The Case of Best Buy Co. Inc.: An Innovator’s Journey CULTURE OF INNOVATION

What is corporate culture? The shared values, beliefs and norms of behavior that exist within an organization. These are defined by the history, performance, leadership and industry of the organization. There are subcultures within the dominant culture. What is corporate culture? The shared values, beliefs and norms of behavior that exist within an organization. These are defined by the history, performance, leadership and industry of the organization. There are subcultures within the dominant culture.

MANAGEMENT CHALLENGES Innovation as a systemic capability Barriers to innovation Planting the innovation gene Ordinary to extraordinary Playing the whole keyboard Managing resource tensions Managing, measuring, leading innovation How does one actually start in making innovation a systemic capability? How does one sequence the capability-building process? What are the things you have to get right first, if later efforts are going to pay off? How do you identify and neutralize the deadly, and often hidden, toxins that destroy innovation? How do you firmly implant the innovation gene in a company that has spent a decade focused on efficiency and short-term operational performance? How do you turn “ordinary” employees into extraordinary innovators? How do you enlarge the scope of innovation so that it encompasses entire business models as well as individual products and services? How do you manage the tension between the need to “let a thousand flowers bloom” and the need to focus scarce resources? How do you create slack and freedom that are essential for innovation, without folks going off the rails? How do you pursue game-changing ideas without taking outsize risks? How, as an executive, do you manage, measure, and lead innovation? From Gary Hamel, Introduction to Innovation to the Core by Peter Skarzynski and Rowan Gibson, 2008.

Best buy co. inc.: the context Time frame Leaders Size Customer Product Best Buy – industry, key players Time frame – Feb 2002 Leadership: committed to innovation, tolerance for failure, provided resources Richard Schulze, founder, Chairman, CEO Bard Anderson, CEO as of 6/30/02 (had been store manager) Kal Patel, hired May 2003 as Vice President of Strategic Planning to replace Mark Fries, previously the “Innovation Steward” Size: 1,900 retail stores in US, Canada, China 2002 Revenue = $23 billion (2007 = $36 billion) 90,000 employees Customer: techno entertainment enthusiast 25-39 year old Affluent, educated Product: Retail, speciality, consumer electronics, technology, entertainment

Culture of best buy Customer oriented Have fun, learn Tolerance for failure Innovation is important, especially innovative processes. For example, Demand forecasting systems Supply chain management Advertising effectiveness systems Knowledge management systems Structural capital Customer oriented: good ideas start with the customer Why is this important in retail? What are the competitive factors in this industry? Low margin, cost, quality, availability, leading edge products. The customer is in control. Have fun, learn Tolerance for failure

strategos What mindset does Gary Hamel, CEO of Strategos, bring to Best Buy? “Help companies develop and embed strategy and innovation into the core of an organization” 10 Principles of Innovation Very expensive Co-designed the process, guided the participants throughout, coaches more than consultants

I-Journey: “catch some fish and also teach people how to fish” Timeline Participants Phases Timeline 6 months beginning What happens after 6 months? Whirlpool’s learning journey took a year, with a 6-month Discovery Phase. Participants 35 directors and senior managers from Strategy and Business Development 100% time commitment Phases Boot Camp First senior executives Then 35 participants Simulate 6 month I-Journey What is the purpose of the Boot Camp? Build commitment Send a message of importance Break away from other responsibilities Team building Discovery, Lens Groups create five domains Consumer insight Orthodoxies Discontinuities Industry Mapping Core Competencies Innovation Lab Making the message clear and concise, 45 minutes for each 1,000 ideas sorted into five domains Synthesis Different groups – break vested interest in ideas, build in objectivity Synthesize and choose Action lab, formal venture teams for business model elaboration supported by investigation and research Venture Reviews with Senior Management – funded, project ended or further investigation Realization Long tail of innovation, 1,000 ideas become six projects Experimentation and venturing Continual review by Venture Review Board Is being rejected considered a failure?

INNOVATION PROCESS & IDEATION (Davila et al, 2006: p.125) Bootcamp: developing mindset Discovery Innovation Lab 1000 ideas into 5 domains Synthesis Realization 6 projects Generation of Ideas Radical Innovation Incremental Selection Execution Creation Of Value Generation of Ideas Product, Service and/or Process Innovation

Three tasks of innovative work behavior: Scott, S. U. & R. A. Bruce Three tasks of innovative work behavior: Scott, S.U. & R.A. Bruce. 1994. Determinants of Innovative Behavior: A Path Model of Individual Innovation in the Workplace. Academy of Management Journal, 37: 580-607. Idea generation: formulation of new ideas of any sort, which are benefical to organizational conduct (Woodman, Sawyer and Griffin, 1993) Idea promotion: capitalizing on ideas generated by finding sponsors and allies with the necessary influence and authority (Kanter, 1983, 1988) Idea realization: the production of a prototype or model of innovation…that can be touched or experienced, that can now be diffused, mass-produced, turned to productive use, or institutionalized (Kanter, 1988, p.191)

HOW DID THIS WORK AT BEST BUY?

