Fulcrum
Bain & Company's research identified something they call the innovation fulcrum.³ It's the invisible point where adding one more offering destroys more value than it creates.
The concept emerged from studying why nearly 70% of executives admit excessive complexity raises costs and hurts profits, yet companies keep adding products and services anyway.⁴ Traditional accounting systems don't capture the full costs of complexity, so decision makers remain blind to the damage until it's too late.
Here's what the research found. Companies that identify their fulcrum and simplify achieve cost reductions up to 35% and sales increases up to 40%.⁵ But most businesses tip the scales toward too much innovation because the costs are hidden.
Complexity doesn't show up as a line item on your P&L. It spreads throughout your operation like a virus. Product complexity creates manufacturing headaches, which causes difficulties for your supply chain, which makes it harder to project your business and finances in the future, which causes organizational bottlenecks, which requires more systems, which causes more distribution headaches.
Each new service is the source where complexity begins. Then it spreads outward, multiplying geometrically rather than linearly.
Sony learned this with PlayStation 3. They added excessive technical features, manufacturing each console for $805.85 while selling it for $499. That's a $307 loss per unit.⁶ The division reported a $1.91 billion operating loss that fiscal year, with cumulative hardware losses reaching $3.3 billion.⁷
For a laundromat, adding PUD (pick up and delivery) when your washers sit idle represents the same miscalculation. You're throwing resources at new complexity while your core operation hemorrhages cash.
Why Smart People Keep Adding
If the math is this clear, why do experienced operators keep adding services to struggling businesses?
The psychology speaks for itself. Sunk cost fallacy kicks in first. For people who don't know, sunk cost fallacy is when you've already invested so much in something that you can't walk away even when it's not working. You've invested years and significant capital in your laundromat. Admitting that the self-service is failing, because self-service is the core business of the laundromat, feels like accepting total loss. Rather than cut losses, you add services thinking "I've invested too much to quit now."⁸
Optimism bias makes it even worse. Research shows entrepreneurs systematically underestimate task difficulty while overestimating success chances.⁹ You believe "this new service will turn things around" despite contrary evidence. You focus on rare success stories while ignoring high failure rates. Here's the thing, there isn't enough discussion in our industry about what fails. We're only highlighting people who are successful when we go to events, conferences, YouTube videos, blogs. Very few talk about the failures. Trust me they are out there.
Then there's action bias. When business declines, the pressure to "do something,anything" becomes overwhelming.¹⁰ Adding services is visible action that appears strategic. Cutting services feels passive, like giving up.
These biases cascade together. You recognize decline, optimism whispers "I can turn this around," sunk cost reminds "I've invested too much to quit," action bias demands "do something now." Adding services appears to satisfy all these needs simultaneously.
Meanwhile, the complexity quietly multiplies. Each service requires different equipment, supplies, training, and management attention. Your best team members get pulled from self-service to handle new offerings. Quality falls as focus gets fragmented.
The Restaurant Mirror
The restaurant industry provides the clearest parallel. Industry research recommends about 7 items per menu section, totaling 20-30 items for casual dining.¹¹ Customers spend only 109 seconds scanning a menu before deciding, and 76% of diners have no problem with reduced offerings.¹²
Large menus create longer wait times as kitchen staff prepare diverse dishes simultaneously. Chef Guy Vaknin explains, "What often happens is that the quality of food suffers. It's hard to perfect a certain set of dishes in a restaurant environment."¹³
The inventory nightmare parallels laundromat service bloat precisely. The restaurant industry loses $162 billion annually due to food waste, much from ingredients spoiling before use.¹⁴ Studies showed restaurants achieved 57% food waste reduction by narrowing menu design.¹⁵
For laundromats, substitute ingredients with wash and fold or PUD. You need the supplies for wash and fold, the labor for it, then pickup and delivery vehicle costs, etc. That's the parallel to the restaurant.
The Cheesecake Factory stands as both cautionary tale and exception that proves the rule. With 250 menu items requiring 700 ingredients, CEO David Overton admits, "I probably should have kept the menu slimmer. If I knew then what I know today..."¹⁶ This model ONLY works because they're a large chain with massive capital and high volume to justify complexity. It's not replicable for smaller operations.
Chipotle took the opposite approach. They refused to add "low risk, high-profit items" and kept the menu to fewer than 50 words.¹⁷ The result? 10.9% comparable store sales growth and 4% traffic increase despite 10% higher prices.¹⁸ Strategic simplicity enabled operational excellence.
The COVID era forced experiment proved the concept at scale. Over 60% of restaurateurs planned to keep smaller menus post pandemic, citing less waste, lower costs, faster preparation, improved quality control, and higher customer satisfaction despite fewer choices.¹⁹
Looking at Your Numbers Differently
Diagnosing this in your business isn't complicated, but you have to be honest with yourself.
