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Reinventing Best Buy

• Format: Print
• | Language: English
• | Pages: 38

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• November 2017
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• Reinventing Best Buy  By: John R. Wells and Gabriel Ellsworth

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Reinventing Best Buy

By: John R. Wells, Gabriel Ellsworth

On March 1, 2017, Best Buy Company, Inc., North America's largest retailer of consumer electronics and appliances, announced a third year of comparable-store sales increases and a 20.8% increase in…

• Length: 38 page(s)
• Publication Date: Mar 31, 2016
• Discipline: Strategy
• Product #: 716455-PDF-ENG

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On March 1, 2017, Best Buy Company, Inc., North America's largest retailer of consumer electronics and appliances, announced a third year of comparable-store sales increases and a 20.8% increase in domestic comparable online sales. These results were in marked contrast to four years of declining comparable-store sales from 2010 through 2013. The stock price rose 17% in March, and on April 20, 2017, it surpassed $50 for the first time since January 2008. When CEO Hubert Joly took over in September 2012, Best Buy was losing share to Amazon.com , which was encouraging consumers to view products at Best Buy and other physical stores and then buy them for a lower price online, a practice known as "showrooming." Undaunted, Joly had encouraged the practice, convinced that it presented an opportunity to sell to customers as long as Best Buy's prices were competitive. Joly had committed the company to a multi-channel strategy in North America and exited struggling international operations. Operating margins had increased as a result, but growth was still proving elusive. In early 2017, Joly announced that his "Renew Blue" turnaround effort was complete and that he was now intent on creating the New Blue. Would the new strategy be enough to stop Amazon's advances?

Learning Objectives

After a brief overview of Best Buy's history from 1966 to 2012, we focus on Hubert Joly's efforts to turn the company around with the "Renew Blue" plan. In early 2017, Joly declared that the turnaround effort was complete and launched the new strategy, "Best Buy 2020: Building the New Blue." We close in early 2018, one year into the Best Buy 2020 strategy. Students will learn about the challenges of operating a big-box business in categories vulnerable to competition from online retailers. They will evaluate the success of the Renew Blue turnaround and consider the logic of the new strategy announced in

• This case provides an opportunity to examine a turnaround strategy.

Mar 31, 2016 (Revised: May 4, 2018)

Discipline:

Harvard Business School

716455-PDF-ENG

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Best Buy: How Human Connection Saved a Failing Retailer

In 2019, a three-year-old boy walked with his mother into a Florida Best Buy store, clutching a toy dinosaur that Santa had given him for Christmas. Only, the dinosaur’s head had broken, and now tears were streaming down the boy’s face as his mother explained to two sales associates that he was desperate to get the toy fixed.

“At any other store, they would have been directed to the toy aisle to buy a replacement,” says Hubert Joly, Best Buy’s former chairman and CEO, who is now a senior lecturer of business administration at Harvard Business School. “But that’s not what happened in that store.”

Instead, the sales associates—nicknamed “blue shirts” after Best Buy’s trademark royal-blue collared shirts—brought the injured T. rex to a service counter and performed “surgery” on the toy as they surreptitiously traded it out for a new one.

“You can imagine the joy the child felt?” Joly asks. “But, do you think that was standard operating procedure? No! What happened that day is that the two blue shirts found it in their hearts to do this, and felt they had the latitude to do it.”

Stopping Best Buy’s freefall

Creating such a human-centered connection among employees and customers is at the core of the near-miraculous turnaround Joly spearheaded at the company during the 2010s. Joly stepped in as CEO of Best Buy in 2012, just after its quarterly profits plummeted by 91 percent and its stock price hit a nine-year low. With Joly’s focus on customer service, aggressive price-matching, and new offerings like the Geek Squad, the company’s stock tripled in 2013.