BOOT CAMP Leadership boot camp: 2 days, senior executives I-Journey Participants: 3 days, 35 from Strategy & Business Development Purpose? Build commitment Set expectations Introduce everyone

Discovery (idea generation) V1 Brad Anderson, CEO Five lens groups: Consumer Insight, Orthodoxies, Discontinuities, Industry Mapping, Core Competencies Face-to-face interaction Team interactions Cultural experiences Meet Toby Nord of Consumer Insight team Testing Assumptions Brad Anderson, CEO Leadership sets the tone Five lens groups: Consumer insight – identify unmet needs and customer frustrations Orthodoxies – executive level “limiting beliefs” Discontinuities – trend surfing, what will change the rules Industry Mapping – what are the competitors doing? Where are the white spaces? Core Competencies – what are we good at? Where are we lacking? Face-to-face interaction Experiential learning Stretch beyond the norm Question why do consumers react positively (or negatively) to this? Team interactions Reflection Personal learning process “we do this” rather than “they told us to” Cultural experiences Compare and contrast, extremes Step out of your comfort zone Make no assumptions: Tv in every room but no central tv watching area Different environemtns – where and how you buy it, where and how you use it. Video Documentation Visuals Testing Assumptions: How do people buy things? How do people pay for things? How do people use things? What infrastructure is needed?

Synthesis (conversion) V2 Reorganizing teams around specific business ventures for further investigation Designing the intersection of learning Internalizing insights Experience Step back Generate conclusions Connect with intuition and decision making Record Keeping Designing intersection of learning Integration of ideas, communicating, articulating Internalizing insights, e.g. of American Girl Connecting across generations Need for community based on a demographic Connect to the past Need to be able to step back from the experience and develop an insight or concept that can be generalized to other situations What kinds of communities do people participate in? How do you connect those different communities? Generate conclusions: Comfort level in history, knowing the way things used to be/ Connect experience with intuition and decision making. Record keeping Pen and card in hand

Realization (diffusion) V3 Experimentation & Venturing From 1,000 business ideas to 6 projects Venture Board Decision Field Research Field Test Venture Board – 10 -15 minute presentation after which an investment decision is made. The story, the experience Why? What? Who? How? Applicability – how can we use this idea? Implications – what will it take to make this work? Next steps, resources needed This is real – they vote that day on your team’s idea. If they fund your idea you get to move forward. $5 million for Bong idea. Field research – some things will work, others not. Analysis – why does this work in Korea? Field test – try it in your environment with your customers. What happened that you didn’t expect (socializing). What infrastructure is needed? Test assumptions.  

Transferrable? Key Success Factors? Issues? Recommendations? What Happened? Studio D Store: A new technology and electronics boutique that helps shoppers discover the possibilities of digital technology and the many ways it can enhance their lives. Escape: a high-energy entertainment and retail environment featuring various game stations and products for guys who want the absolute latest in gaming, gadgets and electronics. Key Success Factors: Connecting senior executives with front line managers, direct communication Ability to take one experience and turn it into a generalizable concept, e.g. cutting slack for some employees based on their work history becomes a company wide policy for flexible work hours. Issues: Cost in terms of time, money, psychic energy Can the next group learn this without the 6 month I-Journey and/or without strategos?   What would you recommend to Patel as a solution to his dilemma of diffusing innovation throughout the company? How do you recreate this across 90,000 employees? Do you have to? Can Best Buy do this without Strategos?

Institutionalizing innovation (V) How does the I-Journey lead to a permanent pervasive innovation capability throughout the organization? How do you get people throughout the organization to understand the consumer value proposition? What value are/can we providing to the current and potential consumer? How do you balance innovation with delivering business results?

Return on innovation ROInn™ Cost (for example..) Benefit (for example..) Direct: financial costs and revenues directly attributable to the I-Journey. I-Journey costs, salaries of participants, consultant, Sales from new ideas Indirect: financial costs and revenues indirectly attributable to the I-Journey. Cost of covering for participants during I-Journey, Future revenues generated from additional ideas. Tangible: Physical, measurable, discernable results; now and in the future. Failure of projects due to lack of attention during I-Journey. New partnerships New products/services New business processes Intangible: Non-measurable, subtle, indefinable results; now and in the future. Negative effect on non-participants or participants whose ideas were not supported. Negative effect on families of participants New skills and competencies. Goodwill generated within the company as well as with customers.

Return on innovation ROInn™ Cost (for example..) Benefit (for example..) Direct: financial costs and revenues directly attributable to the I-Journey. I-Journey costs, salaries of participants, consultant, Sales from new ideas Indirect: financial costs and revenues indirectly attributable to the I-Journey. Cost of covering for participants during I-Journey, Future revenues generated from additional ideas. Tangible: Physical, measurable, discernable results; now and in the future. Failure of projects due to lack of attention during I-Journey. New partnerships New products/services New business processes Intangible: Non-measurable, subtle, indefinable results; now and in the future. Negative effect on non-participants or participants whose ideas were not supported. Negative effect on families of participants New skills and competencies. Goodwill generated within the company as well as with customers.