Interview with Jeanne Jackson, CEO of Walmart.com, October 18, 2000

W = Wharton     J = Jeanne Jackson

W:   What made you take the offer to be CEO of Walmart.com?

J:     It actually starts with Jim Bryant who is the venture capitalist, general partner at Accel partners in Silicon Valley.  I ended up on a New York to San Francisco flight with him last October. There's a very funny story about how we got started talking, but we'll save that for another day.  We just really hit it off.  At the time,  I was running the e-commerce businesses at the GAP and it was clear about why ecommerce made sense at the GAP and that we would keep it inside the GAP and how we would run it at the GAP.   But I didn't get a whole lot of the sites that were out there.  I just didn't get it.  So we had a great conversation for the six hours that we came back.  Then we exchanged emails back and forth over a couple a months.  I was getting some pressure from some of the board at GAP to think about spinning it out.  So I talked to Jim about it and neither one of us thought it was a great idea but we at least did the due diligence on the idea.  Then all of a sudden at Christmas time he calls me when I was on vacation actually, and said there was something he needed to talk to me about and he needed to talk to me about it quickly.  So I said, "There's no way, I'm not going anywhere."  So I said no to Jim many times.

W:   He kept calling.

J:     Yeah, he did.  The one thing I was really committed to as an idea is that I really felt and still do that the technology of the internet is an enabler of other business things to happen.  I don't think it is a whole new business model unto itself.  It is going to give people new ways to do things, some of which will be more efficient, some of which will be more informed.  It will be an enabler of businesses.  I've always had a tremendous respect for Wal-mart, so just intellectually I thought Wal-mart spinning out an internet business was brilliant and I thought they would do a great job at it, and I thought it would be a wonderful business.  But I personally was not going to do it.  So I volunteered to help Jim find somebody to do it.  He was very persuasive.  He had me meet Rob Walton who is just a delightful and a really down-to-earth incredible person.  Then Lee Scott calls me on a Saturday, out of the intimate Saturday morning meeting.  It was just like, "Just come to Bentonville and get to know us."  Well that was it.  And they knew that.  So as soon as I got to Bentonville, I got to meet David Glass who is someone I've always wanted to meet.  I think he's one of the most brilliant business leaders of my time.  And because he's kept below the radar screen all the press goes to the Jack Welch's of the world.  I truly have a great deal of respect for Jack Welch but I think David Glass has done an unbelievable job with Wal-mart.  Then I go to the Saturday morning meeting.  Here in this room, are a couple of hundred people assembled representing the second largest company in the world, the largest retailer in the planet.  It’s the entire executive leadership, every regional manager, every division head, and every VP. You have the executives down in front reporting to the home office associates on the business that week.  "This is what happened this week in Oklahoma.  In Oklahoma there is a store that is a problem that we're going to fix this week."  And David Glass and Lee Scott are talking to the regional manager over that store that's having that problem and talking about how they're going to turn that store around.    I think the intensity of the organization's focus is just inspiring. They were just speaking my language.

W:   That model of this bubbling up, that also can get cumbersome.

J:     Cumbersome, I think, is the wrong word.  I think it can be challenging.  The model for Wal-mart is very simple.  It's genius in its simplicity.  A store manager has the responsibility for making their store work for their customers.  So if the inventories are high the store manager has the ability to turn off certain inventory that's coming to their store, but if you have the store manager empowered to do that their going to turn off the inventory that doesn't sell as quickly in their store while they still receive the goods that they need in their store and their market.  And because of that close to the customer philosophy of empowered decision making it makes things very simple in terms of people knowing what their job is.  Keep the customer happy, keep costs down, and be reliable.  You get very focused on three very, very simple operating principles, regardless of your level in the company.  The simplicity, however, also makes doing anything that is not by the book difficult, which is why they had to spin out Wal-mart.com.  They don't have a regimented process that you can sort of tie into to and say, "Here on a piece of paper is the gantt chart of the process that is Wal-mart.  Now for us to do Wal-mart.com we're going to take steps A, B, J and M and we're not going to take L, and C and K."  It doesn't exist so you can't do that.  You have to unplug completely and start all over again and reach back to them for help where it's critical to get help.  That's the only way that works.

W:   What are the key assets or capabilities of Wal-mart that the internet platform is allowing you to do better.

