BrainTrust Query: Should long-term strategic goals take precedence over short-term financial ones?
As this week's news of Best Buy's disappointing first quarter profits hit the wires, the company's response to its earnings was as intriguing as the numbers themselves. While Wall Street saw its revenues as bad news, Best Buy's executives were staunch in their opinions that while the chain experienced a short-term loss it is by no means indicative of its long-term prospects.
Core to Best Buy's defense is management's confidence that it is building a solid, differentiated brand via unique marketing and merchandising strategies as well as new services that are "investments in solving technology problems."
Executives point out that market share and customer satisfaction scores are at an all-time high and improvements to the customer experience have been vast - both indicating more accurate scorecards for success. Online revenues are also increasing and new promising offerings such as Best Buy Mobile and the Apple store-within-a-store are also on the horizon.
CEO Brad Anderson told analysts on a conference call that the key point is that Best Buy met strategic goals, even if financial ones were missed.
"We're never satisfied with missing earnings," Mr. Anderson said. "However, we know it does not reflect the core health of our business, the strength of our strategy, or our ability to execute through our people or our optimism about the future."
A MediaPost article provides further insight from Best Buy executives with a quote. "We've got to touch consumers where they live, and solve problems in their home. So we're driving this business to build a relationship with our customer. We're just building the trust in making this crap work right now, and candidly, consumers just want their lives to be better."
The response leads to an interesting industry debate as Best Buy is taking a clear stance that its short-term financials should not thwart confidence in the strategic roadmap. As other retailers seek to similarly innovate under Wall Street's ever-critical eye, is this response inspirational or somewhat naïve?
Discussion Questions: Is Best Buy on the right track with their focus on a long-term, customer-focused strategy over short-term financials? How will they win or lose in the long run with their confidence in this approach? What responsibilities do companies have for meeting Wall Street's short-term targets?
[Author's commentary] We had a lively discussion this week on the challenges of change management within retailer walls and how to better motivate it. Looking at Best Buy's response and knowing some of their management team, I feel that they are an example for how to get out there and just do it.
A few years ago, I heard Brad Anderson get up on a podium and state that "60 percent of what we try fails but it's that 40 percent that will take us into the future".
As the years go by, they've shown by both word and action that they are willing to take a hard stance on their position, invest in their future and take it in the chin from Wall Street while doing so. This is rewarded from the top down and passionately embraced by the majority of employees. They're on the right track that they will have to spend, trip up, learn and improve to evolve and defend a market leader position. That said, the dedication to their cherished consumer has to be felt at every touch. Be it via their marketing, communications, store experience, customer service or home installation experience, their challenge is going to be to deliver as promised.
I wish them luck and hope we as industry give innovators such as them a break as they publicly learn what's working - even if they fall down in some cases - and set an inspirational standard for all others. At least they're out there trying!