Category: 3. Business

Sign up here.

SAP said in a statement that it is “committed to the highest standards of business ethics and respects the intellectual property rights of others.”

“o9 believes that the evidence of SAP’s coordinated attack on o9 is clear and compelling,” o9 CEO Chakri Gottemukkala said in a statement.

Dallas-based o9 specializes in artificial intelligence-powered business planning software. The lawsuit said that SAP had lost customers to competitors after it introduced a new version of its enterprise planning and supply chain management software with “high costs, [a] long timeline, operational risks, and poor implementation.”

The lawsuit said that three o9 executives, all based in the Netherlands, left for SAP this year and took more than 22,000 files with them that included confidential technical, marketing and sales information about o9’s supply-chain software.

The complaint said that SAP has since altered its software to “closely mimic” o9’s products.

“It has now become evident that SAP wishes to displace o9 as the leader in the advanced business planning solutions space by attempting to copy o9’s platform architecture, its capabilities, and its product messaging strategies,” o9 said.

o9 requested a court order blocking SAP from misusing its trade secrets and unspecified monetary damages.

The case is o9 Solutions Inc v. SAP SE, U.S. District Court for the Northern District of Texas, No. 3:25-cv-03245.

For o9: Taj Clayton, Adam Alper, Michael De Vries, Carson Young and Christopher Lawless of Kirkland & Ellis

For SAP: attorney information not yet available

Our Standards: The Thomson Reuters Trust Principles., opens new tab

ADI IGNATIUS: I’m Adi Ignatius.

ALISON BEARD: I’m Alison Beard, and this is the HBR IdeaCast.

ADI IGNATIUS: All right. I want to talk about leadership.

ALISON BEARD: Okay, let’s talk about leadership.

ADI IGNATIUS: I think there’s a special kind of leadership that’s required today. We are in a period of intense disruption, right? Geopolitical upheaval, technological change, shifts in cultural norms. And I’m not sure anyone has defined the new skill set that is required for leaders to succeed in this kind of environment.

ALISON BEARD: I think that’s right. We see all different models of leaders in business and politics today. We publish advice on specific attributes you need like the ability to lead with courage, to be a hands-on leader. But I don’t think that anyone has outlined what the whole package should be, particularly if you want to lead with … But I don’t think anyone has outlined what the whole package should be.

ADI IGNATIUS: Yeah. Look, it’s hard out there and I think things are changing. So our guest today is trying to define all of that, right? He’s a powerful voice for consistent values-driven leadership, for learning to live with being uncomfortable as we sort through the complexity. So this is Darren Walker, who’s just finishing up a 12-year stint as President of the Ford Foundation, dedicated to advancing human welfare.

His background is inspiring. He was born in a charity hospital in Texas to a single mother with few resources. He made his way through the public school system, and he has devoted much of his life to philanthropy and public service. And he’s appealing to leaders to guide our institutions in a spirit of service to something more than themselves, to learn not just to manage, but to inspire, and that we need our leaders to help us understand this disruptive journey that we’re all on so that we can move forward. So here’s my conversation with Darren Walker.

All right, so Darren, thank you very much for being our guest on the IdeaCast.

DARREN WALKER: Thank you for the invitation. Delighted to be here, Adi.

ADI IGNATIUS: There are many things I’d like to talk about, but one is leadership. This is a moment where I feel like our leadership is often failing us. And I’d love your perspective on what is the imperative for leaders today? What does good leadership look like? What does good leadership require?

DARREN WALKER: Well, there’s no doubt that it has never been harder to be a leader than today. Part of the challenge is we are experiencing transformation. And in so many spheres of American society, we are looking to our leaders to help us make sense of what we are experiencing. And it is very hard for some leaders to do that.

Leaders today of my generation, I’m 66 years old, weren’t necessarily trained to be therapists for your employees to be expected to have a public position on just about anything of importance to stakeholders. And so this is not to excuse leaders or to allow them to not fulfill their responsibilities. I think today leaders need empathy, to have an ability to relate to people, to be relatable because for many reasons, Americans, and particularly younger Americans, are not trusting of leaders. We have got to be able to mobilize, inspire, help, give people solutions, not all the answers, but solutions and understanding of the context we’re in.

Whether you’re a public company and you’re talking about changes in trends, in consumer behavior and you’re a consumer packaged goods company, or you’re selling automobiles or real estate or you’re trying to run a school effectively, the demands on leaders has never been more greater, and the times we live in have never been more complex.

