Then sometime between 1975 and 1985 they seem to have started thinking they were successful because they were 'the best' and took their eye off the core competencies that made them nimble (logistics, accountable management practices) That is according to people who worked there at that time. Suddenly people who should not have been promoted (they weren't 'Sears people') were being promoted, and things were focused less on operations and more on public image.

The challenge is that you start managing to the effect rather than the cause. It is like companies that spend all of their time doing 'market research' and spend their time trying to be better than their perceived competitors at what their competitors are doing. They lose sight of why they were doing so well in the first place. "chasing your tail", "following the followers", lots of names for it, but they were being challenged by many up and coming brick and mortar competitors (K-Mart, Target, Walmart, Montgomery Wards, Etc.) By worrying about those threats they forgot to watch for the changes in the market, and that led to a lot of what would be difficult pain.

And yes, it is "easy" to see that looking backwards in time at their choices, but even in the 70's and 80's there were voices telling them that they were not focused on the right problems.