Is it possible to compete with Amazon and win?

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For businesses everywhere, this is becoming an increasingly relevant question.

Not long ago most business could just ignore Amazon and say to themselves that’s fine for them in retail they are not operating in our industry.

Well, times are changing, and Amazon is competing in not only retail but consumer electronics, entertainment, enterprise cloud services and is eyeing opportunities in healthcare and payments.



The question for all businesses to ask themselves is how would we respond if Amazon entered my marketplace?

Well, one company did not have to wonder for too long, in fact, they have been competing with them for the past 10 plus years. With the rise of Amazon, many analysts predicted the demise of Best Buy, the US brick and mortar retailer.

So how to Best Buy fight back? They applied the same approach as Amazon – customer obsession.

In fact, under the new CEO, Hubert Joly, they undertook a transformation from a transactional retailer focused on store traffic and closing sales to one focused on building customer relationships for life.

Where does a customer-obsessed transformation start?

It begins with your customers and employees when a business is under attack as Best Buy was around 2009, a new vision and purpose for the business’s future needs to be articulated.

Joly launched a turnaround plan called “Renew Blue” in 2012 that was designed to address all critical stakeholders in the business beginning with customers.

To gain insights on what was happening at the frontlines, Joly spent a week working in a store and talking with employees. They told him the website sucked, it was slow and difficult to navigate, and the employee discount had been reduced recently by previous management. They also described how customers were “showrooming” coming in to see products then buy them somewhere else online.

Joly began with some quick wins, restoring the employee discount and taking price off the table by guaranteeing to match online prices.

This showed he was listening and more importantly acting on feedback, a critical trait for a customer-obsessed leader.

He then focused on customer experience, redoing the website, investing in search and matching Amazon on free fast shipping.

By focusing on their unique strengths, the in-store personal experience, they have been able to focus and start winning again.

Joly shifted the employee mindset by instilling a new purpose. In his words “we’re not in the business of selling products or doing transactions, we have our purpose, which is to enrich lives with the help of technology.”



“We don’t see ourselves as a bricks-and-mortar retailer. We are company obsessed about the customer and in serving them in a way that truly solves their unique problems.”

What does this mean in practice?

For Best Buy that means introducing new service offerings such as the “in-home Advisor” which involves best buy employees going to people’s homes for free and providing expert advice on how to better select, buy and install technology to enhance their lives.

A second example is “Total tech support” which involved Best buy taking ownership of any technical problem in the home and fixing it, all for $200 a year.

The third example of their innovation is a focus on aging seniors with an emphasis on helping them stay in their homes independently for longer. Through the smart deployment of technology they can detect if something is wrong and people need help, they can then intervene to make sure people get the help they need.

Customer-obsessed Leadership

Hubert_Joly_jeff_bezos

Customer-obsessed leaders don’t just say they are focused on customers they act on it and make decisions with a customer lens every day.

A great example is Best Buy’s relationship with Amazon, although fierce competitors on many fronts, they also see opportunities to collaborate and work together because it is the right thing for their customers.

“A lot of other retailers have been reluctant to sell their products. The reason we’ve sold their products is because we’re customer-driven.” says Joly.

In fact, recently Amazon chose to launch its Fire TV Smart TVs exclusively through Best Buy.

“Every management meeting we have, we don’t start with the financial results. We start with people. Then we talk about the customers, and last we talk about the financial results”

 “I don’t believe that the purpose of a company is to make money. It’s an imperative. It’s a necessity. But it’s not the purpose”

Hubert Joly

The turnaround strategy with its reinvigorated purpose and customer obsession around enriching people’s lives through technology are paying off. The ship has turned, and the future looks bright for this retailer once thought to be following Circuit City into bankruptcy.

How can you instill a customer-obsessed culture in your business? It starts by understanding your current culture and charting a path based on purpose, people and delivering great customer experiences.



Sources:

http://tcbmag.com/honors/articles/2018/2018-person-of-the-year-hubert-joly

https://www.cmo.com.au/article/659314/how-best-buy-shifted-from-being-retail-led-customer-relationship-driven/

11 COMMENTS

  1. As you note, if an enterprise mantra of customer obsession isn’t already in place, competing with a customer-focused behemoth, in any industry (but certainly retailing), requires “a transformation from a transactional retailer focused on store traffic and closing sales to one focused on building customer relationships for life.

    From my perspective, much of this has to do with the linkage of customer and employee experience. There is growing general agreement that both developing employee ambassadors and customer advocates, augmented by technology and personalization, should receive high (or certainly higher) priority and emphasis by leaders if an enterprise is going to be successful. What building ambassadorship and cultural obsession, does mandate, however, is that having employees focus on the customer will definitely drive more positive experiences and stronger loyalty behavior (for both stakeholder groups).

    Many studies have shown the performance benefits of CX and EX linkage. For example, results of a retail study by Enterprise IG in the UK showed that, for every 1% increase in documented employee commitment, there would be a 9% increase in monthly sales. So, even if nothing else of benefit, creating more customer-focused and value-based experiences for employees has a financial performance motive.

