As I continue to think about how the insurance industry can focus on -- and brag about -- its noble purpose, I've come across an unlikely model: Best Buy.
The company was given up for dead in 2012. But a new CEO rallied the company around a clear, worthwhile purpose -- to enhance people's lives through electronics -- and got away from the emphasis on just moving as much product as possible out the door (preferably items on which Best Buy received incentive payments from manufacturers).
Best Buy not only served its customers better but won over employees, whose knowledge and passion about electronics could now shine through. Best Buy became a growth story again -- as profits soared, so did the stock price, from $12 in 2012 to $114 today. The CEO who effected the turnaround recently published a book that is getting considerable attention, and Best Buy is getting great publicity in business books and other publications as an exemplar of the power of purpose.
Purpose, profit and publicity: Doesn't that sound like a model that insurers should try to emulate?
Back in 2012, Best Buy was reeling from the pricing pressure that Amazon was placing on all big-box retailers and was reacting so poorly that a much-read Forbes article began, "Best Buy is headed for the exits.... It's only a matter of time." While acknowledging the competitive pressures, the article said the problem was more basic: "Best Buy just doesn’t understand its customers’ point of view."
Enter Hubert Joly, who became CEO in August 2012 after his predecessor resigned under pressure. Joly had no experience in retail but had been CEO of Carlson, a large hotel, travel and restaurant franchise business, and he set about understanding the customers' point of view from day one -- as he describes in this lively excerpt from his book, "The Heart of Business: Leadership Principles for the Next Era of Capitalism."
He soon learned that customers hated Best Buy's markups on products that they could buy for far less on Amazon. (I gave up on Best Buy during this era because a cord that would have cost me $4 on Amazon cost me $30 at Best Buy. I couldn't wait for Amazon to ship the cord, because my dog had chewed through the old one, and I needed to print something that day. As I shared my experience, I learned that loads of friends had similar stories.) Joly quickly pledged to match Amazon on prices.
He then turned to the notion of purpose and saw that, as much as we all love our electronics, we find them confusing and welcome help. I have my brilliant daughters to handle my technology needs, but lots of people need professionals. Best Buy had already moved into the services space by buying the Geek Squad in 2002; Joly expanded services in a host of directions, providing installation, consultations, even in-home visits.
Customers loved the help, as this Washington Post article describes in detail.
Now, I don't want to oversimplify the success at Best Buy and say it's entirely due to a clearly stated and worthwhile purpose. While there has been a lot of (justified) focus in recent years on environmental, social and governance (ESG), "stakeholder capitalism," and other ideas that focus on the broader role of business in our society, I don't think businesses can just find a purpose and then sit back and wait for the profits to pour in. Emmanuel Faber tried that as CEO of Danone, where he was a strong advocate for social responsibility, but investors pushed him out when they didn't see the returns they expected.
If you read Joly's book, you see that, beyond purpose, he devoted loads of attention to operational detail. For instance, he cut the space in stores devoted to physical media, like CDs and DVDs, which were losing out to streaming, and increased the space devoted to mobile phones (and small appliances like juicers, which I certainly wouldn't have pegged as big sellers for Best Buy, but which were). He also tested extensively before rolling out big changes. For instance, before promising to match Amazon's prices, he knew from pilot projects that increased volume would make up for the drop in prices.
In all, though, I think Best Buy is a model that insurance can follow. The industry certainly has a noble purpose and can build on it by using advances in technology and data to help people avoid risks and by helping tackle big societal issues, including climate change. The industry will still have to spend lots of time in customers' heads to understand their point of view, just as Joly did, and will have to pay attention to all sorts of operational detail. But the result should be more focus on advice (and less on pushing product), faster service, fewer gotchas, friendlier language in policies, etc. -- addressing all the stuff that makes perfect sense from an industry viewpoint but little to none if we, like Joly, adopt the customer's viewpoint.
If Best Buy can do it, why not us? We're even starting from a much better position: No one is writing that "it's only a matter of time" before insurance "is headed for the exits."
P.S. Here are the six articles I'd like to highlight from the past week:
New Picture of Total Digital Health
With cyber risk increasing with every data breach, phishing scam and identity threat, it’s time digital health is taken as seriously as physical health.
Future of AI and ID Management
There is no doubt that it won't be long before nearly all identity management systems are powered by AI and machine learning technologies.
Top Problems That AI, ML Help Solve
As insurance carriers get better at leveraging data and predictive analytics, the focus will shift from product-led to customer-centric models.
Why Gen Z Should Go Into Insurance
During an uncertain time for employment, the insurance field may be that sure thing Gen Z job seekers are looking for.
The Perils of the Purchasing Process
Risk managers and service providers are often challenged to demonstrate the value of centralized purchasing.
Foreclosing Danger by Ending Foreclosures
We can eliminate the fear of foreclosure by deputizing real estate agents, making them advocates of life insurance or insurance agents outright.