INNOBLOG

Earlier this year 60 minutes ran a segment on Geek Squad, a group within Best Buy that provides residential and commercial computer support services. Like any online article, the piece has become more interesting as people add their comments. Computer aficionados think that the geeks aren't skilled and that their services aren't good enough, while the tech-challenged sing their praises.

This isn't too surprising if you look at the company through a disruptive lens. Geek Squad opened up computer services to a group of nonconsumers that were previously locked out of existing solutions because they weren't easy to access and were too complex. Tech savvy consumers could always make upgrades to their computers and repair them on their own, and large corporations have IT staff to service their computers. The average less tech savvy customer or small business owner that purchase their computers online or at big-box retailers will run into problems with their PCs, such as losing files, busted displays, or keyboard keys that fall off... It is a hassle for these people to call the manufacturer and these problems usually happen right after the warranty ends and its a huge pain in the butt to be put on hold with tech support only to be told that you can't fix it yourself. Geek Squad and its services provide a simple, convenient solution to this problem for this group of customers.

Best Buy purchased Geek Squad for $3 million in 2002 during a time when analysts were worried that Best Buy was juggling too much. In 2002 Best Buy's same-store sales were declining and the stock was hurting from the $696 million they paid to acquire Musicland, a mall-based retailer of CDS in early 2001 in the hopes of capturing more music sales. The timing could not have been worse as Internet downloads hurt CD sales and it become an expensive write-off for the company. Analysts worried that Geek Squad would follow in Musicland's footsteps. Geek Squad was a new business model for the big-box retailer. The core customer, the target job to be done and the way they would make money were all different -

- Core customer: tech challenged, older people, time-crunched vs. tech gurus who know what they want and upgrade their computers for fun

- Job to be done: get my files back, get my computer to turn on, replace the key that came off vs. should I buy a Dell laptop or an HP? Is this the best optical mouse for gaming?

- What they're selling: computer support vs. computers and computer accessories

- How they're selling it: a la carte services (e.g., $49 for a printer hook up to your computer) vs. computer parts, accessories and warranties

Geek Squad has proved to be a great business for Best Buy as they transition their strategy from pushing gadgets to serving customers. Best Buy should earn $280 million in operating profits on just over $1 billion in sales in 2007 according to Piper Jaffray analyst Mitchell Kaiser and has estimated the home and small and medium business computer support services market at $20B.

Geek Squad gives customers the help they so desperately need and are willing to pay for (as shown in the impressive revenue figure) as more and more of their critical data is stored on computers, such as personal tax returns, small business financials, and precious digital photos of the family.

Have you tried out Geek Squad? Do you think they will get disrupted? Perhaps most importantly, what do you think of their mode of transportation (see photo) :-)?