Service innovation creates success for electronics retailer Best Buy

Best Buy stock has more than quadrupled the past five years. The world’s largest electronics retailer is cutting costs without closing many stores. What made this happen – isn’t electronics retailing simply about selling other manufacturers’ stuff?

In an article in San Francisco Chronicle March 19 2017 Thomas Lee points to an answer, as he quotes Best Buy CEO Hubert Joly: “We believe we can and should go beyond selling products to customers. We want to focus on their underlying needs, which is entertainment, communications, security, energy management, and health”, he said, and he added that it will result in a stronger relationship with customers. Best Buy March 2017 920x1240

This is the way to create value as our societies more and more become service-driven societies, meaning value can be created by focus on the services aspects of the products and not on the products themselves. The ‘underlying needs which Joly points to are reflections of the services that the physical goods provide. Customers aren’t interested in the TV itself, but in the entertainment that is delivered through the TV and how easy this may be done.

In the model we label the Service Innovation Triangle, described elsewhere on this blog, one of the nine components is the Customer Experiences. By strengthening these experiences the firm will build stronger relationships with their customers. These relationships are in part held up or supported by the firm’s intangible assets – in particular by its brand name. By strengthening the relationships with the customers the stronger the intangible assets become. This will make the firm better able to create value, as stronger customers experiences increases the value for the customers.

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