The same human connection Joly cultivated at Best Buy can be found in the pages of his new book, The Heart of Business: Leadership Principles for the Next Era of Capitalism , co-written with Caroline Lambert. The book, which published May 4, aims to reverse some of the damage done by other cutthroat leaders who have taken a slash-and-burn approach to business.

“So much of what I learned when I was at business school, or in my early years as an executive, is either wrong or dated or, at best, incomplete,” Joly says. At the top of his list of leaders who imparted the wrong lessons are Milton Friedman, who believed companies should prioritize their stock prices, and Bob McNamara, the inventor of top-down management, who measured his way to success with ruthless efficiency.

“They figured a company is owned by shareholders and is a money-making machine,” he says. “But no, a company is a human organization made up of individuals working together in pursuit of a goal.”

Leading with purpose and humanity

Based on his own track record in transforming Best Buy, Joly wrote this book to help leaders who value the role that employees play in delighting customers and growing their businesses.

“The book is really constructed as a guide for leaders who are eager to abandon the old ways and are ready to embrace leading from a place of purpose and humanity,” Joly says. “I really wanted to share a thoughtful and practical architecture of what, in my view, we need to move the world forward.”

Of course, pulling off such an ambitious effort is easier said than done. At Best Buy, Joly didn’t start with the traditional turnaround playbook of laying off employees and closing unprofitable stores. Rather, he took measures to boost revenues: matching prices at Amazon, and speeding deliveries by shipping directly from stores. He also cut costs by reducing waste and streamlining processes.

“We were breaking $200 million-worth of TVs every year,” he says. “By improving packaging, we reduced that [number] by 50 percent.”

Fewer slides, more soul-searching

Perhaps what’s most important, he instituted a training program that cast aside PowerPoint presentations and videos and replaced them with soul-searching conversations between both executives and front-line employees about their purpose in life.

“We discovered that we were colleagues, yes, but we were also human beings, and most of us were aligned on this idea of doing something good in the world. So we said, ‘Let’s use Best Buy as a platform for that.’”

Instead of seeing the company as a consumer electronics retailer, Joly and his team refocused the company’s purpose as “enriching people’s lives through technology by addressing key human needs.” Best Buy’s competitive advantage had always been the unique customer service provided by its sales associates, but that only mattered if they truly wanted to help customers. So, in trainings, blue shirts were asked to think of an inspiring friend in their lives.

“For me, it’s my brother Philippe,” Joly says. “He is such a generous soul and a great life coach, always focused on finding the best in you and bringing joy to life.”

Sales associates were then asked to be that “inspiring friend” for their customers—helping them solve their problems and improving their lives through technology. “Then, when a customer walks into the store, they’re not a walking wallet. They are a human being, and you can help them,” says Joly.

Five steps to harnessing human connection

That mindset shift took hold across the company, giving employees a greater sense of joy and autonomy in their work, and attracting customers with a new service-oriented approach. Along the way, the company’s share price grew from a low of $11 in 2012 to $110 by 2020.

In his book, Joly says the guide is one any company can follow, and he distills the formula down to five key ingredients:

• Connecting employees with what drives them , and this is usually focused around finding ways to make the world a better place;
• Creating genuine human connection among employees and customers;
• Giving autonomy to team members , as much as possible, rather than scripting what to do;
• Instituting one-on-one coaching to give employees individual training and feedback; and
• Creating a growth mindset to continue to improve.

“That’s the recipe,” says Joly, who reinforces it throughout the book with exercises that readers can use to guide themselves through the process. “It’s all about humanity. Changing the world starts with changing ourselves.”

At HBS, Joly is now working with other faculty to create a new program for senior executives to help them unlearn some of the toxic profit-focused lessons of a traditional business education and replace them with new lessons centered on human connection.

“The mistake that many leaders, myself included, have made is that they lead with their brains,” he says. “But what’s at the heart of business? Well, it’s the heart. It’s people.”

About the Author

Michael Blanding is a writer based in the Boston area. [Image: iStockphoto/Elijah-Lovkoff]

How can companies connect with customers and employees better?

