B (2:57)

I mean, how do you Think about it. I mean, one is tempted to think, all right, so AI offers these tremendous efficiencies, possibly at the expense of human employment. I mean, how do you. What is the core kind of AI thinking at Walmart at this point?

C (3:12)

Well, again, growth is the first thing that I think of. And the E commerce experience hasn't changed that much since it really started back in the, in the 90s with a search bar and a laundry list. And now we have an opportunity to create an E commerce experience that's multimedia, more personalized, contextual, really change the digital side of the equation. And we're really focused on that as it relates to changes to employment. I really do think that every job we've got is going to change in some way. You know, whether it's getting the shopping carts off the parking lot or it's the way our technologists work, or certainly the way leadership roles change. I can imagine how AI will change every one of those jobs and it will create new jobs. We're starting to see some of that. All of those new jobs we've seen already are AI oriented in some way. It will eliminate some tasks and eliminate some roles. And what we want to do is equip everybody to be able to make the most of the new tools that are available, learn, adapt, add value, drive growth, and still be a really large employer years from now. That's the goal that we're working towards. So we've done things like give everybody a ChatGPT license and give everyone other tools so that they can learn and grow and go through this process with us. As a company you're heading a company.

B (4:35)

That from its founding has always been very purpose driven, the founding family. And you've articulated that as well since you taking over CEO. That must evolve though, right? I mean, has the core purpose or maybe the auxiliary purposes, you know, kind of shifted over time and, and since.

C (4:53)

You'Ve become CEO, when Sam Walton accepted the Presidential Medal of Freedom shortly before he passed away back in 1992, he articulated a purpose for the company. As far as I know, the first time that he had articulated it, and it was basically, will show people what it's like around the world to save money and have a better life, to live a better lifestyle. And so those words have become save money, live better. We wake up every day trying to create value for all of our customers and members. But that live better part of the equation, to your point, has changed over time. If you look at what happened in the mid-2000s with the work we did, led by Lee Scott to become a more sustainable company as just one example of how the mandate was broadened. These days we obviously think about not only saving people money, but saving people time, strengthening community, strengthening the planet, playing a role in healthcare. I think the part that has changed is a more specific view of what live better means and how we can work as associates to improve lives.

B (5:55)

Yeah, and I always find it interesting to think about, you know, a very purpose driven company with very intense profit pressures. And you must feel, I mean, I'm.

A (6:08)

Sure you'd love the answer to be.

B (6:10)

We maximize both, but there must be a push and pull. You know, how difficult is it to keep purpose front and center when you have these short term and longer term profit pressures? How do you handle that balance?

C (6:23)

It's probably important to remind everyone that now, a little over 10 years ago, we made a number of investments that were really sizable, all pretty much at the same time. We invested in higher wages. You know, eventually that became investments in free education and things beyond just the wage rate. But we invested in our people billions of dollars. We invested in lower prices billions of dollars. We invested in E Commerce billions of dollars. And we also invested to modernize our tech stack. As we did all of those things, we took the profitability of the company down. Our operating income percentage peak somewhere north of 8%. Sam Walton once famously danced the hula on Wall street because the management team back then hit a target of 8% or higher on operating income. And when I moved into this role, the operating income percentage was about 6%. With all those investments that I just mentioned, we went all the way down to just a little north of 4%. So a pretty dramatic investment that our shareholders paid for so that we could change the company and get positioned for the future. It was really pretty cool to watch the Walton family and our board of directors work through those decisions with the management team to lay out those choices and to make them and to reduce the profitability of the company so that we could position the company for the future and fulfill our purpose at the same time. We didn't ask our customers to pay for it. We didn't ask anybody else to pay for it. Of course, it. It's really been the shareholders that paid for it. And then if you look at what's happened as of late, because our business model has changed, E Commerce led to membership opportunity and advertising opportunity, other forms of income. We've been able to turn that operating income percentage back up while keeping prices low and continuing to invest in wages. So that played out over a Period of quite a few years and I think has caused us to be able to live our purpose and at the same time transform the company.

B (8:19)

If anything in this conversation inspires you to do hula, feel free.

C (8:24)

That won't happen.

B (8:25)

Well, we'll see. We'll see.

C (8:26)

Sam just gets through that part.

B (8:30)

You've been through a number of shocks recently, right? We all have been, and the COVID pandemic is one of them and resulting supply chain shocks. I think we're all looking to companies like Walmart that import a lot. To what extent are tariffs changing your business? Either overtly or not so overtly? Maybe talk about since the tariffs thing is still kind of ongoing to start with, what lesson did you take guiding Walmart through kind of pandemic supply chain shocks before? What did you learn from that experience that's maybe relevant now going forward?