ADI IGNATIUS: So I feel like it’s a moving picture. And a couple of years ago I would’ve said good leadership absolutely requires empathy of course, but that leaders are actually required to take all of their stakeholders into account, are required to speak up on social issues that matter. Their employees demand it, their customers demand it. Now there’s been such a backlash to that. Where are we? I mean is there an ideal spot between where we were and where the backlash wants us to be in terms of thinking about stakeholders broadly, employee interests, customer interest? Have your views changed on that in the past couple of years?

DARREN WALKER: There’s no doubt that the past five years have felt like a whipsaw. I mean we have gone from talking about, in many spheres of business, being comfortable talking about Black Lives Matter, to now being afraid to talk about race. That’s a pretty remarkable arc in just five years in our country.

And I think that it is fair to say that some of the activities we saw in the wake of the murder of George Floyd generated responses that were not fully rational in my view. And in some ways, for some, became ideological. And I think now we are in the same situation where the response is not fully rational and is very ideological. And so for those of us who see the world not in black and white but in gray, and the gray space is actually where problems get solved and where people can come together, I think we have to speak to that part of the playing field where we can come together. We’re not going to come together in the extremes, which is I think what has happened over the last five years.

ADI IGNATIUS: So then what would be your advice to leaders who absolutely are committed to creating a more equitable culture, but who are afraid of the backlash or the culture war blowback, or maybe just agree with what you said, that there was excess on the other side beforehand?

DARREN WALKER: Well, I think we have to first ask the question, are leaders really committed. I mean, I think it’s one to talk about fairness because I think that is universal. I think it can be fraught in the way it’s implemented. But I think fairness is the right frame from which leaders should speak. And I think we have to be comfortable being uncomfortable. And I think leaders have to be able to be authentic. And that is one of the challenges, Adi, because there are some leaders who authentically don’t believe or authentically aren’t able to communicate, articulate, in a way that is persuasive and that comes across as believable.

ADI IGNATIUS: Well, so you’re getting at the question as to whether these are true values that a leader has that an organization embodies or whether it’s performative, or at least that’s what I’m reading into that. So is that correct or is that just really, does that come down to who you are inside?

DARREN WALKER: I mean, I’ve been in rooms with CEOs reading off of a talking point that their communications office has generated for them. So there was a lot of inauthentic, performative acts by leaders during that period. Now I think it is also true that leaders are in some ways remaining silent when their true values are not what’s coming out. What’s coming out for many is silence. And that too is inauthentic. I regret that we live in a time when leaders can’t be who we need them to be, when leaders can’t talk about service.

When was the last time, Adi, you heard a leader say service – service to community, service to country – must be our imperative? We live in a time when it seems that it has been normalized to say service to myself must be my priority, and that’s deeply regrettable.

As an American person who came up in a country, although I was poor and had certainly a lot of disadvantage, I lived in an America that believed that little poor kids like me should be able to dream. And I had leaders saying to me, “You should dream. America is cheering you on and there is a mobility escalator for you to get on if you’re willing to work hard and sacrifice.”

And leaders today, I don’t hear that message. I don’t hear any of our leaders giving us hope and speaking to us in a way that reminds us that we are a community and that we must be on the same team. It doesn’t mean we’re going to agree, but we’ve got to have a sense of some shared values.

ADI IGNATIUS: My father just passed away a few days ago. He was 104. And he was a representative of the values you’re talking about. I mean old school in the best possible way, believed absolutely in public service, in private-public partnership, in understanding the difference between right and wrong and not exploiting the gray areas for profit but steering clear of them. I feel like that approach, you’d almost be viewed as a sucker today if you weren’t sort of trying to exploit the gray areas, so.

DARREN WALKER: Well, I’m sorry to hear about your father, but how fortunate and blessed. 104, that’s amazing. There is, in my view, a real need not for nostalgia, but for truisms of how we need to live and be in this place called America if we are to make it a success. And part of that challenge today is our leaders are part of a culture and a part of a system that has so prioritized capital as the currency of everything. Of course we’re being nostalgic here, I just said we shouldn’t be, but I will say, but when I was growing up, there was something about service to community and service to our country that our leaders talked to us about.

I was inspired by Roosevelt’s Four Freedoms. I was inspired by Kennedy’s “Ask not what your country can do for you. Ask what you can do for your country.” Those were the words that inspired me. I worry that today too many of our leaders look to Ayn Rand as the north star.

