The Next Generation Can Help the Family Firm Innovate

Yeah, thank you, Rich. Actually, it's a very special subject for me because it's closely linked to entrepreneurship and the value that family business already brings to community and to our economy. And like with every business, we know that change is a constant, both in the form of the products and services that are offered by the family business, and obviously the level of customer demographic that changes at the same time. And what we've experienced through my career at Best Buy is how critical it is for businesses to change in lockstep, if you will, with where the next generation of customer will be coming from. So in the case of restaurants, for instance, it's often times a large portion of family businesses are in that industry. Dad or Mom started the business, ran it for many years, and their children got involved in the business in various areas, and through the course of time obviously became experienced with how that particular business operated and why it was successful. So those were the learnings, those were the experiences. What's critical is as time flows by, every one of this next generation of family members needs to understand the importance of changing with the customer mix, the demographic that they're serving, and the employees who are carrying out the real work. So what I found, certainly the ones who've had the greatest difficulty in generational transition have been the ones that have not been open to change in lockstep with their customers and with the flow of employees that are coming into their business year by year. So I think the first and foremost important consideration for the next generation is understanding the need as well as the challenge to change with the times, both the products and services they offer, the employees that they engage, and of course the customers that they serve. So our experience really is the best way to think about it is to say that if you're not deeply engaged in innovation, re-engineering, and reinvigorating your business all the time, you become vulnerable, vulnerable to competition, vulnerable to the change in buying habits or consumption habits of the customer base you're called upon to serve. So innovating change for the betterment of the customer experience is really job one, and the next generation has to embrace the fact that this is critical to succeed. After that, it's a matter really of finding ways to do that, and in my experience, the best and most proficient way is empowering your employees. They're the closest to the customer base; they'll feedback what the customers like and don't like about the business offering that you have. So whether you're in the restaurant business or whether you're in the service business or whether you're in the manufacturing business, it's really a matter of getting as close to the customer as you possibly can. And in my experience, the best way to do that for all the years that I've been with Best Buy has been engaging our on-the-floor personnel, our blue shirts, our customer service agents, our cashiers. They really helped me to understand what the customer really wanted in the shopping or the buying experience. And I would suspect that that would be the greatest and first source of information that your empowered employees can bring to you in terms of the way to think about the next generation of business. And I guess the same thing would apply to next generation family members: that they're more in tune with cultural change and cultural needs, and they could probably bring new ideas to the business also.

Absolutely. I think one of the biggest challenges probably for the next generation is their ability to convince the last generation about the importance of making changes in what the last generation had come to rely upon as the best and right way to do their business. That may have been great for the last decade, but will it be great for the next decade? And I think really convincing Mom and Dad or the previous management of the company that we need to keep evolving with the change of our customer demographic, and as we do that, we'll stay more closely attached to that next generation of customers. So it's a multifaceted challenge on both sides, but change and innovation is critical. Empowerment is one of the best ways to do it.

Well, you know, thank you. Obviously we don't talk about it too often, but one of the things that happened as Best Buy grew across the nation with a completely diversified level of customer experience in our stores versus the longstanding, more traditional electronics and appliance retailers that were pre-existing in all the cities with which we entered, we found tremendous resistance from the installed base of competitors to change to the reality of what the customer had already declared as being a preferred shopping habit or shopping experience. And so when we eliminated directed selling and moved towards customer control sales, the customer was much more comfortable, much more confident, made more of their decisions on the basis of what they came to understand were better choices. And as a result, the customer experience was richer, stronger, more pleasant, personable, and satisfactory. The installed base of competitors were resistant to change; they were accustomed to what they had done for years and years and years. The locations they were in, the size of the store, the product offerings they had were what they were. In many cases, the existing installed base of competitors had come to own their own store, were being paid rent, if you will, from the operation, didn't want to disrupt that economic flow. And so buying a new store, building a new store, renting a new store when they already had this comfortable scenario was not something that they wanted to take on. And the net effect of all that, for at least Best Buy, is that in a 10-year period of time, as we grew across the United States, there were 576 business fatalities in our industry, which were the installed base of competitors that just would not change from what they were to what they needed to be to stay in tune with their customers. And that's terribly important for a family business because the goal is to stay in business across generations and grow that business. Yes, because failure to grow ultimately means stagnation and then demise.

You're welcome, Rich. Good to be with you. Good to be with you. Thank you.