Profit Should Be an Outcome, Not the Ultimate Goal, Says ex-Best Buy CEO

Companies should treat profit as “an outcome, not as the ultimate goal,” said former Best Buy CEO Hubert Joly in a Q&A session at the recent National Retail Federation Retail Converge event. Joly, who stepped down as CEO of Best Buy in 2019 (see 2003110072) and as executive chairman in 2020, is a lecturer at Harvard Business School. He discussed his recent book, The Heart of Business, which he bills as leadership principles for “the next era of capitalism.”

The former CEO criticized “shareholder primacy” and “the obsession of profitability” in the corporate world, saying a better formula is “pursuing a noble purpose.” At Best Buy, that meant “enriching lives through technology by addressing key human needs,” while maximizing value for all stakeholders, including employees and customers, he said.

Responding to a question on Best Buy's turnaround when Joly joined in 2012, when consumers were buying cheaper electronics and using electronics stores for showrooming, the former CEO said the retailer “took price off the table.” Best Buy management gave salespeople the “power to match Amazon prices,” he said. The retailer also invested in the supply chain to streamline fulfillment of online orders: It “neutralized” competition with Amazon by having the same prices, online experience and shipping speed, Joly said. Today, Best Buy “ships as fast as Amazon.”

Joly downplayed the threat of Amazon to retail and knocked “zero-sum games” that dictate “the only way for you to win is for me to lose.” He noted some Best Buy competitors refused to sell Amazon products “because they thought it was the enemy.” Best Buy sells products from Amazon, Apple, Google and Microsoft for customers’ benefit, he said. He noted Best Buy’s exclusive arrangement with Amazon for the Fire TV platform, saying the e-commerce giant understood Best Buy’s role in TV retailing. “Instead of focusing on zero-sum games, focus on win-win,” he said.

On changes in consumer behavior, Joly said that in addition to an accelerated shift to online shopping, customers increasingly care about environmental and social issues. Companies that “lean in” on “purposeful, responsible approaches are going to be more attractive to customers and more attractive to employees,” he said. He also noted a trend in environmental, social and corporate governance investing.