How Best Buy’s new CEO, Hubert Joly, has turned the profit model upside down

At the Consumer Electronics Show earlier this year, I met with Hubert Joly, the former chief executive of Hotel Royalton owner Carlson hotels, as he sought the support of the technology sector for his…

How Best Buy’s new CEO, Hubert Joly, has turned the profit model upside down

At the Consumer Electronics Show earlier this year, I met with Hubert Joly, the former chief executive of Hotel Royalton owner Carlson hotels, as he sought the support of the technology sector for his proposed $24.6 billion merger between U.S. electronics retailer Best Buy and European appliance chain Home Depot. He won the support of tech CEO Ellen Pao, who liked his firm-going-all-in focus and described his approach as “capitalism with principles.” “Who says you have to do too much?” he asked.

Mr. Joly, the former CEO of the electronics retailer which he renamed Best Buy, will be offering a new type of capitalism as he prepares to step down from that post later this month. Under his tenure, he fixed Best Buy and made it more competitive against online competitors Amazon and Alibaba. He has recently begun speaking out on a topic that has previously been controversial among the American public: what to do with Amazon. When he left the company last week after less than three years in the post, he told Reuters that many Americans were “outraged” by the powers and benefits of the Amazon.com operation. The company, Mr. Joly pointed out, is worth more than the United States, and operates more than 500 fulfillment centers, in a country where the median household income hovers just over $52,000.

“For years, we’ve lived with slow growth as the single-sized version of capitalism,” Mr. Joly said, “where people are told not to have enough — as opposed to giving people more choices.”

This language — an abandonment of the capitalistic, laissez-faire tradition that underlies much of U.S. economic policy — might be a stretch for many Americans accustomed to the bright lights of Silicon Valley or New York’s financial districts. But Mr. Joly is the fresh face in a growing movement to pursue a more enlightened capitalism that seeks to make profit while also delivering a better quality of life and greater financial stability to ordinary Americans. So far, it appears that he has won over a significant number of them.

As a result of Mr. Joly’s efforts, Best Buy stores not only now cost less per square foot to operate, but also remain as busy as ever in a retail sector largely saturated with chain stores and electronic retailers. The company also bet on e-commerce with little formal marketing. It has spent money on online experiments and acquisitions (and in 2015, a spat with Amazon.com) but has largely stuck to its “no-profit model,” far more akin to a Walmart or Amazon than an Apple.

While the rollout of his new management model has been bumpy at times, under Mr. Joly Best Buy has gone from a high-volume business of poorly stocked and awkwardly designed stores to a consumer-centric one with an effortless online order processing. Instead of outfitting Best Buy stores with kiosks designed to boost online orders, the company has encouraged consumers to use its website instead. And instead of promising artificial intelligence to help with ordering or tracking, it invested more in employee training in back-end customer service, improving the customer experience and then trying to convince consumers why they should keep coming back.

No one who witnessed Mr. Joly speak at the Consumer Electronics Show can miss his emphasis on “Ss” — research, process, quality, smart investment, social responsibility and something Joly calls “social innovation.”

Such a platform-shifting approach is one of the driving forces behind the model of inclusive capitalism that arose during the 2012 election and reared its head once again at the 2017 edition of the conference. In The Wealthy Barber’s Handbook of Radical Inclusion, Danny Vinik lays out his case that for capitalism to thrive in the future, it must embed equal opportunity and the corporate responsibility of social responsibility.

Mr. Joly, a former Chinese government official with a clear affinity for market liberalism, began his efforts to adopt such a mission in Europe during the 2000s, when Best Buy ventured into the Turkish market. Under Mr. Joly, Best Buy continued its expansion abroad, focusing on building teams in Asia that could meet consumers on local streets, develop localized online strategies and direct itself more toward meeting the needs of consumers and minority communities with in-store staffing.

Mr. Joly may not be the technocrat Mr. Vinik calls him, but he may have found a new model for capitalism, though one which puts significant weight on not delivering as much profit.

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