The traditional approach for turning around a failing company is simple and ruthless. You brutally restructure the organization and cut costs.
But it shouldn’t be that way.
According to Hubert Joly, “people are part of the solution, not part of the problem”.
Hubert is the former Chairman and CEO of Best Buy. He's also best-selling Author of The Heart of Business and Senior Lecturer at Harvard Business School.
He shared the miraculous story of turning around Best Buy on the StratChat show I hosted in October.
There are 7 key points I want to highlight. They outline a radically different approach to business.
There were several operational issues Hubert identified when he joined Best Buy:
He had to fix what was broken. When you join a company that’s failing, the last thing you need is vision. What you need is execution.
A board member at a previous company taught Hubert an important lesson. Make quick progress on the basic operational level of your business. This will afford you strategic level freedom from your stakeholders later on.
Business activities live on an uncertainty continuum. At Strategyzer, we call this the Explore-Exploit continuum. Creating new growth engines and managing existing business(es) are on opposite ends of this continuum.
If you need to turn around a company, start with fixing what’s broken (exploit). Then you can focus on creating new growth engines (explore.)
It’s not always the right time to prioritise the explore side and that’s ok, as long as it’s a deliberate decision.
Once Best Buy stabilised and started to grow, Hubert paused for a moment. This was when he moved from execution mode to strategy. He began to ask, what type of company do we want to become? What is our purpose?
Talking about purpose has become very popular and rightly so. Hubert argues that it’s fundamental to innovation.
What Hubert realised was that Best Buy was not in the retail business. They were in the happiness business. This is about enriching people’s lives through technology and addressing key human needs. That’s more inspiring of course and also vastly expanded their addressable market.
Focusing on purpose is what leads to innovation. This is how Best Buy went on to introduce the in-home advisor program. That's where if your need is too complex, they’ll come to your home for free. It’s also how they got into the health space. They help aging seniors stay independently in their homes for longer. They do this by putting sensors in their homes, remotely monitoring them and then making an intervention if needed. They sell this service through insurance companies, not through Best Buy stores. So reimagining your company’s purpose is a key foundation for innovation.
Hubert created a Business “purpose-o-meter” which is based on principles from The Heart of Business book. This tool will help you assess the strength of your company’s purpose.
Be vulnerable as a leader. Most people think the leader is supposed to be a superhero, somebody who knows everything and is there to tell other people what to do. Nobody wants to follow that. What people really want is someone who is real and vulnerable.
The part of the organization that's in charge of running the business isn’t going to be able to innovate at the same time.
If you're running a $50 billion company, with a hundred thousand people, there are promotions every month. Everyone is so busy, there's no spare capacity for innovation.
So a breakthrough moment for Hubert was setting up the Strategic Growth Office. This was a special function made up of around 50 highly experienced members of staff. They were 100% dedicated to managing innovation. Their job was to:
This group was led by Corie Barry who reported directly to Hubert. Corie went on to be his successor as CEO. This just goes to show how important and well staffed the Strategic Growth Office was.
If your head of innovation doesn’t report directly to the CEO, you won’t get innovation. The function needs legitimacy and power to succeed.
Ping An is another fantastic example of this type or organizational structure and culture. Learn more about it in another Strategyzer blog here.
The usual turnaround manual encourages you to fire staff; almost as if they are the problem. Hubert disagrees. He sees people as the solution. So his initial focus was reenergizing the workforce and giving them the right tools.
Don’t just tell people what to do. Instead, create the right environment for innovation to happen.
Hubert spent a huge part of his time on this at Best Buy. He wanted everybody to write themselves into the company’s story. He wanted them to become the biggest, most beautiful versions of themselves and to create amazing things.
The role of leader is not to make decisions or show direction. It’s about creating the soil where seeds can grow. This isn’t something you usually hear turnaround CEOs say. But it’s how you balance top down and bottom up innovation as a leader.
Hubert designed a business “electrocardiogram” to help you understand how can you improve the heart of your organization and unleash human magic. Here you can assess the heart of your business.
Hubert gave all his employees at Best Buy a Get Out of Jail Free card. They would go to him when they had ‘failed’ or made a mistake. Instead of punishing them, Hubert would give them two more cards and encourage them to continue experimenting.
To clarify, not all failure is the same.
Imagine if you're Amazon and you're opening up your one thousandth warehouse. You’ve done this type of thing many times before. You shouldn't be messing it up.
But if you’re Amazon and you’re launching a new smartphone, that’s different. You’ve never done that before so you have to be prepared to accept failure. Encouraging this type of experimentation/failure is not just ok, it’s essential.
Another point Hubert spoke passionately about was autonomy. The idea that everyone in the company was empowered to do the right thing.
Hubert created a system whereby everyone (especially customer facing staff) had a strong understanding of the company’s purpose, values and strategy.
This meant he was able to push decision-making down through the organization.
Frontline staff knew they were empowered to make decisions. Hubert wasn’t concerned whether managers liked the decisions they were making or not, as long as they at least took their manager’s inputs into consideration. Hubert called this “autonomy without chaos”. Having a high tolerance for failure was necessary to make this possible.
You can of course learn from your competitors but you shouldn’t obsess over them. This is a similar message we’ve heard from Jeff Bezos (CEO, Amazon.) Amazon focussed on customers. Whereas Amazon’s competitors were focussed on what Amazon was doing rather than their own customers. Your competition is largely irrelevant. If anything, competitors help make the pie bigger, not smaller.
The most jaw-dropping part of Best Buy’s transformation was the strategic partnership with Amazon. Jeff gave them the exclusive rights to the Fire TV platform being embedded in smart TVs that were sold only at Best Buy and Best Buy on Amazon. Remember everybody was saying at the time that Amazon was going to kill Best Buy. When Hubert announced the strategic partnership, Jeff came to one of Best Buy’s stores said, a TV is a considered purchase. You need to see it. The best place in the world is Best Buy.
The media was like, what are you talking about? They were surprised to see two competitors working together.
If you’d like to become an innovation expert, check out our Building Invincible Companies virtual masterclass.