Best Buy spotted a clear gap in the UK market for a high-service category-killer in electricals. They executed their offer well, and they quickly became the best player in the market, then they closed all 11 of their stores and pulled out of the UK, having lost $133m along the way. So what can we learn from their extraordinary failure?
Commentators lost no time in pointing out that they made more than their fair share of bad decisions: they delayed their launch by almost 2 years, landing in the depths of recession; they telegraphed their view of the market gap, allowing competitors to respond before they'd opened their doors; they underestimated cultural differences and overestimated how fast they could build a brand; they set sales expectations too high and discounted prices too low; and they moved into big sheds while customers were moving on-line. None of those decisions, on their own, should have been fatal. But why did they make so many? And why did they fail to recover them?
Quite simply, they made lots of bad decisions because they didn't commit on the big decisions
How we will win
Successful businesses win by being great in a single respect: they have the most innovative or highest quality products; they offer the best service experience, or they offer the lowest prices. The best are well ahead on one, on par with the competition on another, and may be behind on a third, but that doesn't matter, because customers know that they get what they pay for.
Best Buy aimed to be on par with the best on price, and dramatically ahead on service, but when the competition closed the gap on service, rather than opening it further, they pulled the discount lever. I got outstanding advice when I bought my TV there, from a guy who had visited each of the factories and could explain in mesmerising detail which would best suit my room and my needs. I also got a price match to Amazon, plus 10% discount on top, plus a £50 gift voucher. They won my loyalty, but they lost their shirt. It may have been a good move in the long game, but clearly Best Buy weren't playing the long game.
How we will launch
There are two ways to launch into a competitive market. One is to go big straight from the off, get first mover advantage, and keep moving faster than the competition. You need confidence in your proposition and the commitment to back it 100% from day one, win or lose. The alternative is to test and develop, learning and changing until you've got it right, then rapidly expand across the market. For this, you need intimate focus, shelter from short-term pressures, and a commitment to give it the time to succeed.
Best Buy chose to go big, aiming for 200 stores by 2013. But they dilly-dallied for two years, losing first mover advantage, then lost their commitment just before launch and slashed their advertising plan, leaving their big shiny boxes high and dry. They tried rapid fire changes to pull around performance to hit short term targets, but cut and ran before their investments hit their mark. Once again, they failed to commit on the big decision, creating conflicting activity on the ground.
Bottom Line:
Successful launches are the fuel of business growth. But even the best propositions will fail if the big decisions aren't made up front and properly followed through. Loss of clarity around the real objective has killed off more opportunities than I can count.
Is your whole organisation crystal clear on the positioning for all of your key launches, understanding exactly how you will win? And do you have the courage to go big; or the time to test and develop; or are you going to fall between two stools?