Best Buy Turns to Hospitality Industry for New CEO
Best Buy Co Inc. named Hubert Joly, the former head of hospitality company Carlson, as its new CEO. The 53-year old Frenchman has never worked in retail, but has significant turnaround experience in the technology, media and services sector.
The naming of a permanent CEO ends months of uncertainty following the abrupt departure in April of its prior CEO, Brian Dunn, coming just after the world’s largest consumer electronics chain unveiled a comprehensive turnaround effort.
"Hubert was an outstanding candidate for this position and I am confident he will be a great fit for Best Buy," Hatim Tyabji, Best Buy’s chairman, said in a statement. "Hubert’s range and depth of experience in transforming companies is exactly what the company needs at the moment, as is his energetic, imaginative and experienced leadership in executing strategies."
"He is a little bit older, a little bit more seasoned," BB&T Capital Markets analyst Anthony Chukumba, told Reuters. "I think this is a home run for Best Buy."
Mr. Joly drove the turnaround of the French business of EDS, which is now part of Hewlett Packard, from 1996 to 1999. He also led the restructuring of Vivendi’s video game business, including successfully tapping growth in online gaming. In the service sector, he was credited for transforming Carslon Wagonlit Travel into the leader in corporate travel management. As Carlson’s CEO, Mr. Joly strengthened its customer service sector, including its more than 900 T.G.I. Friday’s restaurants and more than 1,000 hotels that includes the Radisson franchise.
He succeeds Mike Mikan, a board member who served as interim CEO since April and had also been vying for the full-time job.
Brian Sozzi, analyst at NBG Productions, wrote in a note that investors would likely be disappointed in the hiring of a hospitality executive at a "critical juncture" for the company.
"Joly is a rogue agent," Mr. Sozzi told the Associated Press. "He comes in and fixes companies and then leaves."
Shares of Best Buy traded down 7 percent on Monday although the decline could have been caused by the weekend’s breakdown of takeover talks with founder Richard Schulze.
Mr. Schulze said on Monday he would continue to pursue his proposal to take the company private. He called Mr. Joly an "accomplished executive" but said the retailer needed a "leadership team with deep retail experience and knowledge of Best Buy."
Mr. Joly is expected to assume his new role as president and CEO in early September when his visa is secured, Best Buy said.
Discussion Questions
Discussion questions: What do you think of the hiring of Hubert Joly as Best Buy’s CEO? When does the hiring of an outsider to orchestrate a turnaround make sense? Is Mr. Joly too much of an outsider?
In theory, an outside hire is just what Best Buy needs right now. The takeover attempt being orchestrated by Richard Schulze and his team (including one of his ex-CEO proteges) was not likely to be as transformative as the company’s issues demand. However, it’s too early to declare that “months of uncertainty” are over, as long as Schulze still has an opportunity to stir things up.
Joly brings an interesting background to Best Buy, with experience in the tech industry and (perhaps more relevant) the hospitality industry. Best Buy’s forgotten legacy is great customer service, and if the company is to survive it needs to compete on a level playing field with The Apple Store. Joly should bring a fresh pair of eyes to the challenge.
From Joly to Johnson, so many retailers seem to be looking for a savior, someone who can make everything work again. As if anyone working there couldn’t possibly know what it will take to move the brand forward. As if loyalty and insight in the trenches mean nothing.
All the while saying how they want their own customers to be loyal to them. It seems many could learn from Ben & Jerry’s CEO who knew he had to join the culture to help it.
Why is it that the retail industry is so quick to reject outsiders and fresh approaches?
Same old, same old clearly doesn’t work. I believe Mr. Joly understands turnaround as well as service.
A turnaround strategy with service to consumers at the heart just might be an idea worth exploring. We all know what happens to shopper sentiment when a troubled retailer cuts back on human service.
Let’s give the guy a chance.
Turnarounds are different than running or building a business. The principles are to conserve cash, reduce cost, eliminate core activities and identify an achievable short-term strategy. Best Buy, like many electronics retailers, appears to need a change of direction or will perish. As much as many in the industry say it is a different business, it is still a business. Turnarounds are not for the long-term, they are for today and tomorrow. Not knowing retail should not be the issue.
My first reaction was to make a joke — is he going to train BB associates to say “Would you like fries with that TV, ma’am?” but the truth is, you never know. I made a lot of jokes when Lou Gerstner (former head of Nabisco) was made CEO of IBM and it turned into one of the great turnaround stories of the ’90s.
Best Buy clearly dumped everything but the kitchen sink into last quarter (the famous ‘re-structuring charges’) so they’re giving the new guy an easy hurdle to exceed. I still have no idea how BB is going to reinvent itself, but absent the founder taking it over (my first choice), I guess all we can do is wait and see.
Best Buy now needs two major steps for success. First, it needs to be “uncrippled” and then restyled to today’s tempo. There is no one on board currently who can do the former and the latter still needs a new paradigm and that’s what former CEO Richard Schultz wants to provide.
Hubert Joly is an effective Sick Chicken Doctor. He will organize the revamping and then probably leave if/when Richard Schultz is successful in taking over Best Buy again. Best Buy and its success is part of Mr. Schultz’s DNA.
In today’s multi-facted, ever changing global scheme of things, who really is an “outsider”?
