You Can Buy a Lot of Things at Best Buy, but You Can’t Buy the Best Map to Success

There is no such thing as “keeping up” with the competition. You either keep ahead of the pack or you keep falling behind.

There is a generally accepted belief that building a successful company is something that can be mapped out; and so long as the map is followed, success will be achieved. This idea is reinforced when you get up close and personal with the workings of successful companies, because there is the appearance that success is formula driven; that these companies all do the same thing to become successful. This impression opens the door to herds of nerds in the form high-paid consultants who recommend the adoption of “best practices” and “peer group analysis,” based on the implied assumption that the map to success is to copy the success of others.

This is a false premise. Success does not lend itself to being “mapped out,” and in fact, is most often achieved by going off the map.

Thinking Outside the Box

The way to build a successful company is not to try to be the best of the rest, but to be distinctive. When you step back and take a wide-angle overview of successful companies, a different perspective on achieving success comes into view. Looking at success from a broad view, you can identify a unique, coherent theme that weaves its way through the very fabric of these companies. It is more than simply trying to be better doing what others do. Instead, what makes these companies distinctive is an unswerving, relentless effort to identify and do what competitors don’t, can’t or won’t do.

As difficult as it may be – and it is difficult – to be distinctive when building a successful company, this challenge pales by comparison to the difficulty of sustaining success. That’s because there is a tendency, once success has been achieved, to keep on keeping on. The focus shifts to protecting the status quo, by using formula-driven business plans and peer-group analysis, to make sure you are keeping up. While this tactic seems logical and is the accepted way to manage successful companies, it is a faulty map to follow, because there is no such thing as keeping up. You either keep ahead or you keep falling behind.

The Rise and Slide of Best Buy

Best Buy is a wonderful illustration of all the good and bad that comes from achieving and then attempting to sustain success. By any measure, Best Buy is an American entrepreneurial success story. Founded in 1966 by Richard Schulze and Gary Smoliak, Best Buy has achieved exceptional growth, profitability and success. By 2006 the Best Buy brand had become the dominant player in the consumer electronics field. With almost 1,000 stores producing billions in revenue and profits, Best Buy had become one of the most admired companies in the country. As a perspective on the success of Best Buy, consider that after its first year in business (1966), the company generated $173,000 in gross sales and by the end of 2011 revenues exceeded $50 billion and profit was a tidy $1.28 billion. Yet despite this remarkable record of success, seemingly almost overnight, Best Buy has become a company in trouble. Year-over-year Sales are slowing, expenses are increasing, stores are being closed, the stock is trading at near record low levels; being artificially propped up by Schulze’s effort to buy the company and take it private.

When Schulze and his cohorts opened their first store – selling electronics and home entertainment products – they did not offer anything that could not be purchased in hundreds of other locations. What made Best Buy distinctive was to specialize in electronics and home entertainment and to bring all the options into a single “big-box” location. Best Buy not only sold product, it sold convenience.

Until the emergence of Best Buy, electronics and home entertainment products were sold either in a small store with limited inventory and selection or as simply an adjunct of larger stores such as Sears. Best Buy offered customers the convenience of going to one store to see, compare and shop for all of the offerings available in electronics and home entertainment. The distinction that drove the success of Best Buy was not in the products offered, but in the way the products were offered. What Best Buy did was to do what others were not doing and, for the most part, could not do.

Of course, as in any industry, successful companies spawn copycat competitors and for Best Buy it came in the form of Circuit City and CompUSA. Best Buy recognized the competition and set about to overwhelm it; and it did. In 2007 CompUSA was forced into reorganization and Circuit City filed for bankruptcy in 2009; both vivid examples that the failure to differentiate is the map to failure.

Who could blame the executives of Best Buy for believing in 2010 that the competition had been eliminated and the world was their oyster? All they had to do to maintain success was to keep on keeping on. But in hindsight it is easy to see that Best Buy was lulled into a false sense of security even though its same-store sales were cratering (click on graphic to enlarge).

Best Buy executives became myopic and were slow to recognize that the competition they faced had not gone away, but had changed. Instead of copycat “big-box” electronic stores, the competition became the “small-box” computers that allowed customers to “shop” at Best Buy, but to buy on the Internet. Unencumbered by the cost of building, stocking and managing 1,000 showrooms, Amazon and other Internet providers were able to offer the same products as Best Buy, but at much lower prices.

Almost overnight, Best Buy discovered that what had enabled the company to differentiate itself from the competition – the value offered by showroom shopping – became its most intractable liability. Best Buy was on the wrong side of differentiation and management was boxed into the position of not being able to do what the competition was doing. While trying to keep up with that they had been doing, they had failed to keep ahead of the competition; and kept falling behind.

Looking Ahead and Outside the Box

Best Buy still has the chance to reboot it success, but it must move quickly. The Best Buy brand remains strong; the company has access to millions of existing and potential customers and it has the financial resources to reengineer its business model in a way that will differentiate itself from the new brand of competition. What Best Buy must do is go back to the philosophy it embraced to achieve success and that is to move ahead of the competition by offering what others don’t, can’t or won’t due.

Fortunately, Best Buy already has an asset in place to do this. Looking back, one of the best decisions made by Best Buy was to acquire a fledgling, funky service called the Geek Squad in 2002. At first the Geek Squad was just an interesting but nerdy little add-on in Best Buy stores, but it has grown to be the most profitable, high-margin service offered by the company.

The Geek Squad offers a unique service (both in the stores and at home) – programming, installing and fixing electronic devices – that most customers are disinterested in or incapable of doing; and are willing to pay for the service. But even more important than that, the Geek Squad offers a service the competition can’t offer. Amazon may be able to offer a cheaper printer, but it can’t connect it to a wireless home Wi-Fi system or fix it if it breaks. What good is a cheap printer that does not print? And since electronic devices most assuredly will become more complicated, and often more exasperating to install and maintain, Best Buy and its Geek Squad can commandeer the catbird seat in this growing market segment. That’s the type of differentiation that Best Buy needs to capitalize on to maintain its success or maybe even its very existence.

It is encouraging to see that Best Buy management seems to recognize the value of the Geek Squad and has recently announced an agreement to expand the service into a number of Target stores on a trial basis. Maybe, just maybe, Best Buy is beginning to once again look for ways to differentiate their value by keeping ahead of competition and begin doing with others can’t do. It is the only way to keep going.

And the Moral of the Story …

There is no magic map to success. Success is achieved, not by following and going where others have gone, but by finding your way to a place where others don’t, won’t or can’t go to.

It is not easy; but it is easier to create success than it is to copy it. The false promises of achieving success by following the maps of others in the form of slavish attention to peer group comparisons and mimicking best practices are just that, false. If that was truly the map to success, the highway would be a lot more crowded. The idea is to keep ahead, not keep up with others and if you don’t do that, then you will keep falling behind. The best time to keep ahead of the competition is when the competition is focused on just trying to keep up. True success is achieved when you are willing to go off the map and find your own distinctive highway to success.

 

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