Best Buy overcame the onslaught of the e-retail giant Amazon by executing a simple strategy that everyone could understand and act on. There are lessons in that strategy, how it was developed, and then executed that can apply to companies in every sphere. If your strategy isn’t a simple story, then it’s harder to grow (and easier to fail!).
An article in the Wall Street Journal (4/24-25/21) written by Hubert Joly, the CEO of Best Buy explains how he engineered the chain’s turnaround starting in 2012. (Joly is now Chairman and will step down mid-June to be a consultant to the company). The moves Joly made that saved Best Buy from destruction are a lesson in humility, focus, and simplicity.
Joly donned a blue Best Buy shirt with a name tag: “CEO in training”. And he meant it. He listened to everyone and heard and saw hard truths that would shape what had to happen fast to save the company. The Board of Directors had given Joly less than 60 days to come up with a rescue plan. Ouch.
As many new CEOs might do, he did not start off with an offsite with the leadership team to get updated on the business. He went to where the action was: to the stores where he could talk to managers and employees. He learned first-hand that searching for products on the website was a disaster. At lunch, a store manager drew a store floor plan on the back of a paper napkin to demonstrate how space was over-dedicated to media products (CDs, DVDs, etc.) that were going the way of the buggy whip due to online streaming. And everywhere he turned he saw where big costs and even the smallest costs could be saved. Example: No more color documents—black and white on 2-sides of a sheet only! His philosophy: the last cost to cut was salary and headcount.
When Joly finally had that offsite, he focused on two problems: declining revenue and margins. His lens was “People—business—finance.” I personally endorse corporate priorities with “people” first which I often read in business articles, but more often see the famous “chainsaw” as the company reality.
The strategy that emerged was simple and clear even though the execution involved complex changes—real-world plans always do. But everyone knew the point of focus. The resulting plan:
- Meet Amazon head-on, matching their prices on electronics.
- Ship online orders directly from stores.
- Rebalance store inventory to match consumer trends.
- Cut non-salary costs, lower headcount as a last resort.
He even branded the rebuilding effort as “Renew Blue”. He knew the strategy would only work if the Blue Shirts, the people wearing the company color would sign on and execute. He made them the heroes of a revitalized enterprise and he was unrelentingly optimistic. It worked. At the end of the year, the sales decline was halted and sales were even versus the prior year. When so many electronics dealers went belly-up, Best Buy achieved a victory. “Stopping the bleeding” as the business press and analysts like to say.
Everyone assumes strategy development is an arduous process based on reams of analysis (yes there’s plenty of that), creating lengthy plans (codifying excruciating detail), which then often sit on a shelf largely gathering dust—to be reopened in the next planning cycle. By visiting stores, every department, and including as many players as he could, he learned a ton in a hurry. He also made the decisions he needed to make and expressed the new direction fairly simply.
I believe any corporate strategy can be summarized in nine words—three words on three lines each. Yes, I know that’s extremely high level and not nitty-gritty, but that’s on purpose. I would reframe Joly’s three words he used at his offsite to fit story thinking and story memorability: Business—finance—people. Best Buy’s 3X3 Strategic Story could be:
Situation: Amazon’s killing us
Action: Match Amazon head-on
Success: Stop sales decline
Does it tell the whole story—certainly not in detail–but it reflects the urgent crisis, the big action they took, and the resulting success. That strategy became a platform for enormous future growth. Despite the disruption of the recent pandemic, Best Buy’s revenues jumped from $43.6 Billion in FY20 to $47.3 Billion in FY21—a 12.6% increase (Source: Best Buy).