    Clearly, such employee-customer interactions can influence downstream customer behavior. This is especially true when customers have had a poor experience and have registered a complaint. Of the customers who register a complaint because of a value delivery issue, between 54% and 70% will do business with the organization again if their complaints are resolved. This figure goes up to 95% if the customers feel the complaints are resolved professionally, quickly and proactively, depending upon both systems and positive employee attitudes and behaviors.

    Other notable studies reinforce these linkage-productivity results:

    • Northwestern University: Study in hotel chain showed that, for ‘The extent to which employees try to satisfy customers’, a 10% increase in this factor resulted in a 22% increase in customer spending per hotel visit.

    • Royal Bank of Canada: Studies have shown that the level of employee commitment accounts for 60% to 80% of customer satisfaction; and 40% of the difference in how customers view RBC’s services can be linked directly to their relationship with bank staff.

    Bottom line, the more leaders, marketers, and HR understand the connection between employee behavior and customer behavior, the more their organizations are able to build focus, effectiveness, and profitability.

    In all strategic and tactical CX planning, a key and fundamental question needs to be asked, “Who in the organization doesn’t own the relationship with the customer, either directly or indirectly?” Recalling the work of W. Edwards Deming, he believed that everyone in the organization is “either serving the customer or supporting someone who does.” This means that, driven by leadership and reinforced by culture, the ideal of employee and customer experience needs to permeate the entire enterprise, from the board room to the mail room.

    it is vital for companies to learn where they are in creating enterprise-wide employee ambassadorship (commitment to the organization, the product/service value proposition, and the customers) and stakeholder-centricity.

  2. The persistent difficulty I have with customer obsession is that obsession is neither normal nor healthy. (Definition: “preoccupy or fill the mind of (someone) continually, intrusively, and to a troubling extent”).

    Now, implement customer-obsession on a company-wide basis . . . Go! The pragmatist in me chafes at the notion of translating that edict into operating policies, procedures, and processes. Theoretically, it can be done, as long as executives are not accountable for revenue, profit and other key financial outcomes that investors follow. (If I’m truly customer obsessed, won’t I insist my customer not buy a product or go elsewhere when I believe it’s in his best interest?) Still, though it’s impractical, customer obsession captivates our interest. Outside of Best Buy’s annual letter to shareholders, customer obsession is mentioned by its executives, as well as the marketing press.

    But operationally, it doesn’t take much sleuthing to see how rampantly that ideal gets walked back. For example, you’d expect a customer-obsessed company to have a returns policy that imposes no constraints or limitations on customers. But Best Buy’s policy cannot be characterized as generous by industry standards (see https://www.bestbuy.com/site/help-topics/return-exchange-policy/pcmcat260800050014.c?id=pcmcat260800050014). I’m not suggesting the company’s policy is wrong. Just that how they really engage on just this one important matter doesn’t match the rhetoric. There are plenty more examples.

    As a strategist, I regularly read corporate letters to shareholders, and it’s interesting to see that Hubert Joly’s latest letter doesn’t include the word obsession. But it does mention customer or customers 35 times (please see http://s2.q4cdn.com/785564492/files/doc_financials/2018/annual/Letter-to-Shareholders.pdf) . To me, that’s significant, and represents a customer focus that’s clearheaded and easy to understand. I also like that in his letter, Joly describes the company’s purpose as “”to enrich our customers’ lives through technology and grow the company,” as you mentioned. That purpose suggests a measured, business-focused approach that doesn’t sacrifice differentiation. Companies cannot grow without adequate revenue and profit. They cannot grow without coherent strategies. Obsession in any form corrodes Joly’s vision regarding the company’s purpose.

  3. Hi Andrew, thanks for your thoughtful comment.

    We probably have to agree to disagree on the word “obsession”, while there can be negative consequences of taking things to extremes it takes tremendous passion to make something unique and valuable. Steve Jobs is a great example, he was so obsessed with creating incredible customer experiences it often came at the expense of people around him.

    I think where our view also diverges is on the definition of customer obsession. This is not about giving customers everything they want. I would describe that as customer compelled or customer led. No this is about understanding customers better than anyone else in your industry and using this knowledge to provide a unique and valuable proposition. Amazon is the best example of customer obsession at scale, it’s not a model for everyone but it shows that it is a viable strategy and not a theory. One can balance the need to drive revenue and growth with the need to deliver great value to customers. I know many executives at Amazon who do precisely that. In fact, my argument would be that taking a customer-obsessed approach is the best way to drive revenue, growth, and profitability over time.

    If you are selling products you don’t believe are in your customer’s best interests to purchase then there is potentially an ethical problem. We have seen where this leads in the banking and financial services industry. I would argue if you can’t really meet a customer’s needs you will waste both your customers and your own time and resources. You will sell something that does not meet their needs and they will be unhappy, complain publically and make it harder for you to attract new customers.

    The reason I like the word obsession is its emotive appeal. I am not sure about your experiences but I find too many businesses operate at the other end of the spectrum, self-obsessed. Customers are viewed by these companies as objects of value to extract profits. That typically leads to their downfall and is not a sustainable long term model that is good for all stakeholders.

    Andrew, thanks again for sharing your perspective it helped me articulate my own thoughts more clearly.