Calculate the profit margin for each service independently. Not just revenue. Actual profit after allocating for all your costs to do that particular service. Examples: supplies, additional labor hours, training, quality control, customer service, etc.
If you can't figure it out exactly, get as close as you can. At least you'll have a starting point.
You might be looking at your business in totality and thinking "we're making money overall." But when you break it down by service line, you could discover one or two are losing money without you knowing it.
What's the profit margin on self-service? What's the margin on wash-and-fold drop-off? What about pickup and delivery? Dry cleaning? Products sold over the counter?
Research shows a pattern emerges, 20% of offerings generate 80% of profits. When this ratio deteriorates, particularly when 40% of products account for only 10% of revenues, you've entered the danger zone.²⁰
More than 50% of S&P 500 companies became less profitable as they grew.²¹ Growth without complexity management destroys value.
Look at your operation honestly. Are washers and dryers sitting idle while staff handles pickup and delivery? Do complaints increase as you add more services?
These operational signals show you've crossed the innovation fulcrum.
The question becomes, which part of your business is generating revenue at the highest profit margin? Maybe you double down on that instead of adding more services to solve a revenue problem.
Profit maximization is very important, but that's a topic for another editorial.
Thinking about the thinking of laundry:
The moment you realize that adding services to a self-service laundromat could accelerate its decline instead of accelerating its growth.
The Subtraction Pattern
Apple was 90 days from insolvency in 1997. The company was losing $1.04 billion annually with a fragmented product line and just 3% market share.²²
Steve Jobs eliminated 70% of the entire product line. He reduced from hundreds of products to just 4 using a simple 2×2 matrix, Consumer/Professional × Desktop/Portable. He cut from 15 desktop models to 1, eliminated all printers, peripherals, and the Newton line entirely.
Within 1 year, Apple went from a $1.04 billion loss to $309 million profit.²³ The company reduced inventory by more than 80% and set the stage for becoming the first trillion-dollar company.
LEGO followed a similar path. In 2003, the company carried $800 million in debt.²⁴ They had diversified into video games, apparel, and theme parks. They sold off or shut down the unprofitable divisions. They reduced brick designs from 13,000 to 6,500 unique pieces.²⁵ They refocused on the core product, building blocks.
The company went from near bankruptcy to becoming the world's most valuable toy company.²⁶
Two massive examples proving the same pattern. Subtraction saved the business. Addition was killing it.
Your path might not be different. The innovation fulcrum exists. The complexity costs are real. The psychological biases are predictable. The operational signals are measurable.
The question is whether you'll recognize the pattern before it's too late.
That's all I got for you today.
Waleed
PS: Building something for laundry entrepreneurs who want real discussions without the noise. Early access: joinpressed.com
Echoing the thoughts of Antoine de Saint-Exupéry.
Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.
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Footnotes:
¹ The Tragic Downfall of Sears - LinkedIn
² Discussion of the Strategy Failure of Sears Company
³ Know your innovation fulcrum? - Bain & Company
⁴ Cutting through complexity - Bain & Company
⁵ Innovation versus complexity: What is too much of a good thing? - Bain & Company
⁶ Innovation versus complexity: What is too much of a good thing? - Bain & Company
⁷ Innovation versus complexity: What is too much of a good thing? - Bain & Company
⁸ Is the Sunk Cost Fallacy Actually Smart Business? - The Decision Lab
⁹ Entrepreneurial Optimism and Risk Taking - NCBI
¹⁰ In Praise of Passivity - Harvard Business Review, 2013
¹¹ How Many Items Should Be on a Menu? - TouchBistro
¹² How Many Items Should Be on a Menu? - TouchBistro
¹³ Why Restaurants Are Maintaining Their Pandemic-Reduced Menus - Forbes, 2021
¹⁴ Restaurant Food Waste - Rubicon
¹⁵ Menu Design and Food Waste Reduction - NCBI
¹⁶ Cheesecake Factory Turns 40 - LA Times, 2019
¹⁷ Chipotle Mexican Grill Finds Its Sweet Spot with Operational Simplicity - Nation's Restaurant News
¹⁸ Chipotle Mexican Grill Finds Its Sweet Spot with Operational Simplicity - Nation's Restaurant News
¹⁹ Why Restaurants Are Maintaining Their Pandemic-Reduced Menus - Forbes, 2021
²⁰ Cutting through complexity - Bain & Company
²¹ Revisiting Complexity in the Digital Age - MIT Sloan Management Review
²² Apple in 1997 - Investopedia
²³ Apple in 1997 - Investopedia
²⁴ Innovation Almost Bankrupted LEGO - Wharton
²⁵ Innovation Almost Bankrupted LEGO - Wharton
²⁶ Innovation Almost Bankrupted LEGO - Wharton