C (9:06)

The thing that comes to the top of the list for me is just how capable our associates were. That includes our store associates, supply chain associates, Sam's club associates. It also includes our leaders. And what I experienced is just how good their judgment was and how fast they could make decisions. Before the pandemic, I thought we were moving quicker. We want to move with speed. Never really satisfied as it relates to that. But during the pandemic, everything changed, just sped up so much and there were so many decisions to make about how to keep people safe, how to manage the supply chain, everything during that period of time, how to help with COVID testing, how to eventually help with immunizations. And we picked up the cadence of the company. And as we were all operating on Zoom, my leadership team and I were too. And we went from what was a weekly monthly cadence to a daily weekly cadence. And we were together every morning surfacing choices that needed to be made. And, you know, we didn't know as. As others in the world didn't, all the answers to those questions immediately, of course. And so we just were forced to delegate more. Hand this choice to this person or the. Or someone else in the company tomorrow. Tell us what you decided and why you made that decision. And, and, but don't wait to act. And wow, they made a lot of really good decisions quickly. And then if I look at this most recent circumstances, it relates to tariffs yet again. The team is showing that they can manage these quantity decisions, change the country of origin, move production where they should, make really good choices about timing and flow. And our inventory has been really well managed during the course of this year, which is so important as a retailer. If you get over Inventoried, you end up with all these additional costs, markdowns and many other costs. If you have too little goods, you end up missing sales opportunities. And the way they've managed through this whole ever changing, complex situation too, has been impressive. Just like it was during the pandemic. Here in the US a little more than 2/3 of what we sell is made or grown here. Today. We operate in 19 countries, but the vast biggest part of our business, I should say, is in Walmart US and that more than 2/3 number helps. But that other third that comes from around the world, including countries like China, Mexico, Canada, Vietnam and some others, more than 100 countries, by the time we get through with it, all that fluid decision making related to where those goods come from has been really well managed. And so I just learned to trust people even more than I did on the front side of it.

B (11:42)

Yeah, well, I want to talk a little more about that because you have. So sometimes the tariffs are set and it's clear, it's 10%, it's 50%, it's 100%. Whatever it is, you know what it is and you have to eat that cost and pass it on or not. But, but then there's the huge uncertainty and it's hard to tell, at least in Washington. Are these negotiation tactics? Are these real? How do you, it feels like the level of uncertainty that must be so profound for you, right? Sourcing so much from all over the world. How do you handle that level of acute uncertainty in your planning? Because it's uncertain, but then it's going to get locked in down the road before long.

C (12:20)

Yeah, well, let's use the example of seasonal merchandise. Go take yourself back to the spring and pretend that you're the Halloween costume buyer for Walmart. How many costumes do you buy? Where do they come from? What price points do you think they'll be at? Because by the time you receive them, which is when the tariff is assigned, it could be a different tariff number. So we, we run what ifs. If the tariff is this amount, here's what would probably happen with pricing then. How many units would we sell if we had that price? Where else could we source them from? What will people buy if they're under, you know, inflationary pressure? We've learned as we've gone through different things over the years, for example, that families prioritize their children and their pets before they prioritize the parents. And a mom usually puts herself last. And so these trade offs happen throughout the family. So we were confident there would be trick or Treating and children's costumes would sell, but we might not sell as many adult costumes, for example. So we just kind of all talk through those independent decisions and hold hands, pick a number and make a decision. And as I mentioned earlier, so far everyone's done a really good job of generally getting things right.

B (13:29)

So I feel like we're all, all of us who are leading businesses in a, in a period where transformation is perpetual. You know, it's not like, okay, we figure out the technology, we adapted, and there you are. How do you think about that? You know, trying to make sure that transformation isn't just kind of lurching from project to project, but is kind of a, an evolving and sustainable capability.

C (13:52)

