I was reading outgoing Best Buy’s CEO Brand Anderson’s interview with Fortune magazine, he talked about the secret of his success, transforming Best Buy into a $30+ billion a-year company that accounted for about 17% of the consumer electronics market in the U.S. and Canada. Investors have been well rewarded, throughout the 90’s Best Buy's earnings per share grew faster than Microsoft's, and its shareholder returns outperformed Intel's. He was leading the company’s effort to focus on customer rather than products, a simple but yet still difficult for many large organizations. He is taking the company outside of North America with strategic investments/acquisitions in the UK and China as part of a longer term growth strategy. Here are the top 3 secrets of his success he wants to share with other CEOs:
- Create the right jobs for talented employees – it means assigning people a job that fits their talent.
- Motivate your staff – it is a key differentiator and without that capacity, you won’t last.
- Know when its time to leave – know why you’re going and finding the right time for transition and to the right people.
So what’s the future of Best Buy? With a major competitor now gone, it is the last remaining big box electronics retailer, it has many new enemies that are not easy to beat. It takes another radical innovation for Best Buy to reinvent itself once again.
First there are the e-tailers (amazon and many others) that create constant threats, online players have s a significant advantage from a cost structure perspective. Second, Costco and Wallmart will always be playing in this category and may see an opportunity to start a Costco Gadgets, a chain that focus on consumer electronics. Third is Best Buy itself,this is the biggest one, the business model is reaching its expiry date and has served them well. This is the time for business model transformation. Many product categories are not giving them the margins/volume they needed to support a growth strategy. Blueray DVDs and flat screen TVs cannot power Best Buy forward, the future is not in gadgets, it is in service innovation.
Service innovations is changing from being mainly a company in-house customer service activity to become more of a network process together with different kinds of business partners bundled together by web-services, IP telephony and interfaces. Focus on core competence, outsourcing, service delivery systems and value constellations have changed the conditions for traditional in-house service innovations. We will see more of service innovations emanating between competitors cooperating in the same network.
What's more important is the execution: the alignment of the right idea, the right team, the right development process, the right leadership, the right level of risk management, the right target, the right time to market, and so on. Innovation is not just a matter of "wow" ideas. It is rather a process that requires a disciplined approach to rigorously identify and execute the most promising service ideas that go beyond customer service but opening up new revenue streams. Here is a simple 7 steps framework we use for the development of service innovation:
- Scan for weak signals around consumer electronic space
- Develop new customer insights through ethnographic research
- Develop future scenarios based on a technological scan and customer insights
- Create new customer service value propositions based on those scenarios
- Develop service model prototypes
- Use prototypes to drive business model and economics development
- Get early customer feedback to drive service requirements
Alvin Toffler pointed out in "The Third Wave", the manufacturing economy developed in the 20th century focused on the "product", but the world’s standard has now changed to focusing on the experience of "service" when making a judgment on user satisfaction. The future competitive power of the developed economies will depend on its ability to create service innovation. Along the way new industries will be born. So Best Buy will go from Geek Squad to Geek Army, every product company should explore service innovation.
Recent Comments