Q&A with Best Buy CEO Brad Anderson

By Kristina Dell

Selling televisions and computers is a fickle business, but the giant leading the pack keeps on growing. Best Buy, the world's largest consumer electronics retailer just snapped up half of Carphone Warehouse, the largest mobile phone retailer in the U. K. The marriage helps Best Buy gain a foothold in Europe and expand its business into cell phone sales, while giving Carphone Warehouse a leg up in electronics. Best Buy CEO and vice chairman Brad Anderson talks with TIME's Kristina Dell about global expansion, best-selling products and how he made the jump from sales clerk to CEO.

Last month Best Buy paid $2.1 billion for half of Carphone Warehouse, the largest cell phone retailer in Europe. What's the strategy behind this?

We were doing really well with selling televisions and computers, but not very well with mobile devices, particularly cell phones. We tried on our own a few times and had very little success. It was the same thing we did when we found the Geek Squad. We went to look at who's good at what we're not good at and found Carphone Warehouse in England. They had the inverse problem to our problem: they were really good at mobile products, but didn't have any way of selling computers and televisions. That has led us to join forces and create a new company together.

Your plan is to start opening stores in 2009?

Yes. We will probably start with a few stores in England and see how that goes, but the intent would be to take advantage of all the change going on and put in a new store structure that connects these capabilities together.

Does it worry you that you are getting away from your core business of consumer electronics?

We are actually trying to change what our core business is from electronics to customer needs. In the last five years we have focused on what someone actually does with the products we sell. How does it affect their lifestyle? We have been focused on the use rather than on the product specifically. We think this is going to help us get a deeper, richer understanding of the product.

You recently expanded into China and are going into Turkey and Mexico. Is this partly because the U.S. economy is slowing?

It had nothing to do with the economic climate at the moment because as we deploy the strategy it is going to be over a long duration of time. Right now people in our operations in China are helping us solve problems for people in North America that we think will help solve problems for people in Europe. Much of what we did in our supply chain is innovation we found out in Europe and brought into the U.S. Good things can happen anywhere in the world and we want to be engaged with as much of the world as we possibly can.

Best Buy opened 130 stores in the U.S.? Why now?

Yes, these are as many stores as we've ever had open. Overall, if the U.S. is going into recession it is a slight recession. You can very easily lose touch with the fact that this is still the strongest economy in the world by some distance. And we're quite confident that we will continue to grow sales in existing stores even in this very difficult climate. We're finding that our new stores are doing really well. Plus our new stores have the advantage of being fresh so we can open the very best stores we know how.

What is the best selling item in your stores?

When it is in stock, it's the Nintendo Wii. I have never seen a game format a year and a half after it was introduced arrive and then disappear. It's extraordinary. There are a whole series of game products that have been a huge hit, like Grand Theft Auto. GPS products have had extraordinary rates of growth. Another category is notebook computers, which nobody really thought would grow as fast as they are right now.

There are rumors that Blockbuster might buy Circuit City? How would that affect Best Buy?

If you look in the consumer electronic space we are the largest, Wal-mart is second and I believe Circuit City is third. So we are watching with great interest Blockbuster's action. We've got a point of view of what we are trying to do for the consumer and we've got to try to do that better whether Circuit is sold or not. So there is not a lot we can do about that, but it is a big force in our industry.

You have made your career at Best Buy. How did you go from sales clerk to CEO?

I spent the '70s in this little three-person store in West St. Paul [Best Buy was then called Sound of Music.] We had seven stores. We were losing a lot of money because our strategy wasn't appropriate anymore and the company was having trouble paying its bills. The founder pulls into the store I was managing and I was sure he was coming in to fire me. I had hair then; long hair. Not a lot up top, but I still had long hair. I really looked bad. He walks into the store and asks me to come outside into the parking lot. That was the only way to have a private conversation. He said 'I am considering replacing the existing management team with one of these three people, all of whom have worked for you at some point. Who do you think I should choose?' I thought, 'Wow at least I'm not getting fired.' But then I did something completely out of character. I said, 'I think you should choose me. These three guys worked for me.' I was shaking. He looked stunned. But he came back and broke the job into two with me managing the store but with some corporate responsibility and chose another person so we both did it together. That's how I got the opportunity.

What made you act so boldly?

A lot of this is being in the right place at the right time and then knowing how to seize [the moment]. I am the least likely person to know how. It was completely out of character. I had been in the store for seven years so I had watched a lot of people do things and I always thought about what I would do if I had been in their shoes, but I never really thought I would get the chance. Something in me caused me to seize the moment. I am very lucky that happened. It's more likely that it wouldn't have happened.

Talk about your management style.

I am managing with the same premise. People have insight that I can't see. The closer you get to the customer the better your ability to see what the real needs of the business are. So how do you collapse the distance between the person that can see the customer's needs and the person at the decision-making level? A person in a blue shirt in a store probably has the best single insight as to what your needs are. How do we as a company follow his leadership, not mine? I've been around for 35 years. I could take you through anything we do today that we take for granted and all of it came from some individual-usually a misunderstood angry individual-who was sitting there saying 'why wont you do this?' and was having trouble being heard. In almost all the cases, two things happen: the point of view that you now cherish as normal was unusual and it was hard for people to hear; and [the person] had trouble getting his or her voice.

How do you make it easy for those ideas to be heard?

I think the worst thing to do is to make it easy. You need to be fighting for that idea as opposed to just having it accepted. That process of being misunderstood helps you figure out how to communicate it in a way that other people can hear. And you need the passion to follow the idea up. So the last thing I'd want to do is build an enterprise that just made it easy to have ideas. It needs that friction, but not so much that it gets smothered.

How do you know when to propose or close a deal?

Any kind of business deal that doesn't give a joint win [to both parties] is ludicrous. I can't think of any one-sided deals that have been really good for us. Try to figure out when you really have vested interests aligned. And don't try to seize the moment where you've got a little too much. Knowing what you know on your side, would you sign up on the end of this deal? Don't go there if they're agreeing to it but you wouldn't. A deal that is relatively as balanced as possible will pay back in spades. The deal we just did [with Carphone Warehouse] is totally dependent on the people we're doing the deal with, using their talents to create new value. Believe me, they better feel like they are in with the right partner with the right value system or you're not going to see their creativity down the road.