The stock of Best Buy Co. may have surged from less than $12 per share at the start of this year to more than $44 a share this month, but it’s clear CEO Hubert Joly scores the gains made in improving the business a little more cautiously.
Best Buy, he said, is only “about a quarter or a third” of the way to delivering the kind of consistent customer experiences that he envisions.
“I constantly remind our teams that we’re just warming up,” he said. “This is a multiyear transformation journey. Very pleased by the progress, but we’re very driven by what we’re trying to accomplish. Which is a lot. ”
Joly invariably calls what’s happening at the company a “transformation” rather than a turnaround, but it’s important to be clear on what he doesn’t mean by the term.
Changing what the company does every day made no sense to him. It’s the how that was in need of transformation. That’s why the more than 1,050 traditional Best Buy stores in the United States are still open. Why close stores that make money?
“These are the stores we have,” Joly said, in a recent conversation in his Richfield office. “We know where they are. They are not going to move. Our mission is to maximize the top line and the bottom line of these stores. So the economic equation we have to solve is incredibly simple. And there’s only so much cost takeout that you can do.”
The opportunity, and really Best Buy’s only opportunity, Joly said, “is to have the customers fall in love with Best Buy again.”
To do that, the company is trying to consistently deliver on promises to be the best authority on the electronics and appliances people want and to be the best destination to find and buy them.
“In the past when we have been criticized at Best Buy, it’s not that these promises were not the right ones,” Joly said. “It is because we did not execute well enough.”
To be the authority in part means making BestBuy.com a whole lot more interesting for folks browsing for what products are available and how a customer might best use them. That’s why the company has launched online buying guides for the holiday season, an initiative Joly described as “a beginning.”
To be a destination means ensuring that Best Buy’s product assortment is as deep and broad as it can be. The five leading brands of tablet computers are from Apple, Amazon.com, Microsoft, Samsung and Google, Joly said, and for the holiday season “we are the only place that has the five. That’s an amazing opportunity.”
The company has also begun to create an opportunity out of the practice of showrooming, which is when consumers visit a big store, decide on the best product and then buy it from a cheaper online source.
Consumers considering one of the two new gaming consoles introduced this month should enjoy dropping by a Best Buy store. These new machines are being displayed out in the open with every intention that they are to be tried out by gamers.
“This is the concept; we are the showroom,” Joly said. “I don’t want to say anything definitive, but we may have done a good job of killing showrooming. With competitive prices and the price match, there’s no reason for anyone to leave our stores empty-handed.”
Best Buy today has about 16 percent share of its market, but even as Joly talked about revenue growth, he said he finds the whole concept of dividing a market into shares dispiriting.
Shooting for gains in market share reflects zero-sum thinking, he explained. A one-point gain for Best Buy means a point lost for Target and Amazon.com. That makes mangers focus on the competition, not customers, and distracts from getting shoppers excited about the stores and the website.
This is one of the themes Joly got from “The Art of Possibility,” a slim book by family therapist Rosamund Stone Zander and her husband, orchestra conductor Benjamin Zander. The book hopes to get the reader to see the world as full of possibility rather than look ahead and see only scarcity and constraint.
In the chapter “Giving an A,” for example, the musician tells of giving all of his graduate students an A on the first day of term, provided they write him a letter dated the following May that fully explains what they have learned and achieved. Thus inspired by their own imagined successes, the students go on to have great terms and earn their A’s.
Joly is such a fan of the book that he has provided a copy to members of the board of directors and Best Buy’s executive team. I left his office with a copy in my bag, too.
Joly spends much of his unscheduled time shopping BestBuy.com and visiting stores to see how the customer experiences Best Buy. He is almost always recognized as the boss, he said, but the system at checkout doesn’t know that, nor does the website.
On a recent trip to New York, Joly made a point of stopping at Best Buy’s 86th Street store in Manhattan. The store and its new in-store Windows and Beats shops looked great, he said, but he also noticed that this store actually has windows facing the sidewalk.
What he saw when he looked into those windows certainly contrasted with the window displays at the Ralph Lauren store around the corner on Madison Avenue, displays he called “inspiring.” So window dressing became another opportunity for Best Buy to improve.
“We are raising the bar in terms of the customer experience, the energy, the focus,” he said. “The test is, ‘Is the store this month better than it was three months ago? Six months ago? Or a year ago?’ The answer is yes. That’s what matters.”