Walmart's goal is to copy what should be copied, invent what should be invented, and ultimately win by changing the way it does things without changing its essence. Walmart's performance over the years shows that the company truly understands customer needs. Through sophisticated customer analytics, Walmart has used its data and relentless pressure on suppliers to become a retail giant, ensuring that the products it sells are almost always at the lowest market prices. With the advent of the internet era, competitors emerged overnight, who know how to track and predict data like Walmart. The rapid rise of e-commerce companies such as Amazon has raised questions about whether a traditional brick-and-mortar company like Walmart, with 4,600 stores in the U.S. alone, can survive and continue to grow in this era. After Walmart's sales growth stalled, the board appointed Doug McMillon as CEO in 2014. The appointment was clear: McMillon must lead Walmart into the future while preserving the chain store model. McMillon has spent his entire career at Walmart, starting as a truck unloader at a Walmart store in Tulsa, Oklahoma. He then steadily rose through the ranks, first as a manager at Sam's Club warehouse stores, then as head of Walmart International. Now, his main task is to lead the transformation of America's largest company. In his office at Walmart's headquarters in Bentonville, Arkansas, in the northwest corner of the state, McMillon spoke with Harvard Business Review. The office is also where the company's legendary founder, Sam Walton, started from scratch. Today, the company's revenue reaches $500 billion. McMillon shared with us Walmart's ups and downs along the way, the $3 billion acquisition of Jet.com (an e-commerce platform), and its response to the changing political winds in the U.S. Walmart CEO Doug McMillon HBR: What was the most important task after you became CEO? McMillon: Walmart has been operating for over 50 years, and this company has a reason for being. But the world is changing rapidly. After I became CEO, the board made it clear they wanted me to prepare for the long term. They said: 'The company needs to change, so don't just be satisfied with operations and maintaining the status quo. Prepare for the future.' That's what we've been trying to do. HBR: Are you sure Walmart's physical stores will still exist in the future? McMillon: Our goal is to serve future customers. To do that, Walmart needs to build a powerful e-commerce business while strengthening store operations. Customers want to save money and time, and also have access to a wide variety of products. We believe that by adding e-commerce and digital tools to our physical stores, we can do more than pure e-commerce companies. HBR: Walmart was late to e-commerce. Why did it take so long? Was it because the old model was highly profitable, so there was no urgency for change? McMillon: We do wish we had started making changes more aggressively earlier. To some extent, we experienced what Clayton Christensen calls 'the innovator's dilemma.' We did hire (e-commerce) talent and made investments, but we were a bit laid-back and didn't aggressively respond to make e-commerce a must-do business. Part of the reason is that we had a bird in hand. We thought if we continued to open supercenters, operations would be fine, because the number of road vehicles in the U.S. was still increasing. But for us, digital transformation is not just about serving frontline customers; its significance goes beyond e-commerce. We need to implement digitalization across all departments and positions to make Walmart faster and more efficient. There are still too many paper-based processes in the company. HBR: Walmart has always been a leader in analytics and customer insight. But in the era of big data, this insight is almost a threshold for retailers. How will you maintain your competitive advantage? McMillon: The challenge is getting people to collaborate in the right way. We have a large team in Silicon Valley. We have a huge technology team in Bentonville and India. We have Jet.com's office in New Jersey. How do we design the company to create the seamless experience customers want? When should we collaborate? When should we be independent? Who is responsible for what? (These are the challenges.) HBR: When attention and resources flow to new digital businesses, how do you ensure leaders of core businesses remain motivated? McMillon: Those managers responsible for traditional businesses must also become digital. We can't have some people living in yesterday and others in tomorrow. Given inertia, Walmart needs to be more future-oriented than other companies. We are trying to get many employees to change their habits. HBR: Walmart faces competition from lower prices and higher quality, as well as e-commerce retail giants like Amazon. What does winning in this environment mean to you? McMillon: We try to focus on customers rather than competition. Of course, there are always competitors in sight, and Walmart learns from them. We hire great digital talent, we have made many acquisitions, and there will be more in the future. We are also more open to partnerships than before; we don't have to do everything ourselves. HBR: Do you think Walmart's version of a hybrid model can beat Amazon? McMillon: As a retailer, we find it interesting to watch Amazon. Their website is cool, and they have created an innovative marketplace where customers can save time and enjoy browsing a wide range of products. So how do we develop these features while maintaining our existing business? Walmart's goal is to copy what should be copied, invent what should be invented, and ultimately win by changing the way we do things without changing our essence. Over the past few years, we have been introspective and feel that Walmart's goals, values, and culture have stood the test of time. Most retailers in history have not survived disruptive changes, but we are confident that Walmart can. HBR: How is the digital transformation going so far? What is the biggest challenge? McMillon: Speed. Compared to most other e-commerce companies, Walmart's e-commerce business is doing well. In fiscal year 2016, our global e-commerce sales increased about 12% to $13.7 billion. But compared to industry leaders, we are far from where we should