  4. Michael thank you for your detailed comments and a great value add to my original post.

    In reference to your comment (which is spot on) “Bottom line, the more leaders, marketers, and HR understand the connection between employee behavior and customer behavior, the more their organizations are able to build focus, effectiveness, and profitability.” – Unfortunately, many leaders do not appear to understand these connections or choose to ignore them and do nothing about it.

    Part of the reason is their operational focus and quarterly metrics but also they think it will be too hard to change. Our experience has been that leaders can change their approach once they decide to.

  5. I agree with Andrew. The word obsession has a tinge of insanity or irrationality to it. But going beyond the semantics, I liked the transition to a customer-driven focus and innovation which Best Buy is doing.

  6. Thanks for your comment Rajeev. Looks like I am outnumbered on the semantics front! As you say I think the key point is this is a great example of implementing a customer-centric strategy in order to compete and turnaround a business that was going in the wrong direction.

  7. Chris, I’m with you. We could use more companies truly obsessed with their customers… in a good way.

    I think it’s worked pretty well for Amazon and Jeff Bezos. In a 2011 video (http://youtu.be/-hxX_Q5CnaA) he explained his approach:

    1. Obsess over customers. “If you’re truly obsessed about your customers” Bezos says, “it will cover a lot of your other mistakes.”

    2. Invent. “You need to listen to customers, they won’t tell you everything. You need to invent on their behalf. Kindle, EC2 would not have been developed if we did not have an inventive culture.”

    3.Think Long Term. “Most initiatives we undertake take 5 to 7 years before they pay any dividends for the company.”

    It’s true that “obsessed” can have a negative or sinister meaning. But it also has positive connotations. Such as: “to be preoccupied with or constantly worrying about something.”

    I think it’s a good thing to have more companies worrying about delivering value to me, the customer. Doesn’t have to be sinister thing.

    What I really object to is company leaders *claiming* to be customer obsessed, when what they really care about is maximizing their bonuses. And I certainly don’t want companies being obsessed about violating my privacy, so they can sell me more of their stuff.

    So, while “customer obsession” may be a loaded term, it conveys an intensity of focus that is sorely lacking in a lot of businesses. I say, if companies want to compete and win against Amazon, they better up the intensity over delivering what customers value.

  8. I’m firmly in the ‘customer obsession’ philosophy camp, and have been for some time. Here’s what I said in a post from several years ago:

    “Companies that are customer-obsessed, and what makes them both unique and successful, have been extensively profiled by consultants and the business press. Often, they go so far as to create emotionally driven, engaged and even branded experiences for their customers, strategically differentiating them from their peers.

    In addition, these companies focus on the complete customer life cycle, and much more on retention, loyalty and risk mitigation (and even winback) than acquisition. Support experiences are strategic, nimble and seamless, and often omnichannel. Multiple sources of data are used to develop insights. Recognizing the information needs of their customers, they invest in altruistic content creation (over advertising); and they communicate proactively and in as personalized a manner as possible

    Customer obsession, what I refer to as “inside-out” customer-centricity, has been a frequent subject of my blogs and articles: One of Albert Einstein’s iconic quotes reflects the complete dedication of resources and values needed for an organization to optimize its relationships with customers: “Only one who devotes himself to a cause with his whole strength and soul can be a true master.” Mastery requires, as well, a storehouse of experience coming from experimentation; so, just like in the pole vault and high jump, we can expect that the customer-centricity bar will continue to be raised”

    It should be recognized though, that customer obsession is frequently a progression for many companies. Rome wasn’t built in a day. Here’s my full post, which explains the steps leading to full enterprise customer commitment: https://www.targetmarketingmag.com/post/what-customer-centric-customer-obsessed-companies-must-do/all/

  9. Simple put: you need customer-focused (not obsessed) executives to compete with any tiny or behemoth company.

    I mean, take a look. Majority of companies that can compete with any big dominant player in any industry, segment or market are filled with money-focused executives (result oriented, which has been the eternal mantra on business schools:). And that’s fine. The objective of any company or organization is to be self-financing. The great difference is the way to get to that point. Some executives take the fast-speed way labeling its products with a high price (something Amazon and Walmart are taking advantage from). Some others take the long and hard way competing to gain and get the market trust.

    That’s all. When you are obsessed (here it is right to point it out) only on money (Y-to-Y, gross annual income, et al), every other thing doesn’t matter (employee satisfaction, brand image, consumer perception, environment protection, best practices, customer information protection/share/buy… you name it)

  10. Bob and Michael thanks for weighing in with your perspectives. I think the bottom line here is a new level of intensity is required for companies to really deliver on their customer promises consistently over time.

  11. Greg thanks for adding to the discussion. I agree there is nothing wrong with money/results orientated executives – they get things done. Customer obsession is about how you achieve those results consistently over time. Being customer obsessed and results orientated are not mutually exclusive.

    My argument is customer obsession is the best way to produce consistent results over time. So far Amazon has proven this is correct and its good to see other companies can use their own unique version of customer obsession to compete and be successful in the market as well. Each company’s version of customer obsession will be unique to its market position inherent strengths etc.

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