Share your insights below.

Book Excerpt

Bringing the purpose question to work.

By Hubert Joly

“What drives you?” is not a question that gets asked often in corporate environments. Asking it more would be useful, as it can help us connect with a purpose, which in turn determines how we relate to our work. This is why Best Buy employees are encouraged to reflect on that question.

“What drives you?” has become a central element of the Best Buy Holiday Leadership Meeting, which gathers some 2,000 managers to kick off the holiday shopping season. I always find the simplicity and humanity of the answers striking. Often, managers talk about friends, family, and colleagues. For a market retail field trainer, it is “being able to see the corners of the world with Grandma Shirley, my favorite person on this planet.” For a district manager, it is “helping employees and customers fulfill their hopes and dreams.” For a senior HR manager: “teaching, developing, growing and inspiring [people] to do more than they ever thought possible.” Encouraging and inspiring everyone at Best Buy to reflect on what drives them may seem a small and woolly step, but it truly has been central to changing how we approach our work.

Understanding your own purpose is one thing. It’s just as critical for leaders to understand what drives the individuals around them—and how it connects to the purpose of the organization. To find out what drove each member of Best Buy’s executive team, I organized a dinner in 2016, in a room overlooking Minneapolis’s beautiful Lake Bde Maka Ska. It was part of one of our regular quarterly retreats. Everyone had been asked to bring pictures of themselves as babies or young children, and to tell a personal story about that picture and about growing up.

Earlier in the day, we had explored the notion of being “all in.” Being all in, I figured, has to connect with who we are and who we want to be. So, I wanted to understand what drove each member of our team and how it fit in their lives and their histories. Where did they come from? Why were they excited to work at Best Buy? How did their personal purpose connect with what they were doing at work? I did not feel I could lead our team if I could now answer these questions.

What might sound like a warm and fuzzy game became one of my most memorable and inspiring moments of my time at Best Buy. We truly connected with each other, as the 10 of us took turns talking about what gave us energy and what gave our lives a sense of purpose. I was moved while listening to each of them describe what drove them personally, from treasuring relationships through unconditional love, infinite support, and the constant fostering of growth, to watching colleagues grow beyond their own expectations by helping them do new things and take on more responsibility.

As inspiring as it was, it was also useful. For it made a huge difference in helping us shape our ambitious and meaningful purpose for Best Buy, a purpose that would drive our sustained success in the following years.

Reprinted by permission of Harvard Business Review Press. Excerpted from The Heart of Business: Leadership Principles for the Next Era of Capitalism by Hubert Joly with Caroline Lambert. Copyright 2021 Hubert Joly. All rights reserved.

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Case Studies

Best buy: a focus on delivering solutions and sustainability, june 3, 2011, the challenge.

In an industry facing growing concerns about e-waste, the “rapid obsolescence” of products, and continued supply chain human rights issues, the senior leaders at Best Buy aim to transform the company’s business model from one based on selling only products to one that focuses on delivering “digital connections”—those technologies and services that help “connect customers to people, knowledge, ideas, and fun.” Recognizing that sustainability is key to that future, Best Buy partnered with BSR to turn that vision into a practical strategy aligned with the company’s other key priorities.

Our Strategy

Our three-phase approach allowed Best Buy to set a clear direction for its sustainability objectives:

1. Assessment

Given Best Buy’s rapid growth in sales and its move into new services and businesses, we began by conducting interviews with 40 Best Buy executives and more than 20 external sustainability experts and stakeholders. We used this information to examine Best Buy’s business direction, management perspectives on sustainability, and current gaps in the company’s sustainability-related activities. Next, we mapped near-term trends affecting the consumer electronics industry, such as new regulations and the increasing costs of input materials. We also reviewed outside perspectives on Best Buy’s role in developing more sustainable products and the opportunities associated with the company’s desire to transition from products to solutions.

