On August 8, 2016, Walmart announced a definitive agreement for the acquisition of Jet.com for approximately $3 billion in cash. According to Doug McMillon, president and CEO of Walmart Stores, Inc., it is an opportunity “to lower prices, broaden our assortment, and offer the simplest, easiest shopping experience because that’s what our customers want.”
This is a great example that can be analyzed from multiple perspectives. Professor Moutahir and recent Johnson & Wales University alumnus Stuart Balcombe ’15 share different perspectives on this sizeable acquisition by aligning them to theories in the bachelor of science in business administration (BSBA) curriculum and recent hands-on start-up experiences.
Mehdi Moutahir: In MGMT4020 Strategic Management, students explore business strategy fundamentals and learn to complete environmental assessments that inform strategic choices. In this case, Walmart’s strategy seems to leverage its dominant market position to diversify and expand its delivery channels. Large conglomerates are not nimble and face significant challenges in quickly adapting to fast-paced market changes. To mitigate the slow pace, acquisition of innovative and agile start-ups is a common growth strategy. Technology entrepreneur Steve Blank effectively illustrates some of the additional reasons why large corporations buy startups to support disruptive, continuous, and process innovation strategies.
Stuart Balcombe: While it might be sound to acquire small and agile startups, it is critical to pay attention to the significant cultural difference between start-ups and large bureaucracies. In my exposure to Teespring, Manpacks, and Pijonbox through my role as growth hacker at Betaspring, I have learned that rapid prototyping and swift testing of business hypotheses is key. In start-up cultures you do not spend too much time meeting and planning, instead, you test assumptions with your customers, collect data, and reiterate quickly. We often apply the Eric Ries Lean Startup Model and the Alexander Osterwalder Business Model Canvas approach.
Moutahir: That’s a good point, and those models are introduced and reinforced throughout the entrepreneurship curriculum. While the business plan model is still heavily ingrained in the academic culture of entrepreneurship, new approaches are slowly informing the JWU College of Business curricula. To go back to Jet.com, one of the important innovations that is understated in this acquisition is the novel pricing model where customers pay less as they add more items to their shopping cart, which made the venture attractive to early investors. While Walmart and other retail giants promote cultures of innovation, the rapid implementation of innovative ideas is very difficult.
Balcombe: I think this challenge stems from the nature of the individual roles and responsibilities of members in large organizations and startups. As a growth hacker in small startups, I wear multiple hats and identify how and where to add value. My job descriptions are loosely defined and I have significant autonomy to help support the goals of the company. I even taught myself how to code in order to scale experiments and test hypotheses that required technical skills. I doubt that working at Walmart would provide me such flexibility and autonomy. Which make me wonder if Jet.com would be able to thrive and remain nimble and innovative under the Walmart umbrella.
Moutahir: Historically, Walmart’s focus has been to deliver exceptionally high value through the lowest prices possible on the market. The attention placed on e-commerce to meet the evolving purchasing habits of customers seems to align with Walmart’s shift from low prices to improved customer experience. In 2014, President and CEO Doug McMillon stated that “a customer has a desire for more items, more assortment, more choices than ever before.” Today however, the emphasis seems to be placed on customer experience. What do you think is shaping this shift in strategy, and do you think the Jet acquisition is aligned with this shift?
Balcombe: A recent customer intelligence report by Walker predicted that “by 2020, user experience will overtake price and product as the key brand differentiator” and Jet.com
is certainly leading the way in e-commerce experience. Companies like Walmart may be slow to adjust, but they also have significant resources to assess macro level trends in the marketplace and can afford to acquire the necessary capabilities to face these changes.
Moutahir: Last question for you Stuart. Should a entrepreneurship graduate try to work for a start-up like Jet.com or a large conglomerate like Walmart?
Balcombe: For me personally, Jet.com would make more sense. Though it is a difficult question and my answer is subjective and informed by my personal preferences, personality, and working style. I have recently joined Compass as their Director of Growth, doing work that I love with people that I find amazing to collaborate and think with. I don’t think graduates should consider large or small companies but instead identify company cultures that meet their personal values and working styles in order to maximize their own personal engagement at work. Should fellow alums want to reach me to talk about start-up experiences or about what I do as a Director of Growth at Compass, they should feel free to reach out to me on LinkedIn.
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