And that’s for me at least deeply troubling. And so yes, leaders today, and we are generalizing here, but I’m particularly talking about leaders of influence because yes, there are many leaders, but particular industries have outsized influence. And when we begin to actually talk about the quality of empathy as undesirable in our society, I worry that America has lost its way and that our business leaders have lost their barometer for morality.

ADI IGNATIUS: One of the things that’s kept me going at Harvard Business Review is I am probably an idealist myself. And governments break your heart and NGOs can only do so much with all due respect. So at times I thought, “Well, maybe the way positive change happens is within companies, companies that are directed by leaders who have a certain level of enlightenment or thinking broadly about stakeholders or thinking broadly about the planet.”

And I guess I still believe in that. But again, the last year or so, I mean you mentioned it, the silencing of, let’s say, the CEO class in America is striking, is alarming, and it’s so different from what we thought a couple years ago where we thought, “No, no, no. CEOs have a voice, need to have a voice. We need to hear from them. It’s part of the conversation, it’s part of the social experiment.” And almost overnight, it’s like, “No, these guys feel intimidated and that voice is erased.” I mean, is it better quietly behind the scenes in corporate America, in the corporate world than the picture I’m painting?

DARREN WALKER: Well, first, I agree with you. As a capitalist, I’m a firm believer in the idea that enterprises can provide many solutions to society’s challenges. And I often say on the corporate boards I’ve been on or in other settings with CEOs, think of yourselves as problem solvers also. I do think that leaders find it harder now because the consequences, regardless of your position, can be fatal. And I don’t believe that leaders of companies need to have a position on every social issue. I think that is a mistake.

I think however, leaders do need to have a set of values, principles, a framework from which they lead, that would make it clear or at least rational to a stakeholder why or why not they’re taking a decision. And I think that’s what’s hard for leaders when they fear that simply taking a position means that they might imperil their career.

And let’s be really clear here, this is not about right or left. This is about a culture of intolerance where we are unwilling, regardless of left or right. I’m not making a judgment here. I am observing that we have become, as a society, intolerant of positions and people we disagree with. And that is antithetical to our very founding as an institution, as a country. We need leaders today who can speak to those values, that framework, and it’s harder to do that when we are pulled apart by the extremes.

ADI IGNATIUS: So having seen you speak, having read your writings, I view you as a hopeful person sort of by nature. And so assuming that’s right, how does one sustain hope as a leader in moments of polarization, fatigue, discouragement, really everything we’ve talked about? How do we hold on to hope?

DARREN WALKER: Well, first of all, for me, I have no choice but to be hopeful. I was born in a charity hospital to a single mother. I never knew my father. I didn’t grow up with any real advantage. And yet I have prospered in this country not because I went to private schools. My entire education from head start through law school was in public institutions because in a democracy, the strength of public institutions is the indicator of the long-term sustainability of that democracy.

So my own journey from that dirt road in Ames, Texas to the Ford Foundation leaves me no choice but to be optimistic on this country. And secondly, I would say, as a person of African descent, as a Black American, I stand on the shoulders of people who knew in their day they would not find justice or fairness or real opportunity for them. And yet they believed in America.

Fannie Lou Hamer, the great civil right activist, she marched across Mississippi carrying the American flag, and she was beaten, spat upon. And yet she never let go of that flag because she believed in America and she was hopeful. And so when I look at my heroes like Langston Hughes, the great poet of Harlem in the 1930s when he wrote, “Let America Be America again,” and he was so angry in the opening stanza. He said, “Let America be America again. America never was America to me.” And he was his frustration and rage at being dispossessed in his own country. And yet he ends that poem, the final stanza, “But oh yes, one day America will be.” He is speaking to me today.

And so I, on any given day can be depressed, dejected, dispirited, but I am hopeful. And my hope is what leads me to speak out, to take opportunities like this, to hopefully share my perspectives and make my very modest contribution to public discourse.

ADI IGNATIUS: I think you used the term earlier, discomfort. And I think you’ve written that significant change requires discomfort along the way. So what’s your advice to leaders on building the muscle to sit with discomfort, to learn from discomfort, to move forward from the discomfort?

DARREN WALKER: I think naming it is exceedingly helpful. And I think often, leaders aren’t comfortable talking about their discomfort or aren’t comfortable saying, “I may not be familiar with this, but I want to be helpful.” Or, I’m not sure I have the answer, but I do want to say I think it’s hard for leaders today because the stakes are so high and the risk associated with a misstep are high. And so when you say get uncomfortable, I mean when I talk about being uncomfortable, part of that comes from the ability to be comfortable in your own skin and to engage in a lot of different places and to be comfortable and sometimes saying, “I’m not a 100% comfortable, I’m not really sure… But I’ll need your help here.”

