Industry experience can bring advantages. It can make entrepreneurs more likely to succeed. It can be valuable for independent directors on corporate boards. And, it can be beneficial when a company hires from the outside. Yet, sometimes the individual with industry experience is not the best choice.
Recent media publicity for a highly successful turnaround executive provides an excellent example. The April 24-25, 2021 Wall Street Journal article. “Lessons From a Former ‘CEO-in-Training’“ was written by Hubert Joly, former CEO of Best Buy, who led the company’s impressive turnaround. The article was adapted from Joly’s forthcoming book “The Heart of Business Leadership: Principles for the Next Era of Capitalism.” In the article Joly says. “I had spent my career in technology, videogames, travel and consulting, so I was new not only to Best Buy, but to retail in general.” Thus, Joly, who was recruited from the outside to turn Best Buy around, successfully did so without industry experience.
As I see it, there are good reasons why Joly’s background was well suited for Best Buy’s turnaround despite his lack of traditional retail experience. As I explained in a previous newsletter, industry experience can be a double edged sword because it can often be very valuable, but it may not always be as successful as other backgrounds. That newsletter focused on industry experience in independent corporate directors. However, industry experience can also be a double edged sword in areas beyond independent corporate board members. And, a good example of this is Hubert Joly’s successful turnaround of Best Buy despite his lack of retail industry experience.
Based on my 25+ years researching business success and failure patterns, industry experience is often so valuable because it can provide expertise in areas that are essential for the success of the business. These areas generally tie in with the strengths of the business. Yet, in some circumstances during changing times, other areas of expertise may be as, or more, valuable than traditional industry experience. The key here is to evaluate what expertise beyond the industry is valuable and how to get that expertise in a way that does not compromise the basics of the industry that are still essential for success, even during changing times.
Although Hubert Joly did not bring retail experience to Best Buy, other aspects of his background were valuable for the turnaround. Best Buy’s sells technology related merchandise, and Joly did bring a technology background, including experience with consumer tech such as videogames. This consumer oriented technology expertise could be more relevant prior experience than retail industry experience with little or no tech expertise. His tech background was also valuable since many industries, including retail, have been dealing with digital transformation.
Additionally, Joly had prior experience as CEO of Carlson, which had travel and restaurant businesses. Restaurants are not retail stores per se like Best Buy, but restaurant chains can be thought to have somewhat of a retail component. So, in addition to his valuable consumer tech background, he brings experience that is not exactly retail stores, but is close. Thus, he brought a background to Best Buy that could be better than traditional retail industry experience, yet is close enough so that compromising the essence of the business is less likely.
Furthermore, it appears Joly was willing to learn what his non-retail background didn’t provide. This meant he was bringing valuable background, that wasn’t quite industry experience, and was willing to learn from those who were experienced in the industry. Thus, he brought in the valuable tech experience, but did so in a way that tried not to compromise the basics of the industry that are still required for success, even in an era of rapidly changing technology. It also helped that Joly worked to build a positive relationship with the Best Buy’s founder, since founders often have valuable insights that can contribute to the company’s success even after the business requires professional management skills that founders may lack. Joly’s prior background may have helped prepare him to strive to work well with founders.
So, Hubert Joly did not have traditional retail industry experience. But, if Best Buy had merely hired an industry veteran, it would not have obtained the valuable expertise that Joly brought. And, that expertise was more valuable than mere run-of-the-mill industry experience. That’s why companies need to be wary of the double edged sword aspect of industry experience. They need to think through what expertise they really need and how to get it without compromising the industry basics that are required for success.