2. Materiality

We analyzed more than 60 sustainability issues—from digital privacy, to access to technology, to product safety, to transportation—based on how they affect Best Buy’s business and based on their importance to consumers, communities, governments, NGOs, and others. We presented the results to Best Buy’s Sustainability Team and Advisory Group, which used the presentation to agree on four priority areas: Product Stewardship, Sustainability Solutions, Access, and Inspired Workplace.

3. Strategy Development

Once Best Buy's senior leaders validated BSR’s conclusions, BSR and the sustainability team defined goals for each area:

• Product Stewardship: to lead the industry from product design to end-of-use solutions
• Sustainability Solutions: to provide products and services that allow customers to lead more sustainable lives
• Access: to build business models that enable people who don’t have it today to access all the benefits of the connected world
• Inspired Workplace: to become the preferred place of work because of sustainability efforts

We also helped Best Buy develop specific targets for each area, and we proposed a sustainability governance structure that creates clear leadership and accountability within the company and a structured review process that incorporates external input.

By nature, strategy projects set the direction for changes that come into practice fully over the medium to long term. Best Buy has made significant progress in establishing its sustainability strategy and a foundation for progress. To begin implementing this strategy, company leaders have started to develop relationships with consumer products manufacturers that are focused on sustainability and are key to the achievement of Best Buy’s sustainability goals.

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Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals .

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The Heroic Rise Of Best Buy’s Omnichannel Customer-Centricity Model

The journey that Best Buy has traveled towards success has indeed been a heroic one – and I do mean ‘heroic’ in the literary sense of the word.The electronics retailer has fought its way through an obstacle-laden, enemy-guarded pathway to prosperity, which, as anyone in corporate business will tell you, is comparable to any hero’s journey – from Prometheus to Batman to LeBron James – in no uncertain terms.

Indeed, many challenges have been thrown down along Best Buy’s voyage, rivals have attempted to out maneuver the retailer so they may win the day themselves, allies have been formed along the way, as indeed have new enemies. But, time and time again, the electronics chain has dug deep, drawn on its wits, its steely resolve and its covetable customer-centric skillsets to ensure that it pulled through. Indeed, these are all inevitable occurrences of a successful retailer’s heroic journey, and, thankfully for Best Buy, in the end have manifest in what is perhaps the most important survival trait of all triumphant heroes – the ability to grow (and if Universal Pictures haven’t already bought the movie rights, then I’m tempted to place a bid myself!).

The Birth Of Omnichannel

It’s no secret that at the turn of the millennium, at a time when ecommerce first began its rapid growth, Best Buy stores were struggling as consumer preference for buying electronic goods online started to increase. As is the case with all great heroic journeys, the odds at this point in time seemed stacked against Best Buy’s success.

However, digging deep, the company turned to what was then a revolutionary customer-centric approach , and began fighting back.

Today, Best Buy is the largest multi-channel consumer electronics retailer in the world – but long before such a thing we now call ‘omnichannel’ was an industry buzzword, Best Buy had already started to focus on a strategy that would revamp its customer experience across all the channels its customers use.

In ‘ The History of Omnichannel ’ – a blog series for RSR Research – author Nikki Baird goes so far as to bestow on Best Buy the accolade of being the company that gave birth to omnichannel initiatives.

“Omnichannel starts way back in 2003,” Baird writes. “And one of the reasons why it’s important to go back that far is because I think a lot of people forget or lose sight of the fact that omnichannel didn’t begin as omnichannel, or even cross-channel. It began as Customer Centricity. And the retailer who should get credit for putting Customer Centricity on the map is Best Buy.”

Baird explains that at the time Best Buy was struggling – unable, as it was, through a lack of resources, to beat out its competitors like Walmart through lower prices. And so the retailer decided that it would focus its efforts elsewhere –namely, on providing its customers with a better experience. In hindsight, it’s truly remarkable to consider just how ahead of its time Best Buy was, as now, in 2016, the customer experience is in fact the most important way that retailers attempt to differentiate.

