Best Buy Case Study
The Challenge of Change
Typically
companies devote the majority of their resources to optimizing current business
models especially by applying and improving incrementally on existing
capabilities. This is because business models are ultimately based on a common
understanding among individuals—company managers, employees and investors—of
what business they are in and how they create value. Shifting these mental
models to evolve business models remains a powerful barrier to innovation.
But,
just because business model innovation requires a mental leap and requires
potentially painful shifts within a company doesn’t mean it isn’t possible or
necessary. In fact, when it comes to survival, some established companies will
shift their models, and will do so quickly.
In
2012, the world’s largest electronics retailer, Best Buy, announced that it
would begin a transition to a new model, initially requiring the elimination of
50 stores, the creation of 100 new smaller stores, and a focus on mobile device
sales. The business model shift, from big-box retail to “Connected Stores,” was
precipitated by swiftly declining sales and competition from online retailers.
The experiment with smaller, more mobile-focused stores began immediately and
was brought online in a span of only 18 months. Whether Best Buy’s experiment
is a commercial success or not, its effort is evidence of how quickly a company
can shift market position and approach when conditions require it.
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