After The Turnaround: The Next Tack @BestBuy // Building the #NewBlue $BBY


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I stand up and enthusiastically applaud Top Management Team’s (“TMT’s”) that have a propensity to outperform.  And TMT’s with “Staying Power”, a/k/a the capability to consistently outperform over long periods of time, have a special place in my heart.  They have that “Je ne sais quoi”, a rare quality that cannot be easily described or named.

Here are some examples of what TMT’s with Staying Power do different.  They:

  • Create new categories of products and services for customers
  • Generate demand amidst extremely challenging economic forces
  • Return value for shareholders, in the form of Total Returns
  • Offer learning, development, and career opportunities for employees
  • Produce socio-economic benefits for the communities in which they operate

But most of all they do this one thing different: Somewhere and at some point in their lives, they learned one critical behavior that translates to outperformance: Never. Be. Satisfied.  I’m not sure where this falls in Korn Ferry’s skills inventory, or a Heidrick & Struggles leadership assessment, but I do know one thing: It works and it’s invaluable.  I owe thanks to my Mom for instilling this Type-A trait in me, and how to temper it when it becomes counterproductive.

Outperforming TMT’s teams intrinsically know they cannot rest on their laurels, they MUST write the next chapter – or it shall be written for them.  They see complacency as a quiet, erosive force that dilutes performance well before it appears in Statements of Cash Flows and Income Statements.  They know how to systemically reinvent themselves, their companies, their products/services, and their talent pool.  And they know they can’t do it alone – it takes unlocking the economic potential of their entire workforce to cultivate Staying Power.

Best Buy, headquartered in Richfield, MN, is a Staying Power success story right in the backyard of the Minneapolis / St. Paul.  #GoMN.  Best Buy under Mr. Joly’s leadership, has deservedly earned another place in the history books and will no doubt become Turnaround Case Study for other executives worthy of publication in Barron’s, Harvard Business Review, and arguably the growth rebels at FastCompany.

CEO’s are judged, selected, heralded, and terminated based on the relative strength of their competitors.   Best Buy, a Goliath in its own right, has felt the tremendous pressure of disruptive market forces, creative destruction, and formidable price competition.  Hubert Joly has conquered – and since 2012 his playbook, backed by favorable macroeconomic tailwinds in consumer spending – wrote a remarkable turnaround story that is the envy of many CEO’s.  And given the maturing bull market we are entering, my bet is it will become increasingly important lesson for other CEO’s in the near future.

Best Buy’s Turnaround: Then and Now

Then: FY11 – FY14

  • Problem 1: Negative Y-o-Y Domestic Comparable Sales
  • Problem 2: Decelerating, but positive Y-o-Y Domestic Non-GAAP Operating Income (OI) Rate

FY14 -to- FY15 was the watershed inflection point in Best Buy’s Turnaround, where (a) Domestic Comps turned positive, and (b) the rate-of-change of Domestic Non-GAAP OI accelerated in a positive direction.

Now: FY18 (solved)

  • Positive Domestic Comps
  • Accelerating-to-Near-Constant Domestic Non-GAAP Operating Income Rate

In the process, a need for change surfaced: Best Buy’s Domestic Non-GAAP Operating Income rate has roughly plateau’ed over the past 3 fiscal years (as observed in Full Year Domestic OI Rates starting in FY16).  This signaled the need for a new tack in strategy, something different, but something that would still harness Best Buys underlying strengths and assets.  I like to think of theses as underlying (or hidden) growth and value opportunities that can push a company to the next level of operating performance while staying true to itself (e.g. not abandoning the core).  The financial results demonstrated a clear need to push-forward to higher levels of profitable growth through reinvention, new opportunities, and new categories.  Mr Joly, and his management team, recognized this need for a slightly different direction (Read: The Next Tack, below).

Looking ahead – as $BBY trades on expectations of future outperformance, not just executing on fundaments, analysts and investors are now focusing on Best Buy’s leadership team to translate it latest strategic programs financial results in terms of two simultaneous objectives: (a) higher revenue at (b) higher Non-GAAP Operating income rates.

3-Points of Best Buy’s Growth-Value-Strategy Hypothesis that Proved True

  1. It possible to win financially with competitive prices and a higher level of service.
  2. Multichannel is a great asset.  (Note: Jeff Bezo’s and Amazon has clearly been taking note based on his push into physical channels over the last 3 years.)
  3. Winning is not a zero-sum game against a single competitor.

The net-effect: What I call “The Twist”, a strategic design that is competitively sensitive to Growth+Value, proved to be attainable at Best Buy.

The Next Tack: What’s next in Mr. Joly’s playbook for Best Buy?


In fiscal 2018 Best Buy declared its turnaround over (dubbed “Renew Blue”) and launched our new growth strategy, Best Buy 2020: Building the New Blue. As found in Best Buy’s 2017 Investor Day presentation, Mr. Joly’s team has laid out a clear and exciting purpose: enrich our customers’ lives through technology. We aim to fulfill our purpose by addressing key human needs in areas like entertainment, productivity, communication, food, security, and health and wellness.  Best Buy believes it is in an opportunity rich environment, and Best Buy is uniquely well-positioned to capitalize on these opportunities because our combination of assets and capabilities gives us the ability to serve customers online, in stores or in their homes. Best Buy’s Board was deeply engaged with management in the development of this strategy, and will continue to guide and support management in its execution.

A personal hobby of mine is reverse-engineering corporate strategy.  According the most recent Proxy Statement, Best Buy is expanding its strategy in two dimensions:

  1. What Best Buy Sells
  2. How Best Buy Sells

As I see it, here is a list of the apparent macro trends associated with the new incremental elements of Best Buy’s Next Tack for expanding “What It Sells”:

  1. Digging for Customer Loyalty and Additional Revenue in Services: “Total Tech Support”
  2. Looking to Capitalize on the Demographics of an Aging U.S Domestic Population: “Assured Living”
  3. Leverage IoT can Enrich Day-to-Day Life Beyond The Home Theatre and Appliances: “Smart Home Management”

Note: There are underlying implications for each of these in terms of Best Buy’s business model, whereas there is a notable shift to revenue models that are akin to cloud-economics as witnessed in Consumer and Enterprise Software.  A key question we need to ask is: Customers are demanding the quality of service that comes with an ongoing relationship, but what must be done in order to create a more wedded, long-term buyer-seller relationship?

In terms of “How It Sells”, Best Buy is focused on three strategies to accelerate omnichannel growth:

  1. Continuing to improve the customer experience (CX) within and across channels
  2. More effectively addressing customer needs in under penetrated categories
  3. Building the in-home channel

Number 3 is the biggie in terms of transforming Best Buy customer experience, transforming its business model, and creating new evergreen revenue streams.

Over the months ahead, I will be digging deeper into how Best Buy is entering each of these exciting opportunities.  I’m keeping a keen-eye on what the prospects are in terms of directly-translatable revenue and what it means for customers, employees, investors, and society in broader sense.


“You move to strategy after you improve things operationally, because by then, you’ve created degrees of freedom,” Mr. Joly said.  This quote was found in Barron’s.



(1) DEF14A – Best Buy Proxy Statement, May 24, 2018.

(2) World’s Best CEO’s: Turn Around Experts.

(3) Best Buy Co, Inc. (BBY) CEO Hubert Joly on Q1 FY2019 Results – Earnings Call Transcript.  May, 24, 2018.

(4) Best Buy 2020: Building the New Blue – Investor Day September, 19, 2017.

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