be. Beyond e-commerce, we need to drive many digital changes. The direction is right now, and the company is making progress, but not fast enough, and that frustrates me. HBR: What is the ultimate value of acquiring Jet.com? Why spend $3 billion on Jet.com instead of building such a platform internally? McMillon: Before the acquisition, we were gradually improving walmart.com, but it wasn't enough. The transparent customer experience created by Jet's CEO Marc Lore and others was very appealing. Jet's 'smart basket' allows customers to get different pricing based on payment method—using a debit card instead of a credit card, waiving return rights, etc. Jet is a powerful technology platform for us, and the team culture fits Walmart's view of the world. HBR: Let's talk about your role as CEO. What do you need to focus on most? McMillon: I've been with the company for a long time, so it's important for me to cultivate an outsider's perspective. If I'm too attached to what the company has done in the past, and consciously or unconsciously try to overprotect it, it will hold the company back. So I spend a lot of time outside the company learning from other CEOs. Of course, I still visit stores and membership clubs. I also go to Silicon Valley often to meet with people from startups and large companies that we sometimes partner with. I ask questions and learn what digital is; I also travel the world to learn what globalization is. Then I use what I've learned to develop appropriate strategies and accelerate Walmart's transformation with appropriate paranoia. I try to view Walmart as a startup, combining the perspectives, wisdom, and experience of others to lead its development. HBR: How do you know you're on the right track? McMillon: First, I'm not doing this alone. Of course, change comes with risk, and it might fail. But I'd rather take a chance and try to get closer to the future. That way, Walmart will still exist in 50 years, rather than clinging to the old system. HBR: Have you ever felt the pace of change was out of control? McMillon: A long time ago, companies like Walmart might have set annual or quarterly grand strategies. But now strategies are set by the day. I occasionally chat with former P&G CEO A.G. Lafley, and not long ago we joked that we now have to set strategy by the hour. As CEO, you need a framework for strategy in your head, but strategic thinking is much more fluid now. HBR: That sounds difficult. McMillon: It can be frustrating for the team. It's best not to make team members feel like the target is moving every day. In the CEO learning process, you have to be careful about how you share what you learn with others and how you are thoughtful with the majority of the company. But like it or not, strategy cycles are much shorter than before. HBR: Let's talk about global markets. In the future, is Walmart's main growth more likely to come from the U.S. or overseas? McMillon: We used to have targets for overseas revenue growth. But because there are still growth opportunities in the U.S., we haven't talked about that much recently. That said, we can grow in many regions. China is a market unto itself; India is important and we need to understand it better; sub-Saharan Africa excites us. We have operations in Canada and the UK, which are similar to the U.S. and have strong teams. And Walmex, covering Mexico and five Central American countries, is a very important business segment for us. HBR: What insights do you have on balancing global scale advantages with local market differentiation? McMillon: Our principle is to first focus on local markets, then seek scale synergies. Speed trumps scale. In almost all our markets, most of the products we sell come from local suppliers. For fresh food and canned goods, transportation distances can't be too far. In terms of globalization, general merchandise and apparel are more involved. In those areas, we work together. HBR: Are you worried that given the current global political situation, we might enter a phase of deglobalization? McMillon: The world is a global market. You can choose to participate less, but other countries will continue to trade. Years of data tell us that trade is good for the U.S.—in terms of GDP growth, saving people money, and enabling people to live the lives they want. We support trade, but we also recognize that it has negative effects for countries that don't participate in global trade. HBR: If the U.S. and China end up in a trade war, what would that mean for Walmart? McMillon: There are many dimensions to this question. Do Americans want U.S. manufacturing to grow and succeed? Yes. Do we want to increase exports? Yes. Do we want to buy goods like bicycles at lower prices? Yes. So, leaders of both governments need to find ways to resolve this tension, and so do businesses. At Walmart, we actively participate in these discussions to ensure our employees are informed. HBR: What will the Walmart experience be like in 10 years? McMillon: A seamless experience created by digital and physical stores, with an added element of sustainability. Our AI and logistics will ensure that customers' refrigerators or pantries are always stocked with everyday essentials. Whether online or in stores, we will create the right shopping environment for customers to explore products they might be trying for the first time. HBR: Will Walmart shareholders have patience for your pursuit of long-term returns? McMillon: Walmart is half a family business, which is an advantage for us. In some cases, it makes it easier for us to take a more balanced approach. The board and the Walton family care about both short-term and long-term results. But more importantly, they want Walmart to be a well-run, quality company that has a positive impact on the world. In this environment, my management team and I can balance short-term and long-term thinking. I am deeply grateful for that. Statement: The article is reposted from Harvard Business Review. If not attributed, it is because the original author could not be determined through search. We welcome the original author to contact us. This platform reposts for sharing and exchange purposes, for readers' reference only, and not for commercial use. If there are copyright issues, please contact us as soon as possible, and we will delete it promptly. -END-