Yeah, you have to be willing to change so many things. I'm remembering as you asked the question what it was like to move into this role almost 12 years ago. We were running, running negative comps in our US super center business. We didn't have much of an E commerce business to speak of. We had some challenges in international, where I had been, and there were a lot of questions about strategy and transformation. And what the leadership team and I decided to do fairly early on was to explain to everyone what wouldn't change because the list of things that needed to change was really long and if you started talking through all that, it'd feel pretty overwhelming. So what we said to everyone was, we believe in this timeless purpose that our founder Sam Walton gave us. We will stay committed to helping people, helping people save money and live a better life. We believe we've got the right four core values and we want our culture, our behaviors to match those four values. So the Walmart that you joined in terms of how people are treated and how we want you to lead, that's going to stay consistent. By the way, part of those values include striving for excellence. So the bar is high, expectations are high, but we respect the individual, we act with integrity, we serve the customer. Those, those values are going to be consistent. Everything else is open for change. If customers don't want stores in the future, we won't have stores. So we started out really trying to play catch up on E commerce and build an e commerce business. And that led to understanding, largely informed by spending time with startups and digital companies and other e commerce companies that we had to literally change the way we worked. We needed design as a capability, we needed product management, we needed some roles that technology companies had and have that we didn't have in the company. And we had grown up running the business with operations Our store leadership team and our merchants making a lot of the big decisions when really we needed to change the way we thought and work, to put the customer and member in charge and work backwards to build the right tech. And that caused more organizational change than what I anticipated in the beginning. So it kind of put a punchline on your question. One of the things you have to do as a big company is to set yourself up to change all the time and not just once. So that means constant learning, constant mindset shifts, changes to structure new capabilities, just a faster pace of organizational change so that you don't fall behind again, you.

B (16:24)

Know, before we started this event today, we asked our audience what issues they wanted to hear most about. It was interesting. AI was, you know, you wonder, is AI overhyped? Do people, are they tired of hearing any answers? No, they, they, they really want insight. So I'm going to actually go to a couple of audience questions if it's okay that, that relate to AI and one of them, and it picks up. You had said that you're making AI large language models available to your employees, but there's a question from Leor Arousi, not sure from where, like whose responsibility is it to kind of adapt the new technology? Is it about, you know, in your case, Walmart, you know, investing in change management, you know, kind of making it happen, forcing it to happen, or is it up to the employees to kind of stay current and relevant? Do they have to kind of show that, that spark of interest in the new technology?

C (17:12)

Yeah, great question. It's, it's obviously both. I mean, if you've been inside Walmart, maybe just at the beginning of this year, for example, we were all learning a lot. You know, one of the great things about being here is you have access to all the leaders that are responsible for building the frontier of, of artificial intelligence. So you get access to ask questions and learn. And we were all doing that, my director Ports and I. And when we got to the springtime, we realized we needed some additional resource. We knew top down what we wanted to do. We wanted to reinvent how E commerce works and how shopping works for customers. We wanted to equip our associates, we wanted to drive productivity, of course, we want to manage inventory better with these big objectives that we could click down on and explain. But so many of us were doing these things on top of all the other things we'd been doing before this wave of change came our way. So we decided to create a new role that reports directly to me, that we announced just maybe A couple of months ago. And that role is one filled by Daniel Danker, who came to us from Instacart and had worked at Uber and Facebook before then. He's a product management leader. He's a really good thinker, he's a problem solver, he's native AI, lives in the Bay Area. And his responsibility includes speeding up our AI transformation. While we're not a company that should be investing to build all this compute and invent the frontier, we do need to be the best in the world at application. And so Daniel's taking on that responsibility for how we turn this into an AI organization. Product management, design, tech prioritization, and the change management related to AI fit within his responsibility. So what we might have done years ago where we had all these tech stacks that we'd picked up by buying companies around the world, Suresh Kumar and the team, the technologists, had done a great job in recent years of modernizing that tech stack, getting us on the road to have platforms that work everywhere. And now we can infuse that with AI in a way that causes more speed. So from a top down point of view, we know what our priorities are and we're resourcing that change and we're driving it. And it's what we spend most of our time talking about. At the same time, we have 2.1 million associates around the world and we are giving them all the tools that we can give them and being transparent about what we expect from them as it relates to their learning journey so that we do this together. And I expect that we'll get some goodness from just great ideas. I was just reading a note this morning about an idea that one of our associates in a Sam's Club has here in the US that she would like to see us implement in our app. That kind of stuff will happen and those top down initiatives will be driven because we've resourced it differently. But again, it causes the company to have to work in a different way than we would have before. It's just constant change.

B (20:05)

So here's another audience question. This is from Gavin Dia and it really follows up on what you were talking about. So to what extent does Walmart plan to go beyond access to tools, some of these investments, bringing in some of these high level people to a kind of structured upskilling programs to prepare the workforce for this, you know, AI integrated future?

C (20:25)

Yeah, we, we have something called Walmart Academies where we teach curriculum to all of our associates. We'll be using those academies to create some kids already have create specific programs so that people can learn and understand what capabilities that they need to be building. We also provide something called Live Better U where we pay for college tuition and books so that people can go get a degree if they want to get a degree. And we've had some move into technology roles. I've been running into people in the field that want to work in cybersecurity. We have been creating a lot of technicians in the company to fix all the equipment that we're running, whether that's the automated storage and retrieval systems that we are deploying in our distribution centers or the H Vac equipment we've got in stores. There's more talent needed in the world to do that kind of work. And so we've been teaching people and certifying them on how to do that and in some cases have started to sell those services outside the company and, and have what may grow into a profit center.

