A few weeks ago, Best Buy agreed to acquire Napster, the online file trading service that revolutionized the music industry. The ensuing explosion in digital music products and services made some people very rich, while others came and went. Napster was one of those early market leaders who survived, but didn’t thrive in the iPod era. The integrated model proved to be the killer value proposition.
A side note on my near brush with fame during the digital music revolution. I interned at Apple Computer during the Summer of 2001. It was the summer prior to the introduction of the first iPod. I remember sitting in my boss’ office for our weekly 1:1 when Apple’s technology guru busted through the door holding a hard drive in his hand. His remark was, “they’re finally small enough.” Little did I know that he was referring to the fact that Apple finally had a hard drive small enough to put into a portable music device. Two months later, the iPod was launched and my boss was named head of iPod marketing. The rest is history.
There has been a lot written about the Napster acquisition and whether it makes sense for Best Buy and their customers. Enough has been said about it, so I am not going to rehash the wisdom the move. I am here today to talk about leadership and whether this move helps Best Buy deliver on the promises that it is making to its customers. This posting offers no assessment on the feasibility of the acquisition or Best Buy’s ability to monetize the relationship.
First, a note on leadership. Best Buy is the leading consumer electronics retailer in the world. But, leading market share does not necessarily imply leadership. To me, leadership requires a clear vision of the future. It implies that you know where you’re going and that you can act with confidence and conviction. In Best Buy’s case, leadership is about the ability to peer into the future and make sense of a murky and rapidly changing technology landscape and to help make sense out of it for customers. And, Best Buy does this rather well, as evidenced by its size, breadth of product assortment and helpful blue shirts. The problem for Best Buy appears to be consistency in application.
When I look at this acquisition, on the surface, it appears to be about looking into the past rather than into the future. This is where most of the commentary focused, and who’s to blame the pundits? Best Buy did not provide consumers that leading point of view that we expect. What is the unique perspective that Best Buy brings to this market? What will they do with the asset? How will Best Buy leverage this asset to solve customer problems? Instead, the announcement focused on providing customers choice in a market that is dominated by a single player and has high switching costs. Choice, while beneficial to the customer, does not constitute a leading point of view.
So, if market leadership does not explain the acquisition, then what does? This brings me to the promises that all companies make to their customers. The great thing about the consumer electronics category is that there is always a sense of newness, which brings with it the excitement of discovery and the hope for a better tomorrow. Consumers consistently line up for the latest gadget or must have technology. In order to stay ahead in the market, Best Buy must constantly provide consumers with the latest gadgets and edit out the ones that don’t make sense. It is an implied promise in return for the customers business. Recent wins in this area include adding the iPhone and Apple and Dell computers to the assortment. However, it is hard to explain the Napster acquisition within this framework. Napster is neither new nor an industry leader in its own right. In essence, the addition of Napster does little to advance Best Buy’s relationship with its customers.
I admit that I’m struggling a bit with how this acquisition fits into the overall picture for Best Buy. The idea of leadership implies some options for what Best Buy should do with this asset, but I am sure that there are many more. I’d be interested in hearing yours.
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