And I just think we don’t condition our leaders to be human beings. We don’t extend to them grace. We are not tolerant when they make a mistake. And so we need leaders today to be courageous more than ever. And at the same time, we dis-incent courage on the part of our leaders. So we, the public, need to also acknowledge our culpability in the very problem we’re diagnosing. And when we see people canceling leaders, not making a distinction between a felony act and a mere infraction, I think it is upon us as the citizens, as  the consumers, as the employees to speak to that.

ADI IGNATIUS: Let’s shift the topic to philanthropy. We’re approaching Thanksgiving in the U.S as we record this. You’ve been running a $16 billion organization that gives out money to make a difference. I’m interested, how has that mission changed in this climate we’ve been talking about that’s become more difficult, that’s shifted in ways that we all perceive? How has that mission evolving?

DARREN WALKER: Well, I think making the connection between our mission, which is in part to strengthen democracy, and what are the drivers of the disintegration of our democracy. So Henry Ford II said the Ford Foundation’s mission should be in part to make democracy in America and the world stronger. What are the barriers to that?

What we’ve identified as the barriers to that are a lack of economic mobility, growing inequality. Those two things are at the heart of the crisis of hope and purposelessness that we have in our society. What we’re seeing is particularly among working class whites, but for most groups is a widening of a gap, the gap between those who are prosperous, those for whom this economy has worked like me, and most Americans who are feeling increasingly left behind.

And so the Ford Foundation is working on those issues of economic mobility of what is happening in the heartland, which for too long, too many of us and particularly big foundations, have ignored rural America. There are parts of rural America that I have visited that have indicators of well-being that look like some of the developing world where I have visited.

And so those Americans rightly are angry. I don’t blame them for being angry. They have every reason to be angry because they are being left behind and we aren’t doing enough to help them. But part of the reason for that is because they are increasingly marginalized in an economic system which has placed less value on their labor and on their contribution.

And so we need to understand that at the core of our ethic is hope. And inequality is the enemy of hope because a hopeless people will do irrational things that make no sense to people like you and me who have a lot of hope. So sometimes I hear people say, “Well, why did this group vote that way? Or why did this group take this position? Don’t they see it’s against their own interests?” Well no, actually. Maybe they can’t see because they are so angry that they aren’t able to always be rational. And that anger is justified. I just think we need leaders to speak to that anger in a way that helps them be hopeful, not hateful.

ADI IGNATIUS: So beyond the mission of the Ford Foundation where you work, I’m thinking about our listeners now. Does philanthropy, as we practice it generally, does it work? Does money get moved to the right places?

DARREN WALKER: Well, we should acknowledge that there is no more population of people on the planet more generous than Americans. There are a group of philanthropists, mostly women now I’m going to name, but Mackenzie, Scott, Laurene Powell Dobbs, Alice Walton, Melinda French Gates, Barbara Hostetter. I mean there are some extraordinary philanthropists doing remarkable work in a way that actually is respectful of the communities and not patronizing. And I think that we need to follow those models more.

Unfortunately for too many philanthropists, the issue of control, the need to not fund institutions, but to fund my project is the priority. And I believe at the end of the day in the democracy, we don’t need strong projects as much as we need strong institutions with strong leaders and boards. And when we have that, they will know how best to deploy the philanthropic capital they’re given.

ADI IGNATIUS: So getting back to you and your experience as a leader, what’s the hardest leadership lesson that you have had to learn in your career?

DARREN WALKER: I think the hardest lesson I’ve had to learn is people will make assumptions about you. And I think this is true for all leaders. I am a Black gay man. People need to have assumptions about me based on that you are a straight white man, married, whatever. As human beings, our brains are wired with a sorting mechanism. And because we get so much data and stimulation on a regular basis, we need to sort. And I think as leaders, we sometimes get missorted. And I think for a lot of leaders, regardless of our identity, regardless of our background, it is easy to mistake.

And for me, again, candidly, I think there are probably people who are Black who make certain assumptions about how I will be and comport myself. I think there are probably certain gay community who think there’s a particular way I ought to be in the world. I think there are others, conservatives, who might look at me with a particular lens.

