The story of BEST BUY Strikes Back
Best Buy is a company with a great history and it
started as an electronic store in 1962. This store was started by Richard
Schulze and another partner. They named it Sound of Music. Richard was born in
St Paul, Minnesota, United States of America in the year of 1941. The people of Minnesota are nice according to
stereotypes. The thing is even during “dialing wrong numbers”, they do have
full conversations with the callers.
Minnesota
–The State and History
The state was inhabited for thousands of years by
Native American tribes until Europeans arrived in the 1600s. What was with the
year 1600? Europeans were expanding their network everywhere including India.
After various wars, Minnesota became a State in 1849.
About
Richard Schulze-Founder of Best Buy.
Richard was born in Saint Paul, Minnesota, and did his
early years of schooling at Central High School. He dropped out due to some
problems. Lots of really successful people are college dropouts. Maybe school
and college curricula should redesigned to have practical real-world
environments to make the students ready. The thing about school/college is they
tell you how you should build success and without a certification you can’t do
a thing. At least that is the stereotype in Asian countries.
Richard initially joined the U.S. Air Force at the
Minnesota Air National Guard. Then he changed his line of work and became an
electronic salesman.
Whilst working as an electronic salesman, he wanted to
do something of his own. He did and called his new audio equipment store: Sound
of Music. Later on, he made changes in management and handed over to a new CEO.
Best
Buy –The store scenario changes.
The
store made a massive sale after one of its stores was hit by a tornado. This
led to a major change and that was the name. The name became Best Buy and remained so. Best Buy
introduced sales of various electronics such as VCRs which led to forty new stores.
Though the company had a huge revenue in 1987 of 240 million $, they were
facing losses. In 1988 Richard wanted to his company to Circuit City but they refused. He was not unmotivated yet
introduced “Concept II”.
Concept
II of Best Buy.
So what is Concept II, which is different from Concept 2 –an in-house rower?
Concept
II was
the thinking that stores that were designed as warehouses could be presented
beautifully to customers. That included bright
lighting and pushy salesmen. That is putting customers in charge of the
process and it was consumer consumer-friendly approach. Instead of available
products locked in a storeroom, it was presented in a nice, visual with
customers having a greater say whilst purchasing. The Concept stores went to
Concept IV in 1998.
According to Richard Schulze on Concept Store:
“About five years later, we
introduced our ‘Concept II’ store into the marketplace, which was really the
seminal decision to put the customer in control of the process . . . That was
the springboard. There was no turning back at that point. We couldn’t open
these stores fast enough.”
Revenue-The
1st Billion Dollar revenue by Best Buy!
The 1st
Billion dollars came in 1992 for Best Buy. An increase of 76% in revenue
over a period of 5 Years. The good old
nineties when everything was smooth and people were social. Coke bottles in
vending machines was 0.50$ and a Grey Hound bus trip from NY to Washington cost
45$.
2000- The Attack of the Clones’ by Amazon.com
Everything was going up
steadily for Best Buy except that Amazon became an online competitor. Amazon
with no stores of any kind and founded by Jeff Bezos became a new challenge for
many. This was known as the “Retail Apocalypse”
which led to the demise of a lot of well-known stores
such as Sports Authority, Payless
Shoe Source, Toys “R” Us, and Circuit City.
Among a common trend would be that
customers would check prices at Best Buy stores. They would eventually buy from
Amazon at lower prices. Talk about loyalty! Maybe Best Buy ought to have a PR manager,
who has interacts with the customers and makes people at home with stories.
Just an idea though. This would result in a loss of 7 billion dollars in
revenue.
This continued and the decline was
noticed in 2012. Best Buy felt this
decline and on top of that, there was an internal controversy involving the CEO
of Best Buy then.
It resulted in the resignation of the CEO
Brian Dunn and eventually the founder had to leave still having a 20% stake in
the company.
The Shopping Mall Empire Strikes Back.-New CEO Hubert
Joly steps in.
Best Buy had a great crisis on hand. The
loss in revenue as well as mismanagement.
The stock of Best Buy had fallen to 80 percent under previous CEO Brian
Dunn.
Hubert Joly Biography
Hubert Joly was born in France, in 1959. His
education comes from HEC Paris, which is
an international business school. A world-class Business school. Before joining
Best Buy he was CEO of Carlson. Currently a professor at Harvard. According to
Joly, there are 5 criteria for leadership. They are as follows:
·
Purpose
·
Values
·
Clarity
·
Authenticity
·
Service
Hubert only comes with a new move and
that was competing with Amazon. A spectacular leadership was needed is turn the
company around in times of crisis. Since the future was uncertain, the board wanted
Joly to apply Transformational
leadership.
So what is Transformational Leadership?
Transformational Leadership is a theory
that started with James V. Downtown in 1973 and then enhanced by James Burn in
1978. This model encourages the leader to show something authentic and genuine.
Though the model applies to every industry but is important to the tech
industry where innovation and speed can make or break the company.
Four main elements define
transformational mode and style. They are:
·
Idealized influence:
·
Intellectual stimulation
·
Inspirational motivation:
·
Individual consideration
Some examples of transformational
leadership are:
·
Jeff Bezos, Amazon.
·
Reed Hastings, Netflix
·
Steve Jobs and Tim Cook,
Apple
This is a kind of leadership which I am
familiar with whilst working as a Production manager. I would say this role is
related to HR manager. In summary, if I say in layman’s language- the leader
may consider the following:
·
think out of the box
·
Override status quo.
·
Encourage creative and
quality work.
·
Strong attention and focus on
HR and employees.
·
Have a message “Trust me, I know what I am doing”
His technique was different. There were
no winners or losers in the business game. He saw competitor companies as partners.
This was The Infinite Game, a book by the name exists by Simon Sinek.
According to Joly:
“The key
is to get moving.”
In Summary, Joly did the following to get
Best Buy across the crisis and well.
·
Compete with low Amazon prices
·
Do not view competitors as Rivals.
·
Value Employees
·
Bring back loyalty programs.
·
Value of training employees in technology.
The Result:
·
Company market Share grew to 15 percent
·
Share price grew 271 percent.
Concept of Transformational leadership.
Books. (Recommended by Indica Books)
·
The Heart of Business – Leadership
Principles for the Next Era of Capitalism.” By Hubert Joly.
·
The Infinite Game-
by Simon Sinek. To Buy.
Please like Indica Books on Facebook.
Universities recommendation:
·
HEC
Paris. A great business school, one of the best in the world.
|
To Keep reading
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References
https://leaders.com/articles/business/best-buy-history/
https://www.cio.com/article/228465/what-is-transformational-leadership-a-model-for-motivating-innovation.html
https://www.companieshistory.com/best-buy/
https://leaders.com/articles/business/best-buy-history/
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Arayan G
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