It would seem that Mr. Joly’s history of success speaks to his ability to synthesize the character of various businesses with attention to technology and customer experiences. I think that combination is a likely source of a new success for Mr. Joly and growth for Best Buy.
My choice would have been Richard Shultz taking the company back and going private. Let’s wait to see how this change in leadership develops. He has a challenging task ahead, and already we have visa problems?
People who know Mr. Joly speak very highly of him.
Best Buy needs fresh new thinking and a willingness to leverage its physical space to create new revenue from services. The industry hopes against hope that he can turn BBY around.
If the board has a clear and committed course of action on how to guide the company in the next 18-24 months, then an action guy like Joly can come in and aggressively move the company forward. If Joly is going to come in, and have a need to learn the retail business over 12 months, this isn’t going to give Best Buy the time they need to make proactive changes.
It is difficult to change a culture that has had industry leadership for a number of years. Best Buy has those historical roots. However, it is readily apparent that Best Buy needs to aggressively move forward with changes. The board at this point is keeping Schulze at bay. If that is their position, they have to decisively give Joly the reigns, and insist that he drive the company in the direction that they have laid out.
Best Buy hasn’t been making operational or marketing mistakes. They have been making cultural and strategic mistakes of knowing when to START, STOP, and SUSTAIN their actions.
In the short-term, a turnaround expert like Mr. Joly can stabilize the financial fundamentals. In the long-term, a sustainable vision is needed. In Mr. Joly, BBY most likely has somebody who is highly skilled in the short-term urgencies, and may have the skill set to chart the longer-term course.
I don’t know anything about Mr. Joly but I can only hope that he is also a creative or at least knows how to entertain creative thinking. BB has been a great brand and can be a great brand again with the right creative service model.
I think Best Buy needs a services guru if it’s going to transform itself into the business it needs to be. Its future absolutely does not lie in displaying electronics commodities at the lowest prices possible. That’s a sucker’s game, and by now everybody knows it.
But there is a significant opportunity for BB to redefine itself as the go-to place for customer success. Consumer electronics are complicated and they don’t easily work well together. Best Buy has numerous opportunities: Help me reliably sync my Verizon smart phone data with my Windows laptop and my Samsung tablet. Help me set up, configure and manage a personal cloud in my home office. Help me set up remote home climate, security and lighting controls that I operate from my mobile device or automobile. Help me set up, manage, monitor and control home solar power installations.
All these services bundles may include some equipment purchases, but they depend primarily upon a high level of reliable advice and hands-on involvement that customers could and should pay for. Apple’s Genius Bar is a good if highly simplified starting model, but it doesn’t come close to managing the kind of diverse issues I’m talking about here.
So here’s my back-of-the-envelope model for Best Buy ( coutez s’il vous plait, M. Joly):
* Change “Geek Squad” to “TechMasters” or something that signifies your serious intent.
* Offer services solutions of real value at a fair price – possibly on a subscription basis. Include a small business/home office practice, an entertainment practice, and a home systems practice.
* Hire smart people and pay them decently with incentives based on customer success.
* Most-favored customers should receive hardware at near-cost (worth it because services are high in margin). This will neutralize showrooming.
* Lean on major vendors to provide much better help resources, training for your customer facing staff, and improve cross-brand compatibility and connectivity. Consider a “Best Buy Certified” program to underscore this for shoppers.
That’s enough for now. You know where to send my fee.
We know that Mr. Joly successfully led the refocus of Carslon Wagonlit Travel from consumer-dependant model to a more B2B focused company as the online travel sites altered the travel landscape. This is similar to the market dynamic he faces at BB. Not sure this same strategy would work for BB but it does show that Mr. Joly is willing to make large strategic changes and that he has the management chops to oversee the implementation of sweeping change.
My reflexive answer is to say an outsider never works — or almost never — for the simple reason that he/she was hired by the same people who allowed the business to collapse in the first place (and thus implicitly don’t know what they’re doing); and Monsieur Joly is about as “outside” as you can get, being not only outside the company, but also the industry and even the country…so there are enough hurdles to make the recent Olympic events look like child’s play. But no one here has either anything (personally) bad to say or any wish but “bon chance,” and I don’t intend to break that pattern (if I knew what is supposed to be done I would have been the one hired).
I guess you never know, but generally, you need a retailer or a merchant to lead your retailers — especially in the U.S. where the logistics, scale, H.R. and real estate issues can dominate a discussion like nowhere else and no other industry. It’s not only about product here.
So, seems like a bit of a stretch to me unless he’s been sent in to shrink or morph the beast to a manageable size/format.
By virtue of his varied background and demonstrated success in helping companies in diverse industries, I believe Mr. Joly has proven his mettle and can be a valuable asset for Best Buy.
This is an extreme comparison, but Best Buy should be in the early stages of future proofing, possibly a similar scenario as when Blockbuster first realized the world was going digital.
The value of a big box retailer is selection and price. Service is a nice to have and can be a differentiator, but too often is left behind in pursuit of profits. As Best Buy loses more often on the price war to online competitors and selection becomes more a driver of “showrooming” than for actual customer convenience, there is obvious need for forward planning.
An “outsider” can make the difference between winning and losing and therefore I believe Mr. Joly may be a good choice to lead Best Buy through this next stage of development.
I believe that looking to the outside for inspiration and good ideas deserves merit. But with the economy the way it is, there has got to be a great ‘retail merchant’ out there who would have had a better understanding of how to help Best Buy.