B (21:24)

This is another question from an audience member, Ginger Tabe, who notes that in the current issue of Harvard Business View, we have an article about hands on leadership. And you know, as CEO of one of the largest corporations, I think it's interesting that you have the Walmart employee tag on right now. You know, what percent of time do you spend really on the front line? And how valuable is that? How relevant is that from your position?

C (21:45)

Yeah, it's vital. I mean, if you know anything about our history, you know that Sam Walton was in the stores all the time and became a pilot to move around faster. And we've now, you know, we've got airplanes and we're, we're flying out of Arkansas. If I use the US as an example all the time to go visit stores and clubs on a surprise basis on social media, you'll, you'll see some of those visits and you'll hear people say things to me like, you should, you should come see the real world. 99 of the time, nobody knows we're coming, including me. We just show up in a market. We show up in the first store, Sam's Club. How are things going? Go straight to our associates that are either, you know, helping people check out or picking orders for an E commerce order or whatever. I love that part of the job. I've just lately been in Mexico, Canada and China. And the conversations always lead to something. I always leave one of those visits with a list of to dos that's longer than the list that I leave. If anything, because the things I learned can, we can, we can use to help the whole company.

B (22:46)

I would Say Walmart gets praised for its pursuing its environmental and social goals. It gets criticized for pursuing its environmental and social goals, depending on who's commenting. You know, we're in a somewhat different environment in terms of the expectations of how companies think about, you know, engagement. And again, in environmental and social issues. How do you navigate this? You know, you're going to get criticism from all sides and, you know, I know you want to stick to your purpose, but the ground is shifting. You know, how do you. How do you think about. How do you navigate this?

C (23:17)

Raj, it hasn't been that difficult because it's just all super practical. The work we were doing before was good for the P and L. It's been good for the company, and it still is. So, you know, when this whole conversation started back in the early 2000s, I would say we were going through a maturation process. We'd just. Like any startup does, you focus on your customers and you focused on your. On your associates, your employees. And we were like that, too. And we'd grown into this big size, opening one store at a time, but we still acted in some ways like an inexperienced company. And then Lee Scott and Rob Walton and others caused us to start thinking about the fact that we had this big footprint and there were things we could be doing that would make our business better and also strengthen the planet and strengthen communities. And I tell this story all the time, but I remember leading Sam's Club at the time, and I'm embarrassed to tell you, we were paying people to hard to haul off the corrugate behind our Sam's Clubs. As brown boxes came to the back of the club and we bailed them up. And as we were going through this learning journey and going to visit landfills and reading books and getting more informed about what we could do given the size of the company, we started realizing how much value there was in that corrigan. And we went from paying somebody to take it to charging them to take it away because it was worth so much. My P and l benefited about $50 million in one year just because we learned something. We had spots like that, but that was 20 years ago that, that we've continued to kind of uncover and learn as we've grown. So whether I'm talking to a member of the media or I'm talking to someone that works in government, if we're getting criticized for something, I just get really practical, you know, Wouldn't you expect Walmart to be eliminating its waste? Yes, it helps us save money so that we can lower Prices. It's a good business choice. So, you know, all of this work that we're doing, that lens of how does this strengthen the business and how does it help the customer or associates, that all matters. And sometimes it just boils down to time perspective. And I'm in a really good situation here because of the board that we've got and the Walton family's investment where I can think more long term. And once you start thinking longer term, these things all just make a lot of sense.

B (25:38)

Doug, you and I first met shortly before you took on the CEO role. And we did an HBR interview soon after you took over. And when you took over, I'm sure you had a vision of what you wanted to achieve. Now looking back, you've had to adapt. We need to be adaptable. What advice would you share with other leaders who are trying to lead major transformations? You know, what, what maybe even is the trap that they should avoid as they try to push toward the future?

C (26:04)

Listen to your gut. The thing that most of us, I think as we get to more time and role that we regret is not going faster. And while not everything was clear, you know, back when you and I first met, I was really focused on how do you build an e commerce business and, and turn it into an omni business, leveraging the assets we had, including the stores. And that was a lot of work. But what I didn't really understand is it was going to lead to this bigger change in the way the company worked and figuring that out with our team here and just taking steps to try and get faster and to become more digital in nature. We use a phrase around here. We're people led and tech powered. We want to be great at deploying technology. We want to be the best at that. And we want to start with the humanity of this experience. Whether it's the customers we serve or the associates that we have, this is about people. And the tech is to serve people. So people led, tech powered. There were things that I just didn't know back then, and once I did know them, I was sometimes too slow to act because I was worried about what someone thought or can the organization handle this much change? And what I've learned is that people can handle it. And you need to go hard and you need to go fast. And when you know something's right in your bones, you need to act on it and don't delay too much. Yeah.