J:     Well, it's not necessarily that it lets you do what you did before better.  But it is a business enabler.  By that I mean, Wal-mart is the best there is at providing a broad array of goods to customers at the best possible prices in an atmosphere where it's fun.  There is an opportunity to Wal-mart to deepen the relationship to those customers by utilizing the internet.  For example, today, because keeping costs down is really critical, there aren't exactly a lot of associates on the electronics floor to help you select which DVD camera is best for you.  So the odds of Wal-mart getting a major part of your spending on DVDs is pretty low.    But if we can replace that with a very cost efficient internet, virtual sales associate, you can get all the information and Wal-mart prices. Wal-mart, then, can have that business.  Then you also go to services where today Wal-mart might lease out space in the front of the store to a service, like optical.  If you're in the replacement contact lens business you can very easily imagine Wal-mart being in that business.  You can imagine banking, you could imagine insurance, you could imagine travel.  If the internet allows Wal-mart to do that business very efficiently and pull the costs out of those systems the way they pulled the cost out of the retail supply chain, all of a sudden Wal-mart has another business with the Wal-mart customer that deepens their relationship with the customer.  So it enables Wal-mart to expand its relationship with the customer and expand its business.  The average person comes in on Saturday and fills their basket up with everything from toilet paper to garden hose.  We're not going to replace that basket with a shipping box from an internet warehouse.  That's not going to happen.  It's about taking the relationship with Wal-mart and adding layers. 

W:   From what you've said, the pure play is not going to win. 

J:     If an industry is a low market industry where there are category killers who have put out broad assortments of goods at low prices, then the customer already has a need served, so you're not really serving a need.  Now, if those margins are so low that adding a shipping cost into those margins makes the economics of the transaction questionable.  Now I definitely don't get it.  The one that always amazed me is pets, because the number of pets in the US is not growing.  There is a finite pet business.  If you take the pet business and you see how it's sliced -- and oh by the way, Wal-mart has the largest share of the pet business -- you see how it's sliced, you see how does the business, first of all it's not that big of a business.  Then you say, "how much of that business could be done over the internet" and you just do some rudimentary math that says, "gee this isn't one that's going to be 50%, it might be one that's going to be 15%."  Who's going to pay the shipping cost on a 50 pound bag of dog food?  Nobody.  Nobody in their right mind.  So then you say, "okay, maybe it's 15% of the market".  Now start slicing that little 15% into three or four companies, maybe five, you now get some little tiny businesses where you say the most a business is ever going to do is $100 to $300 million dollars.  If the margins are razor thin and you have to build a fulfillment center to get it done, and build marketing capabilities, and, and, and, and.. the economics don’t work.  The basic business plan doesn't work.  But for some reason everybody ignored the basic business plan.

W:   So you the people best poised to be the winners are the eStore incumbents, where you have a broad range of products versus the category killers have a better chance there?

J:     I don't think we really know how a customer is going to apply the internet yet.  I think there's going to be all kinds of winners in different kinds of places.  The internet is basically an information network.  Where the auto created a transportation network, the telephone created a communication network, TV created an entertainment network, the internet is creating an information network.  It is the ability of people to get information quickly.  So you just take that thing and say, "now, where will more information change the business model."  Now there are some places where more information may fundamentally make brick and mortar alternatives to getting the information relatively obsolete.  If libraries were a commercial operation you might wonder about the future of libraries.  You'd just say, "Gee, if I were in the business of running libraries maybe that business is going to be tough."  Music is fundamentally going to change.  Napster is nonsense, but the technology of Napster is now going to morph into the next generation and the next.  If you start ticking off the places where the technology is going to change the industry, there's going to be big winners there.  I'll bet all day long on Real Player. Ebay has fundamentally changed flea markets and classified ads.  And Ebay has a model that makes sense.  They've created a flea market on the internet. They've created a community on the internet.  So Ebay is going to do well, it's going to win.  If they don't do something stupid they will win and Meg's pretty smart. 

W:   You mean the fact that information is excessively available on the internet doesn't make a difference.

