Best Buy

What are the challenges of doing business in today's marketplace?
A sampling of senior
executives would probably come up with the same list: Competition is global. Companies are
increasingly competing for the same wallet. With more choices and information, customers
are choosing mostly on price. Even before the recent downturn, what former IBM boss Lou
Gerstner called "commodity hell" was pretty much every business's nightmare.
That sampling is also likely to agree on the solutions: Embrace your market and become
"customer-centric." That said, it would be hard to find a CEO who would tell you that his or
her firm isn't customer-centric already. And that's exactly where mass delusion begins for
most companies.
To be sure, most major enterprises do have departments devoted to surveying their

customers. But the truth behind "garbage in, garbage out" still applies. Ask about your
business only through the lens of your offerings — How do you like product X? How can we
improve service Y? How receptive would you be to new product Z — and you may learn
something about them, but you will discover almost nothing significant about your
customers.
Becoming customer-centric means looking at an enterprise from the outside-in rather

than the inside-out — that is, through the lens of the customer rather than the
producer. It's about understanding what problems customers face in their lives and then
providing mutually advantageous solutions.
It's the approach Best Buy took and it's a key reason why the company has survived in the
tumultuous consumer-electronics marketplace, while Circuit City is gone. Best Buy took the
time to understand who its customers are and what they need and then started selling
solutions instead of products. As part of its research, for example, Best Buy discovered that
55 percent of its customers were women, and that for the most part they loathed their
shopping experience at the retailer. Men look for a specific product at a discount price.
Women want not just a digital camera, but a printer, cable, and other accessories--and they
care far more about these things than price. Equally important, they want help with
installation, while most men prefer to try to put things together themselves.
Accordingly, Best Buy adopted mostly common-sense solutions once it understood the
issues involved. Related products were bundled together. In many stores, kids now have
special play areas while their moms browse. To help with installation, the company acquired
Geek Squad. Buy a flat screen TV and they'll have it running before your favorite show airs.
Getting from awareness to action, however, was anything but easy for these companies.
And that illustrates the final — and most critical element — of customer-centricity:
implementation. Owning customers' "problem spaces" doesn't just happen. It takes lots of
work.
Even when a company and its employees try to make sense of what they are hearing from
their customers, they often find themselves immobilized by their own organizational
architecture — the internal "silos" that inevitably grow around specific units and functions. I
hasten to add that there is nothing intrinsically wrong with silos. Division of labor,
specialization, and departmental responsibility are necessities in any operation. But most
firms today are still structured around product and geography. They have excellent
perspectives on what they make and where they distribute and sell it, but poor views of
customers and their problems. And these inadequate sight lines impede coordinated action
toward solving these problems.
For Best Buy, bundling related products was an obvious answer, but that required separate
merchandisers to work together. It necessitated adjusting distribution schedules, creating
new store space, and training front-line employees to serve as personal shopping assistants.
These aren't "division reorganization" issues &38212; division reorganization is basically
musical chairs for adults. This kind of reorganization is enterprise-wide. It requires
connection and cooperation across broad swaths of the organizational terrain. Sometimes to
get there you have to blow up silos. More often you can bridge them with some persuasion
and cajoling. But however you get there, you are traveling into the very heart of what you do,
and that takes determination and more than anything else, strong and sustained leadership.
For most firms today, customer-centricity is a necessity for survival — the only sure way to
ensure the organizational resilience that will keep a company out of the jaws of commodity
hell. Getting there is not for the faint of heart, but the process makes — and keeps — the
company competitive.
On the wall in the service department are two large signs explaining the return
policy. There are so many rules it seems as endless as the credits from Star Wars. The company
makes it painfully obvious that if you buy something and ever intend to return it there will be a price to
pay.
vision statement: "Making Life Fun & Easy."
innovation had to be coupled with performance if the company was to sustain and increase its position
in the marketplace. Frequently, innovation comes on the heels of a crisis, when the company's back is
against the wall. Alternatively, innovative ideas often pour forth from an entrepreneurial leader in a
startup company. Senior management recognized that it was neither in crisis nor a startup. The
changes required by innovation would be difficult in the midst of its success. It had to create the
necessity that would become the mother of invention.
That necessity came in a concept that everyone in Best Buy could accept: customer-centricity. Best
Buy decided to move from the mass market and price formula that animated much of the strategy of
retail chain stores to a "unique store approach." Stores would become "customer-segmented" and be
built around the unique interests of customers in each area. Rather than have a cookie-cutter
approach to design and stocking that fit corporate needs for efficiency and control, stores would
reflect customer needs. More autonomy would be given store managers, and technology would be
employed to keep on top of customer buying patterns. Processes that were not customer-driven
would be driven out: readjusted, outsourced, or eliminated.
By tuning in customers and employees

more closely, we are being rewarded
with new ideas every day--ideas that
in the past would not have made their
way to headquarters and have been
implemented at other stores ...
Moreover, given that

consumers' tastes are constantly
changing (as are product cycles), our
goal has become a moving target, forcing
continuous improvement.

Best Buy

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What are the challenges of doing business in today's marketplace?

To be sure, most major enterprises do have departments devoted to surveying their

Becoming customer-centric means looking at an enterprise from the outside-in rather

vision statement: "Making Life Fun & Easy."

By tuning in customers and employees

Moreover, given that

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