“Best Buy wants to be the best consumer electronics outlet in the US and beyond. The multinational retailer sells both products and services through three primary channels: about 1,500 retail stores, online, and call centers. Its branded store banners include Best Buy, Best Buy Express, Best Buy Mobile, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, and Pacific Sales. Its stores sell a variety of electronic gadgets, movies, music, computers, mobile phones, and appliances. On the services side, it offers installation and maintenance, technical support, and subscriptions for mobile phone and Internet services. Amid declining sales, Best Buy is focused on a turnaround and has exited Europe.” (Hoovers)
WHY IS IT AN INTERESTING CASE STUDY?
As recounted in Gary Hamel’s The Future of Management, Best Buy’s ‘Geek Squad’ chief, Jeff Severts, set out to discover the apparent disparity between the company’s marketing forecasts of certain products and actual results, which were originally blamed on poor marketing-led demand generation.
Inspired by James Surowiecki’s Wisdom of Crowds ideas, Severts ran some internal pilots to tap into the hands-on knowledge and experience of Best Buy’s associates across the firm’s huge stores network, which enabled him to gather alternative forecasting data which proved to be more accurate than the top-down estimated which the company had relied upon. Originally based on a shared Excel spreadsheet, where employee ‘tips’ and observations were laboriously gathered, the approach has since evolved into a fully-fledged prediction market, supported by a dedicated platform:
The market, called TagTrade, allows Best Buy’s workers to trade imaginary stocks based on answers to managers’ questions. The market’s judgment has often proved to be more accurate than the company’s official forecasts. TagTrade is open to all of Best Buy’s 115,000 U.S. employees. The roughly 2,100 of them who choose to participate get $1 million in fake money to trade for a nine-month period. The top trader in the period wins a $200 gift certificate. (Source)
The Best Buy story is now widely quoted as a good example of innovation emerging from middle management working with the wider workforce to improve company performance.
- “Minimize your political risk: stay away initially from anything dealing with very high visibility initiatives or those involving compensation
- Start with volunteers: “design your initial management experiment in a way that minimizes the number of permissions you need to get, while maximizing the chances of learning something new and useful.”
- Make it a game; keep it informal: It’s less threatening to those running the current approach
- Run the new process in parallel with the old: You’ll need the data to see if indeed progress continues over time
- Iterate: start small and grow based on success” (Source)
- Crowdsourcing Insights: Crowdsourcing insights can be used to make forecasts or making decisions with an approach that avoids personal bias or relies on the judgment of a single individual or team.