J:     Yes, it's not going to change the way the customer behaves with that thing they're doing.  If fresh flowers for the home require you to be able to see them and smell them you're not going to change.  Now some people will do it out of convenience, but it will be a sliver.  It won't change the whole industry.  I do think there's going to be small slivers of boutiques.  Blue Nile is a terrific site for high-end jewelry, but again you do the basic business case and you do, "the entire high end jewelry market is this big.  If there's 15% of the people who are going to be willing to buy it over the internet and not actually stare at the $10,000 diamond before they buy it.."  You have this sliver, but as long as you keep the cost down and they run the business tightly they could have a very nice, popular, little $50 million business.  That will be a fine thing.  But don't count on it being a $3 billion business.  It's not going to happen.  Then I think from there on it's just how does it apply to a big business.  How does Wal-mart use the technology to deepen the relationship with Wal-mart customers.  How does Ebay use the internet to deepen its relationship with customers.  How does Time Warner?  There are things that are going to happen in each one of those areas.  I sit at these conferences and I listen to people a lot smarter than me who have very different points of view on what it is going to look like.  I don't think anybody's really got it nailed.

W:   Do the store managers see any threat from this new dot com?

J:     No, I haven't heard that any of them do.  I'm sure there must be some out there.  I strictly look at is as if we execute it right it should strengthen the relationship with customers and help them.  In fact, out of the box, some of the things we want to do when our site does refresh and come up:  we've linked up with MapQuest so the site will tell you exactly how to find a store location.  We want to get to the point where we can put in "in-store" events that are keyed to your zipcode.  I'd love to get to the point -- and I think we can get there quickly -- where we can email customers what's going on with rollbacks and prices, special deals going on in the store which would help the store, not hurt.  As long as we are always looking at it from the overall business perspective of the Wal-mart brand, leaving its relationship to customers, I think we'll be fine.

W:   Now let’s switch gears and talk about leadership.  As a leader, what are your top priorities?

J:     I think the leader is clearly responsible for articulating the vision clearly.  Now it doesn't mean the vision has to be the leaders.  I'm not smart enough to have the vision for what a business is going to be.  But if the management team and the folks within the company come together and can talk through what the vision of the company is going to be, it's the leader's job to make sure it's articulated very clearly so everybody understands what it is.  And that everybody understands what their role is in making it happen.  People feel most accomplished and most successful when they understand what their piece is of making the whole come together.  I think a lot of times people spin because they're not sure of their role. Or it's a company where only one little group gets the credit for what the entire company does.    So  it's about articulating it, it's about making sure roles are clear, it's about setting expectations..  And it's about being the conduit for making sure people's paths are clear, get stuff out of their way so they can do what they need to do to be successful.  So if process is in their way get it out of their way.  If they need capital to build something to make it happen, get them the capital.  All I can do is tell them where we're headed and clear the way.

W:   Do you think leadership in an e-business differs from leadership in a traditional bricks and mortar business?

J:     I don't think the principles differ.  How you spend your day differs dramatically particularly in a start up.  Not all the players are cast when you begin a company and if you're not willing to step in and do the job that needs to be done, that's sort of like clearing the trees..  We still don't have a head merchant, so if I'm not willing to step in and be the head merchant then who's going to do it?  When I first started I had to pay the bills.  I had the checkbook.

W:   Was that hard for you to make that transition?

J:     It's not that it was hard because I started out that way.  I didn't come from an ivory tower where suddenly this was the first time in my life I'd ever touched a checkbook.  For me it was sort of going back to what I'm used to.  But I've seen people really struggle with it, especially in Silicon Valley where you have somebody that came out of consulting or straight out of investment banking, or straight out of business school and started a company.  "Isn't there someone around here to do that?"  It doesn't work.  I can clean off the counter and the coffee counter in the morning and make the coffee if that's what we need to do.

V:    Do you think that the fast growth environment has an impact?

J:     It does because you have to give people courage.  Part of courage is making sure that they feel it's okay to make a mistake and that you're not going to kill them if they make a mistake.  If you start doing that then they're going to hold back and you're not going to move as fast as you need to move.  I was actually happy we had the engineering crisis on Sunday because it meant that they were really pushing the envelope.  If we had gotten all the way through the refresh process and they'd never hit a bump in the road it meant they weren't pushing hard enough.  So giving people the courage to take risks and giving people the courage to really try something that's never been done before.   It’s giving people the courage to do different things as Lee Scott would say, whether it's try to survive, try to get your job done with less people and less cost than your competitors, whether it's trying to get things done on a faster time schedule or get something out the door at 80%. You've got to do things differently if you're going to beat your competition.  I think that's true in all businesses but it is very true in e-business.

