Fresh from a meeting about educating entrepreneurs with the dean of the University of St. Thomas School of Business, Dick Schulze relates what he’s learned while building the Best Buy Co. Inc. empire, the world’s largest consumer electronics retailer, which he started with one store. He believes many entrepreneurs themselves are what keep their companies from growing.
“I don’t know that there’s a common denominator to a failing or shortcoming, but the most prevalent behavior, at least in my case, was in the early stages I felt I had the vision. I had the answers. So everything was built around my own view of the opportunities, the competition, the marketplace.
And it was years down the road that I finally realized I didn’t have a corner on all that was right. I began to understand the value of teamwork and accepting there was more than one way to skin a cat.
I developed a culture relatively early in the game, 30 years ago, that came to bring a much higher level of engagement to the work force. I said, you’re not just going to sit here. We need everybody thinking about our challenges. The more people we listened to, the better.
Early on I engaged in an exercise. They performed a service for key management, to identify and align personalities. They had us identifying different personality types, which kind of person are you. I am a controlling style, of course. One of the greatest challenges for controllers is listening well.
They said, give me a list of people that you know that have nothing to do with your business. They matched up what those people said with what the people at the company said. There was a wild discrepancy between what I thought and what they thought. That was a wake-up call.
It changed the course of my entire behavior. I vowed to be the best listener I could possibly be. That set me in a different direction from that point on: teamwork, communication, honesty, lack of patronization. All of a sudden my life became easier. The company became more successful. We were able to accomplish a ton.
At the time this all came together it was a $12 million company. It took us 10 years to get there. Within three years we were to $48 million. As soon as you empower people — the key is it’s OK to fail but we need to learn those lessons.
That’s why you’ll see me fall back on the teamwork. The requirement for that is times 10 today, because of the complexity.
One of the messages for other entrepreneurs is, it’s important that you succeed on the field on which you’re playing. If you’re a small, undercapitalized niche player, it’s difficult to go after the big industrial power. Play where you can make a difference, not where you can get squashed.
The secret sauce that you apply to beat a customer, don’t let that out. People have a tendency to want to crow about something. Pick your place where your opportunity is.
An example is when we took the Best Buy superstore concept and re-engineered it to Concept 2. We took a commission-driven environment, with a showroom, and went to open architecture, with everything out on the floor. We decommissioned the sales force and put the customer in charge. It changed the operational system of the whole industry.
We went under the radar screen with it because we opened in places where no one would notice us. After the first year … the sales doubled — doubled — from a regular Best Buy. This was 1988-89, when we went to Concept 2.
The competition didn’t believe it would work. They underestimated what this could do. When we went into big cities with this, we just rolled over them. Within the first five years of that strategy there were 576 competitors that went away.
The most rapid growth was Concept 2, because it was double-down. Before Concept 2, it was $12 million per store. 15 years ago, we’d do $25 million to $26 million per store. We’re at $45 million a store now, so since then it’s been evolutionary.
We are who we are today because people cared enough to comment on what we do, and their ideas were reacted upon. We have a shot at becoming the first retailer in our sector to get it right in service. It’s very hard to do.
Running a big company, the complexity that goes along with that is gargantuan. It’s a whole different skill set, a whole different way of communicating. The assimilation of the passion has to flow much more deeply into the organization. You need the systems and the bureaucracy, but they’ll kill you.
The bigger you get the more challenging it is to keep the doors open, to keep the innovation. Without that you die. Look at General Motors, Ford. The list is unbelievably long of companies where the people who were in charge thought they knew more about making cars than the people making them, or driving them.
If it’s successful and it’s working really well, be concerned about it, because the lackadaisical things that follow will break your back.
In the early years, I honestly felt that we could be a factor in the state of Minnesota, and as that success began to mount, I thought that the Midwest could be our domain. Well, this journey has evolved to setting higher levels of expectations to now. At one time $100 million in sales was the bogey. At $1 billion we bought everyone a jacket. Now $100 billion is our expectation. That’s the next number.
— As told to Beth Ewen
[contact]
Dick Schulze is chairman of Richfield-based Best Buy Co. Inc.,
and the namesake for the Schulze School of Entrepreneurship at the U of St. Thomas College of Business:
Dean’s office: 651.962.4201;
Best Buy Co. Inc.: www.bestbuy.com
