Not long ago, jetlagged and wired from having just delivered a keynote, I sat at the back of a Consumer Electronics Association conference ballroom in Paris, sucking up all I could from Best Buy CEO Hubert Joly. I believe whenever you get the opportunity to learn from someone who has seen more and done more than you in any area you should squeeze out all the learning you can.
Why should you care what Joly has to say? Because after nearly 20 years at McKinsey, he has led and turned around three major businesses.
As head of Carlson Wagonlit Travel, he grew sales to $25 billion from $8 billion in just four years. He then went on to lead the entire Carlson, Inc., corporation, which operated more than 900 TGI Fridays restaurants and over 1,000 hotels, for five years, where he led a “renaissance” across all of its division. Since taking Best Buy over in 2012, the company’s stock price has nearly doubled to $30 per share.
Joly knows something. It works. Here are four lessons we can learn from him.
I asked Joly why Circuit City failed while Best Buy survived. This is a question many clients have asked me over the years, to which I’ve had no good answer.
Joly surmised it was because Circuit City had lost touch with the customer. At Best Buy they prioritize staying close to the customer, understanding their needs, and adjusting to consumer shifts. This is key in the fast-moving consumer electronics retailing business.
Who is your core customer? What are the concerns, passions, desires, behaviors?
In each company he turned around, Joly or the company were able to articulate a simple logic that explained a core strategy. For example, in explaining the Best Buy strategy to the New York Times in 2012 he said, “The strategy is very simple. We believe that price-competitiveness is table stakes. The way we want to win is around the advice, convenience, service.”
Think of the beauty in this simplicity. He starts the strategy from the view of the customer, for whom price-competitiveness is expected, and clarifies the three areas in which Best Buy can add differentiated value: advice, convenience, and service. A less experienced CEO might say something like, “We recognize retail margins on consumer electronics can rarely reach over commodity levels so we will add incremental value by emphasizing service . . .” Boring. Unmemorable. Disconnected from the customer.
One of Best Buy’s biggest moves was to offer a low price guarantee. What this did, he explained to us in Paris, was erase the view that Best Buy was becoming the showroom for online retailers. People didn’t realize that Best Buy offered products often at the same price as those Amazon.com and other web-based retailers offer. This diminished the role price plays in consumer consideration and reinforces the idea that “price-competitiveness is table-stakes.”
What is your strategy in one sentence? Does it start with the customer? Clarify (to employees and investors) how you will differentiate yourself.
Your team, employees, and investors are likely to forget your strategy, especially in a turn-around situation in which distracting fires pop up unexpectedly. How do you keep people focused in the same direction? Give them a short memorable name to remember. This name is easy to recall and unpacks your strategic priorities in their mind. At Carlson, for example, Joly named his strategy “Ambition 2015.” At Best Buy he calls it “Renew Blue.”
What is your strategy’s name, in two words or less?
In each business he ran, you will find a set of priorities he laid down, early on, after assessing the situation. His Ambition 2015 strategy at Carlson, for example, involved repositioning of the company’s core brands; operationalizing the brand promises and upgrading the guest experience; boosting revenue generation focused on the web, the company’s loyalty programs, global sales and working with the trade; as well as the global expansion of the company in key emerging countries.
At Best Buy the strategy prioritized big box stores, superior customer service, product selection, and services like the Geek Squad. He then stuck with those priorities for four to five years. He doesn’t flutter or shift priorities. As he said in Paris, “Retail is a business primarily about execution.” Execute your priorities.
What are your (few) strategic priorities? Are you ready to stick with them for the next four to five years?