W:   Do you have any specific tools that you use in motivating your people and getting people to follow your vision? 

J:     I think communication is critical.  I'm a major believer in communicate, communicate, and communicate again.  I communicate at every level of the organization.  I just personally believe that if I only communicate to the executive team, then you end up with layers through whom messages get communicated.  Every time it gets communicated it's going to change ever so slightly.  So if a person is two layers down they're going to hear a different message than I really intended.  If a person is four layers down it could be dramatically different by the time they get it.  So I personally believe I need to spend 90% of my time listening and communicating.  Either it's information coming in or information going out.  If I'm not doing that most of the time I don't think I'm playing my role right.  For example,  we have a meeting every Monday where then whole company gets together.  People can ask me any question they want and they've asked me some hard ones.

W:   Would you give an example?

J:     Yeah, there is some skepticism among some of the folks that we're really going to go public.   We have a lot of pride.  We're really proud of what we're doing and I think it's going to be good, so even though I don't want to jinx it I think they feel that pride and they say, "This is going to be really good and Wal-mart's going to see how good it is and just roll us back in and we're never going to go public."  So they'll bring it up and you can tell it's deeply bothering them.  So then I'll bring out the articles of the corporation and show them the exact agreement and say, "Here's what the agreement says."  I'll tell them what I'm worried about.  I tell them what I'm confident about.  The other critical, critical thing and one doesn't work without the other is pick the strongest players you can get. You need A people and A people hire A+ people because A people understand that the better your team is the better your results are going to be.  If you hire B players, B players hire Cs and Ds.

W:   They're threatened by them?

J:     They want to be able to manage them.  So you cannot hire enough good talent.  You can just hold out.  The times I've really gotten burned in all the years of managing are places where I've wanted someone in a job so badly I settled for somebody who wasn't absolutely the best, or where I let somebody stay in a job too long who wasn't performing.  So you've got to cut your losses quickly -- which sounds cruel, I guess , in some ways -- but you've got to get them out of there.  It's bad for the organization, it's bad for business.  If somebody's not cutting it they've got to go.  And make sure you've got A players because without it, forget it.  You can't win.

W:   How have you gotten where you are today?  How have you learned these lessons?

J:     The hard way.  I screwed it up!  Honestly, I think that's the way you learn anything.  I've been lucky enough along the way that a few people have invested.   Back when I was at Saks, they invested in sending me to a leadership camp, which really helped bring about self awareness.  It helped me understand more about how I'm perceived as a leader and how I can be more effective.  So those kinds of tools I've found to be very useful kits to put in the bag.  But the biggest lessons I think you learn are because you made a mistake and you just mark that one down.  "I'm never going to do that again." 

W:   If you can say you use this tool kit to assess yourself, what are areas that you would like to improve on?

J:     I will tell you it hasn't changed from my very first leadership assessment 15 years ago to the one I did last year.   I can be very impatient.  Over the years I've learned to moderate it so now the impatience will only surface in an explosion 10% of the time and maybe used to surface 60% of the time.  But it's still there and it's still something I work on controlling every single day.  And listening.  Listening is something I don't think I can ever do enough of.   One of the tools that's made a lot of sense to me is situational leadership where not everyone who reports to you gets managed the same way.  Certain people who have earned complete autonomy get complete autonomy and just report in.  Other people, either because they're new of because they haven't proven themselves yet, or because they've made a mistake, need more hands on guidance and it's okay.  I just do not believe that being a hands off complete delegator is necessarily good leadership.

W:   Is there any other message that you take to class?  Just for the record you teach a class at Stanford on leadership?

J:     No, I teach a module on leadership that I have taught at any number of places, but it's one that I taught at the engineering school at Stanford, in their leadership series there.

W:   Are there any other good messages that you make sure your students here you loud and clear on?

J:     Personal accountability.  When I sit and talk to a John Chambers, who I think is an incredible leader, the people who I really respect as leaders -- Colin Powell -- those people have a tremendous sense of personal accountability that they own the result.  They own the development of the people who work with them.  It's not somebody else mystically is going to come in and you're not going to send them off to school to solve their problems.  They're not going to send them off to the personnel department to have personnel tell them what they did wrong.  They're going to directly and openly take ownership of those people or of that business and you're going to own the results until it's done.

W:   One last question.  This whole internet thing..  What would Sam say?

J:     Sam would say, "If it helps the customer do it, but do it right."