A (27:24)

So I remember that when you were.

B (27:26)

Trying to become a digital powerhouse, you hosted an event in Davos and brought people in and basically said, we're really.

A (27:33)

Good at brick and mortar. We're not good at digital. Help us out.

B (27:35)

I mean, nobody goes to Davos and says we're not good at something. So I thought that was refreshing. But, but talk about it. Are you, are you happy with where you are now in terms of digital commerce?

C (27:45)

Or, you know, no, but remember, I'm compensated to be dissatisfied. Okay? That's the nature of the work. We just have so much room to improve. I mean, we've made progress and our customers are having a better experience. And Walmart is known today with our customers for being convenient at about the same intensity level as we are known for having low prices. So, so that's progress. And I don't want to, I don't want to skip over that. Thank you to our associates for what's been done. But we can just be so much better. And this, this opportunity to get AI right is a great one.

B (28:20)

And, and, and back to AI. So here's another audience question. This is from Hilda Ingham. You know, and this is down to the lower level. People fear change. I mean, I mean, we know that. We, we, we feel like our companies have a secret sauce because we do things a certain way and then somebody's trying to force change on us. How do you help people embrace change where it's not just, okay, the board has figured this out, the C suite has figured this out.

C (28:45)

Go.

B (28:46)

You know, how do you, how do you bring people along understanding that they, they fear change? They, some will adapt, some won't. How do you, how do you handle that part of it?

C (28:54)

I joke with our folks here that I, I love change, except when it relates to me. Like, I, I don't really want to change. I just want all of you to change. You know, I think being really honest about things is important and being consistent is important. And let's take artificial intelligence and the situation that we're in right now, there's so much we don't know. Like that, literally, you mentioned earlier this question about how much of this is hype. Well, the hype curve is real. We've seen that repeat itself over time. So certainly there's some investment here that's happening that's not going to work. But big picture, it feels like to me that a lot of this is going to work and we should have this mindset that it will work and be moving that direction to try and make that true so that our customers serve better. And I think if you're honest about it, you remind every people, everybody, what you're trying to do. What it is we are trying to do is to serve customers and members better so that we grow, which creates more opportunity for everyone. So let's lean into this together and let's learn as we go so the rhythm of the company comes to mind. Like how often are you together? How often are you together in person? We really believe in being together in person, including with our associates and our store managers. We bring people together during the course of a year. We've got a calendar that works and it is designed with purpose to cause us to build relationships, earn trust, shoot people straight, go through it together, remind them of the big picture of what we're trying to accomplish, and then if something goes wrong or doesn't work, just acknowledge that, put it to the side, and move on to the next thing. But you know, I just, I don't know how else to do it. I think you've got to be really straightforward, really honest. Give people what they need, encourage them, support them, but lean into change because the alternative is not very enjoyable.

A (30:44)

That was Doug McMillan, CEO of Walmart, speaking to me as part of the Future of Business event at Harvard Harvard Business Review Check in next Thursday for another Future of Business episode. If you found this episode helpful, share it with a colleague and be sure to subscribe and rate IdeaCast in Apple Podcasts, Spotify or wherever you listen. If you want to help leaders move the world forward, please consider subscribing to Harvard Business Review. You'll get access to the HBR mobile app, the weekly Exclusive Insider newsletter, and unlimited access to HBO. Just head to hbr.org subscribe and thanks to our team, Senior Producer Mary Du, Audio Product Manager Ian Fox and Senior Production Specialist Rob Eckhardt. And thanks to you for listening to the HBR IdeaCast. We will be back with a new episode on Tuesday. I'm Adi Ignatius. In sports, winning is everything. That's why the NFL, NBA and the PGA Tour are elevating their game with AWS AI to turn data into insights, accelerate process optimization and deliver game changing fan experiences with the most comprehensive set of AI tools and services. AWS delivers innovation without constraints. From the gridiron to the green. Learn how the biggest leagues are putting their data in play with AI at aws.com sports. In sports, winning is everything. That's why the NFL, NBA and the PGA Tour are elevating their game with AWS AI to turn data into insights, accelerate process optimization and deliver game changing fan experiences with the most comprehensive set of AI tools and services. AWS delivers innovation without constraints. From the gridiron to the green. Learn how the biggest leagues are putting their data in play with AI@AWS.com sports.