Hubert Joly
Hubert Joly is a French-American business executive who served as chief executive officer of Best Buy from August 2012 to June 2019 and as executive chairman until June 2020. He is generally credited with one of the most complete corporate turnarounds of the period, taking a retailer that was widely expected to be destroyed by Amazon and restoring it to growth and profitability.
Since leaving Best Buy he has been a senior lecturer at Harvard Business School and is the author of The Heart of Business: Leadership Principles for the Next Era of Capitalism (2021), an account of his approach to management that argues for treating purpose and human connection as the source of business performance rather than as a supplement to it.
Early life and education
Joly was born in 1959 in France. He studied at HEC Paris and at Sciences Po, the two institutions from which a substantial part of the French business and administrative elite is drawn.
Career
McKinsey
Joly joined McKinsey & Company in 1983 and spent thirteen years there, becoming a partner and working principally on media, technology and travel. The experience shaped a method he applied subsequently: rigorous diagnosis of where money is actually made and lost in a business before deciding what to do about it.
Vivendi
He left McKinsey in 1996 to join Vivendi, where he led the French operations of Electronic Data Systems following a joint venture, and subsequently ran Vivendi Universal Games. The video games business was in difficulty and he restructured it, an early instance of the turnaround work that became his speciality.
Carlson
Joly became chief executive of Carlson Wagonlit Travel in 2004 and of its parent, the American privately held Carlson Companies, in 2008. Carlson's holdings included the Radisson and Regent hotel brands and the TGI Fridays restaurant chain. He led the group through the financial crisis, and the period established him in the United States, and specifically in Minnesota, where Carlson and Best Buy are both headquartered.
Best Buy
The position in 2012
Joly was appointed chief executive of Best Buy in August 2012. The company's condition was widely regarded as terminal.
The specific threat was showrooming: customers visiting a Best Buy store to examine a television or a laptop, obtaining advice from staff, and then buying the same item more cheaply from Amazon on a telephone while standing in the aisle. Best Buy carried the full cost of the store, the inventory and the staff, and Amazon captured the sale. A large body of commentary at the time concluded that the model was unsustainable, and comparisons were drawn with Circuit City, the competing chain that had liquidated in 2009.
The company's own condition compounded this. The previous chief executive had resigned over a personal matter, the founder was attempting to take the company private, sales were falling, the share price had lost most of its value and there was no succession plan.
Renew Blue
Joly's first act was to spend time in stores, working shifts and speaking to employees, and his diagnosis departed from the prevailing analysis. He concluded that the problem was not that customers preferred to buy online but that Best Buy was giving them reasons to: prices were higher, the website was poor, delivery was slow, stores were untidy and staff were insufficiently trained.
The programme announced in November 2012, called Renew Blue, addressed these directly.
Price matching was made permanent and unconditional against Amazon and other major competitors. This was the decision most criticised at the time, on the ground that it surrendered margin, and it was the one that mattered most: it removed the reason to leave the store, and the cost proved far lower than predicted because most customers do not in fact check.
Ship from store used the inventory in more than a thousand shops as a distribution network, so that an online order could be filled from the nearest store rather than a distant warehouse. This dramatically improved delivery times at almost no capital cost and converted the store estate from a liability into an asset, an insight subsequently adopted across retail.
Stores within stores turned the supplier relationship around. Rather than competing with manufacturers, Best Buy leased space within its shops to Apple, Samsung, Microsoft, Sony and others, who fitted and staffed their own branded areas. The manufacturers gained a physical presence without building their own shops; Best Buy gained rental income, better presentation and manufacturer investment in its stores.
Cost reduction removed well over a billion dollars from the cost base, through supply chain efficiency, reduced returns and damage, and administrative savings, and the savings were reinvested rather than taken as margin.
Employees were the stated foundation of the whole programme. Joly restored employee discounts that had been cut, invested in training, and framed the strategy internally around the proposition that customers would return only if staff could genuinely help them.
Best Buy 2020 and results
The successor strategy, Best Buy 2020: Building the New Blue, extended the approach from selling products to providing services. In-Home Advisors visited customers' houses without charge to design solutions across a whole home. Total Tech Support offered a subscription covering all of a household's technology regardless of where it was bought. The 2018 acquisition of GreatCall, a provider of connected health devices and emergency response services for older people, extended this into health.
By the time Joly stepped down in June 2019 the share price had risen approximately fivefold from its 2012 low, comparable sales had returned to consistent growth, and the company was routinely cited as the counter-example to the proposition that physical retail could not survive Amazon.
He was succeeded by Corie Barry, the company's chief financial officer, and remained executive chairman until June 2020.
Views
Joly's argument, set out at length in The Heart of Business, is that the purpose of a company is not to maximise shareholder value and that treating it as such produces worse results including for shareholders. He proposes instead that a business should pursue a purpose beyond profit, treat employees as human beings rather than as a cost, and understand profit as the outcome of doing those things rather than as the objective.
The argument is not unusual in itself; what gives it weight is that it is made by someone who executed a turnaround conventionally expected to require mass redundancies and did so while restoring employee benefits. Joly has been explicit that he did not begin with large-scale job cuts, and that the cost reduction came from waste, returns, shrinkage and supply chain rather than from staff.
He has been a critic of the shareholder primacy doctrine associated with Milton Friedman and a participant in the stakeholder capitalism debate that followed the Business Roundtable's 2019 restatement of corporate purpose.
Assessment
The Best Buy turnaround is among the most instructive in modern retail because its central move was counter-intuitive and cheap. The consensus analysis held that the stores were the problem and should be closed; Joly concluded that the stores were the asset and that the problem was how they were run. Matching Amazon's prices removed the reason to leave, and shipping from stores turned the estate into the fastest distribution network in the category.
The criticism that can be made is that consumer electronics retail remains structurally difficult, with thin margins, deflationary product prices and manufacturers increasingly able to sell directly, and that the company's performance since has been uneven as the pandemic pulled forward several years of device purchases. Joly's response would be that no strategy makes a category easy and that the test is relative performance against competitors who no longer exist.