It’s All About Mindset — Hubert Joly, CEO Best Buy
The Industrialist’s Dilemma — March 7, 2019
When our session started with Hubert Joly, the CEO of Best Buy, we didn’t know what to expect. Best Buy has had quite a run under Joly’s leadership. But we seem to exist in an era dominated by headlines about Amazon’s eventual takeover of the retail space. In the sessions this year on Home Depot and Instacart, our students were excited to talk about the moves being made by Walmart and Target. But, Best Buy didn’t seem top of mind in Palo Alto.
Soon after we got going — however — it became clear just how relevant Best Buy was to Joly’s audience.
We pulse checked the students to kick off the session, “Who’s been to Best Buy in the last 6 months?” Almost half the students raised their hands. More customers than Home Depot, more than 23andMe, more than Instacart. It was going to be a session on defying odds. Best Buy wasn’t just brought back from the brink under Joly’s leadership, it was far more relevant than even its customers give it credit for.
Our question? How?
In a market littered with bankrupt organizations such as CompUSA, RadioShack, Circuit City, how did Joly bring the brand back to life and stave off disruption? What ensued was a master class on dealing with the dilemma. Although my notes are littered with takeaways, three lessons stood out.
See the Headwinds as the Tailwinds
Case discussion started with a breakdown of the position Best Buy was in coming out of the financial crisis. The students painted a picture that was bleak. Who would want to take this company over?
When Joly stepped out at the end of the discussion, he addressed this situation immediately. Yes — when he took over things looked bad. But the reason he took over was because he could see opportunity. He saw a potentially healthy company that was being discussed — internally and externally — in regards to all its headwinds. Every one of the business’ headwinds could be positioned as a tailwind. Best Buy was facing a mindset challenge as much as anything else. Categories were decaying rapidly while new consumer electronics and categories were emerging just as quickly. eCommerce vendors were taking share of many of the high volume, small box, goods that Best Buy distributed. At the same time, however, a whole new category of connected devices were emerging on the scene that offered higher price points and more need for educated in store associates. Best Buy’s suppliers were opening up their own stores. Joly realized that no one — not even Tim Cook — had a house that was 100% homogeneous in brand. Even if the world had branded distribution for every OEM, someone had to know how to put it all together.
Best Buy was in a dynamic market. But seeing that dynamic market as the opportunity not as the challenge made all the difference. Mindset change allowed the team to reorient, reinvest, and get behind a changing strategy.
A Systems Integrator for the Consumer
One of our students worked for Accenture ahead of business school. During class discussion she mentioned that it would make sense for Best Buy to become the Systems Integrator for the consumer. There was some debate, but ultimately discussion turned elsewhere.
When Joly began discussing his vision, he quoted her directly. He had an idea that systems integrators brought complex, disconnected, technologies together for highly heterogeneous company landscapes. They helped them get more value more quickly out of their systems in an increasingly digital world. Despite spending more year after year on electronics, consumers didn’t have access to the same capabilities.
So Joly embarked on a journey to transform Best Buy’s offerings. He couldn’t favor any product (including his own private label) on the show floor, because the customer had to be given the perfect components for their experience. He couldn’t limit himself to providing support for products that he’d sold, because those products needed to work with everything else. And he needed to have educated, capable, employees.To get there, he mentioned that he needed to be consummately focused on his customer and not his competitors. If he looked left and right at companies squarely in retail, he would have missed the opportunity to transform into a services business. But when he looked at the needs of his customer it became clear what the company needed to do. When he looked at the customer — and the problems that the new world of smart, connected, devices were creating — it was easy to see that there was an opportunity to simplify customers’ lives across the landscape.
Treat the Supplier Like a Customer
Joly treats everyone like a customer. Why? Being helpful to those you rely on can’t hurt.
His suppliers are no different. Joly is even helpful to the suppliers that compete directly with Best Buy (e.g., Amazon). When asked directly about it, he mentioned that these companies make great products. If he didn’t court them, work to make their store footprint as desirable as possible, and help them build a distribution strategy around Best Buy, then end consumers would be the ones that miss out. Since he’s on a mission to deliver the best product to his customers, suppliers are a critical piece of the puzzle.
Unlike many retail companies that have reacted to disruption through the development of private label brands, Best Buy has decided to be so valuable of a partner to their suppliers that they become part of the supplier strategy. They are so helpful to their suppliers that they play a critical role in orchestrating product launches and setting product standards. Treating their suppliers like customers, ensuring they get value out of every exchange, keeps Best Buy constantly relevant as their market evolves.
At the beginning of our session, few were optimistic for Best Buy’s prospects in a tough retail environment. At the end of the session, it was clear that Best Buy was building a thoughtful strategy — a complementary set of activities — to differentiate their position in an ever fragmenting world of products. Joly left the class with a room full of students thinking that anything is possible when armed with the right mindset.
