Saturday, January 26, 2008

Vital Signs: Wal-Mart CEO Describes the Company of the Future ... and a transformation into an energy provider for its customers

Wal-Mart CEO and President Lee Scott describes Wal-Mart's vision in a January 23, 2008 presentation to its Wal-Mart U.S. Year Beginning Meeting. (full video here)

This was not a speech merely about the financial performance measures of Wal-Mart U.S. but more a rallying call for Wal-Mart's leadership in solving the world's most difficult challenges through a vision for the future that will fulfill its mission to "save people money so they can live better"

I looked for the vital signs of Wal-Mart in the speech and was not disappointed. Scott began with the basic Financial Vital Signs:
Lee recounted the following two financial vital signs for Wal-Mart
* 2.4 % comparable stores increase as competitors were having decreases
* 18.2% increase in net sales

What really surprised me was that he then went on to focus on the major issues of the world today and how Wal-Mart will be a leading problem-solver in Health Care, Energy Efficiency, and Supply Chain Management.

More Affordable Health Care Through Efficiency
Lee described Wal-Mart's transformation of its technology leadership to providing value added services for health care:
We think we can even do more with prescription costs. This year we will be contracting with select employers in the U.S. to help them manage how they process and pay prescription claims. Our approach will be based on taking out unnecessary costs while providing high quality health care products and services. With this effort, we believe we can save employers more than $100
million this year alone.

Vital Signs:
* 93%/82%: number of Wal-Mart associates with health insurance/ Americans insured
$100 million: Wal-Mart's target to save employers
* 2010: Year by which Wal-Mart will provide e-Health records
* 8 million: number of electronic prescriptions which Wal-Mart will fill in the U.S. in 2008 (400% increase over prior year)

A More Energy Efficient Future

Scott explained the energy challenge in terms of the impact on Wal-Mart's customers:
"Every day in our stores, we see the impact of $100 a barrel oil and high natural gas and electricity prices. We see our customers having to choose between filling up their gas tanks or buying food and medicine and clothes. In America, out of pocket energy costs for working families have doubled over the past decade. These families now spend an estimated 17% of their monthly income on energy. Somebody has to do something. And your Wal-Mart will."

“What if we extended our mission of saving people money so they can live better -- to saving people money on energy?” Scott asked. “We believe we can do this. Wal-Mart can help our customers use less energy and spend less on energy. This will also help every country where we operate reduce their dependence on foreign oil.”

He then outlined a vision for how Wal-Mart innovate along with the auto manufacturers to actually providing energy to its customers through its vast network of

"What if we looked at whether Wal-Mart could provide eco- friendly energy to our customers? What could we do in the U.S. -- where per capita energy use is among the highest in the world?"

"Imagine your customers pulling into your parking lot, and seeing wind turbines and solar panels, and being able to charge their cars while they shop. I think that would make them feel good about shopping at your stores. It would also make them feel good if they could save money in the process. What if we fed the power generated by those wind turbines and solar powers back into the electrical grid? Just imagine the impact of our customers being able to buy eco-friendly energy at the unbeatable Wal-Mart price."

Energy Efficiency Vital Signs:
* 30%: energy efficiency improvement of flat panel TV's sold
* 3 million: number of homes that can be powered with Wal-Mart's projected energy savings from working with suppliers "to make the most energy intensive products in our stores, anywhere in the world, 25% more energy efficient within three years...or the equivalent of 10 million barrels of oil."

Supply Chain of the Future
On the topic of ensuring that products are made safely, Scott shared a vision for an industry-wide transformation:
"In the next three years, we would like to build a very different system. We believe that there should be one framework of social and environmental standards for all major global retailers. And there should be one third party auditing system for everyone. This will ensure improvement can occur across the board on a level playing field."

We first read about The Wal-Mart Effect and its relentless pursuit of low prices. Wal-Mart's business practices have been often criticized by organizations such as Wal-Mart Watch, most recently in "Wal-Mart Opens 4 Efficient Stores - Only 6,796 Energy Hogs To Go". However you land on your view of Wal-Mart, no one can argue that the inspiring message Lee Scott delivered was about a company that cares for the world and the U.S. people, and a company that will leverage its leadership in technology and its reach to benefit its customers, its employees, and its shareholders.