The new strategy was, however, a turning point on Best Buy’s journey. As Baird explains, the tactic focused on helping customers “build their own path to purchase by assembling from the various product and service offerings that Best Buy offered. And they viewed that path to purchase as everything from researching products to post-sales service and support.”

The Growth Continues

The assumption for Best Buy back in 2003 was that customers would be willing to pay a little more for a better service. And it’s one that paid off – but that’s not the end of our hero’s story.

In 2012, more revolutionary moves were on the cards. Hubert Joley – the man who was previously responsible for growing Carlson Wagonlit Travel sales from $8 billion to $25 billion in just four years – took over as CEO. He issued a company manifesto called “Renew Blue” to revamp Best Buy, which involved a promise to improve sales through omnichannel strategies. Since taking over, the company’s stock share nearly doubled to $30 per share in just two years.

"The strategy is very simple,” Joley told The New York Times in 2012. “We believe that price-competitiveness is table stakes. The way we want to win is around the advice, convenience, service."

Over the past four years, Best Buy’s strategy has been refined and refined again in order to drive traffic to its website and, in turn, improve online sales. It’s been effective– domestic internet sales grew 24% in the first quarter of 2016 compared to the same period a year ago, outpacing Amazon. 

(Image source: The Motley Fool )

The retailer has achieved this triumphant feat through the 2015 launch of new apps, features and sales perks. These include:

·          Blue Assist:  Users of the mobile app can now shake their device or push a button to get live help via chat about potential purchases.

·          Touch ID login:  iPhone and iPad users can login to their Best Buy accounts using their fingerprint.

·          Geek Squad app:  The new and improved application allows customers to schedule an appointment and check the status of a repair.

·          Same-day delivery:  This pilot program was launched in 13 cities and allows for same-day delivery of online orders of products that are available in-store.

Victorious In Customer Service

Since the beginning of the fight back, Best Buy has been keenly focused on the customer experience. As a market leader in the sale of electronic goods, the store is a haven for tech junkies who come in droves to appreciate the wide assortment of goods at (now) competitive prices. But Joly believes that it’s the unique in-store experience that Best Buy provides that keeps the footfall strong in the Internet Age.

"We've always believed that as a result of these trends in consumer behavior, the store experience needed to be so much better," Joly said . "When the customer gets to the store, she has done a lot of research and she's much more educated than maybe a few years ago. And so it's maybe that in some cases we see fewer trips to the store, because so much time has been spent before the store. And so the focus in the store is on the customer experience. We've invested significantly in the physical experience in the stores, and candidly, it is so helpful. You cannot use your senses online to see the difference in picture quality of the TV or the sound quality of a headphone. You really have to go to the store."

To Be Continued…

During fiscal 2016, Best Buy grew its domestic online revenue by 13% overall.

"This performance is the direct result of the execution of our Renew Blue strategy and the hard work, dedication and customer focus on the part of all of our associates,” says Joly.

"Our purpose, from the customer's standpoint, is to build a company that does a unique job of helping customers learn about and enjoy the latest technologies.”

Looking ahead to fiscal 2017, Joly has outlined his new priorities to complement its existing Renew Blue strategy, which, as ever, is customer-focused to the core. "We are investing to be the leading technology expert, who makes it easy to learn about and confidently enjoy the best tech," said Joly.

Indeed, since 2003, Best Buy has been one of the very best examples of customer-centric business practices, simply by making the shopping experience – both online and offline – informative and interactive. Thirteen years ago, the store pioneered the concept of customer-centricity, but along this heroic journey, Best Buy has grown to become one of the most inspirational retailers that continues to venture new ground with innovative omnichannel strategies. The sequels to this saga are already writing themselves. 

About John Waldron: John Waldron is a technology and business writer for markITwrite digital content agency, based in Cornwall, UK. He writes regularly across all aspects of marketing and tech, including SEO, social media, FinTech, IoT, apps and software development.

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