Walmart CEO Doug McMillon on Leading with Purpose in Turbulent Times

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0:42Shop now at palmolive.com. Walmart is the world's largest company, its biggest private employer, and its most successful retailer with 255 million customer visits per week. Doug McMillan started his career there in 1984 as an hourly associate and 30 years later became CEO. Under his leadership, the company has become a digital as well as brick and mortar powerhouse. It has increased pay and benefits for its workers. It's leveraged technology to improve the customer experience and work to create a more environment-friendly supply chain. Doug, thank you very much for joining us.

1:17Doug McMillon:Hey, Adi. Great to see you. Doug, it is always great to have you here. Thank you for making the time. So let's just jump right in. It's never easy running a big company. With AI poised to disrupt, with recurring ways of geopolitical uncertainty, what does it take to lead consistently in an environment like this? I think remembering who you are is important, but also being open to change. And when I think about what AI presents, the first thing that goes through my mind is the growth opportunity. I think, you know, right after generative AI captured everyone's attention, we were pretty balanced in terms of our mindset between offense and defense.

1:52Doug McMillon:And I think that shifted over time to being offensive in our orientation and growth oriented. We'll talk, I'm sure, at some point about agentic AI, but there's a great opportunity for us to change how people shop and be able to save them even more time, things like that. So we're excited about the opportunity that AI presents. And as it relates to geopolitical issues and things like that, there's been turbulence now for quite a few years. And I think we've just learned how to operate in that environment. Well, let's talk about AI. 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.

2:35I mean, how do you, what is the core kind of AI thinking at Walmart at this point?

2:40Doug McMillon: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 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.

3:18Doug McMillon: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 Chad GPT license and give everyone other tools so that they can learn and grow and go through this process with us as a company.

4:01Yeah. So you're heading a company that from its founding has always been very purpose-driven, the founding family, and you've articulated that as well since you've taken over as CEO. That must evolve though, right? I mean, has the core purpose or maybe the auxiliary purposes kind of shifted over time and since you've become CEO?

4:26Doug McMillon: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, we'll show people what it's like around the world to save money and have a better life. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. This episode is brought to you by Palmolive. Family time isn't just the big moments.

5:06It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com.

5:30Doug McMillon: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, it's just one example of how the mandate broadened. These days, we obviously think about not only saving people money, but saving people time, strengthening communities, strengthening the planet, playing a role in health care.

6:04Doug McMillon: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. 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 sure you'd love the answer to be 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 how do you handle that balance? Yeah. You know, it's probably important to remind everyone that 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.

6:56Doug McMillon:We invested in higher wages. 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 peaked 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.

7:30Doug McMillon: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 position 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.

8:09Doug McMillon:We didn't ask our customers to pay for it. We didn't ask anybody else to pay for it. Of course, 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.

8:42If anything in this conversation inspires you to do a hula, feel free. That won't happen. Well, we'll see. We'll see. Sam, you can't do that for it. So, you know, you've been through a number of shocks recently, right? We all have been. And, you know, the COVID pandemic is one of them, you know, and resulting in supply chain shocks. You know, I think we're all looking to companies like Walmart that import a lot. You know, to what extent are tariffs, you know, changing your business either overtly or not so overtly? Maybe talk about, since the tariffs thing is still kind of ongoing, start with, you know, what lesson did you take guiding Walmart through kind of pandemic supply chain shocks before?

9:29What did you learn from that? Propel Fitness Water with Gatorade electrolytes, zero sugar and vitamins. Propel hydrates better than water. to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade Electrolytes. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean.

10:06And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. That's maybe relevant now going forward. Yeah, it would take a long time, I think, to share everything we learned about ourselves and the company as we went through the pandemic. 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.

10:39Doug McMillon: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 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.

11:17And 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 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 someone else in the company. Tomorrow, tell us what you decided and why you made that decision, 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.

11:53Yet 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.

12:17Doug McMillon:If you have two 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 U.S., a little more than two-thirds of what we sell is made or grown here. Today, we operate in 19 countries, but the biggest part of our business, I should say, is in Walmart U.S., and that more than two-thirds 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.

12:57And so I've just learned to trust people even more than I did on the front side of it. Yeah, well, I want to talk a little more about that because you have, you know, 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 And you have to eat that cost and pass it on or not. But then there's the huge uncertainty. And it's hard to tell, at least in Washington, are these negotiation tactics? Are these real? 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?

13:36because it's uncertain, but then it's going to get locked in down the road before long.

13:42Doug McMillon:Yeah, well, let's use the example of seasonal merchandise. 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 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? Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins.

14:21Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together.

14:58Shop now at palmolive.com.

15:01Doug McMillon:If they're under 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 tradeoffs 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.

15:37So I feel like we're all, all of us who are leading businesses in a period where transformation is perpetual. You know, it's not like, okay, we figure out the technology, we adapt it, and there you are. How do you think about that, trying to make sure that transformation isn't just kind of lurching from project to project, but is kind of an evolving and sustainable capability?

16:02Doug McMillon: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 negative comps in our U.S. Supercenter 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.

16:42So 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.

17:16We serve the customer. 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.

17:53And we'd 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 worked 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.

18:35Yeah. You 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 really want insight. So I'm going to actually go to a couple of audience questions, if it's OK, that relate to AI. And one of them, and it picks up, you had said that you're making AI large language models available. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self.

19:12What propels you? Propel with Gatorade electrolytes. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. To your employees. But there's a question from Lior Arusi, not sure from where.

19:51Like, 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 to kind of stay current and relevant? Do they have to kind of show that that spark of interest in the new technology?

20:12Doug McMillon:Yeah, great question. It's obviously both. If you've been inside Walmart, maybe just 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 artificial intelligence. So you get access to ask questions and learn. And we were all doing that, my direct reports 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.

20:47We wanted to equip our associates. We wanted to drive productivity, of course. We want to manage inventory better. We had 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.

21:11Doug McMillon: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.

21:59Doug McMillon:So what we might have done years ago where we had all these tech stacks that we picked up by buying companies around the world, Suresh Kumar and the team, the technologist, 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. And then 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.