And again, this isn’t just political. I simply am saying, as leaders, we are monitored, we are judged. And that is part of what makes this such a high-stake thing today to be a leader. And it’s not like being a leader 20 or 30 or even 10 years ago. I mean the level of what social media has done to paralyze leaders, because you are so mindful that you are being monitored. Even private meetings, you may be videotaped. I mean, these are the realities. So I’m very empathetic and sympathetic to the plight of a lot of leaders. And again, we get into this circular thing where employees and stakeholders are like, “Why can’t you be more courageous? Why can’t you be more…”

And the answer is because you make it harder to be courageous stakeholders. You make it less possible for me to be able to really authentically engage with you. Because if you don’t like what I say, just because you don’t like it or don’t agree with it, you may want to turn it into some major kerfuffle that ultimately then becomes a huge distraction and takes me off of my game.

ADI IGNATIUS: So if people are listening to this and think, “Okay, I’m inspired, I would like to be a better leader or a more courageous leader,” what’s something they can do right now to be on that path?

DARREN WALKER: Talk to your team, talk to your stakeholders and say to them, “I want to be the best leader that I can for you, but I hope that you will extend to me grace and generosity because there will be times when I’m not perfect and you may disagree with me.”

ADI IGNATIUS: Darren Walker, thank you very much for being on the HBR IdeaCast.

DARREN WALKER: Thank you.

ADI IGNATIUS: That’s Darren Walker, the outgoing President of the Ford Foundation. Next week, Alison will speak with Ayelet Israeli about fastvertising, rapidly created advertising that responds to the moment to grab the attention of customers.

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 HBR online. Just head to hbr.org/subscribe.

And thanks to our team, Senior Producer Mary Dooe, Audio Product Manager Ian Fox, and Senior Production Specialist Rob Eckhardt. And thanks to you for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Adi Ignatius.

BRIAN KENNY: Welcome to Cold Call, the podcast where we dive deep into the stories behind groundbreaking Harvard Business School case studies. What do United Airlines, Bud Light, Target, and Dove have in common? They all share the jarring experience of watching their brand reputation and share value spiral due to viral social media. In an era where billions of people engage across multiple platforms, online conversations shape trust, reputation, and ultimately business performance. Today’s case looks at how brands operate at the intersection of AI-powered automation and human judgment, navigating viral controversies, customer engagement, and the delicate balance between free expression and brand protection. The case highlights the dilemma around how much to moderate and how brands should respond in moments of crisis.

Today on Cold Call, we welcome Professor Julian De Freitas, along with case protagonists Jenny Wolfram and Vesa Rikkinen, to discuss the case “BrandBastion: Managing Online Brand Communities.”

I’m your host Brian Kenny, and you’re listening to Cold Call on the HBR podcast network.

Julian De Freitas’ research looks at how customers interact with AI, how firms can create value and assess risks associated with AI. Jenny Wolfram and Vesa Rikkinen are the co-founders of BrandBastion and the central figures in today’s case. Welcome, everybody.

JULIAN DE FREITAS: Great to be here.

BRIAN KENNY: It’s great to have you in the studio. You’re here today because you just discussed this in class. Julian, is that right?

JULIAN DE FREITAS: Yep. Right out of class, straight here. So, you’re going to get the energy from the class.

BRIAN KENNY: I have to ask you, the two of you, how did it feel listening to the students talk about decisions that you’ve made and things that you’ve done?

JENNY WOLFRAM: It was incredibly interesting and very exciting as well. And we actually learned a lot. We took a lot of notes.

BRIAN KENNY: We love having a protagonist on the show, and I know our students love when protagonists visit the classroom because it really brings things to life in a completely different way. So, thanks for being here, and thanks for writing the case and coming in to talk about it.

BRIAN KENNY: Now, as a brand manager myself, I manage, I think, one of the best brands in the world. I think a lot about our reputation, and we very carefully think about what we do before we post things online and before we step out onto those social media platforms. So, I read this with great interest, a little fear, a little trepidation. But I think people here will be able to really relate to what you’re doing because we all use social media, and we’ve all seen brands suffer the consequences of missteps online. It’s just such a big part of what we do these days.

So, why don’t we get started. Julian, I’m going to ask you to start, and I guess if you could tell us why you wanted to write the case about BrandBastion and what broader lessons you hope to draw out in the discussion. And then importantly, how did you start the class today? What was your cold call?

JULIAN DE FREITAS: So, I wrote the case because I think all brands realize that they need to have some kind of social media presence, especially in today’s world. But especially as they try to scale the brand, they run into new challenges. All the negative comments that their brand attracts. Also, as they grow their customer base, and there’s a higher volume of comments, as they are expected to be present on so many additional social media platforms. And as they become global brands that have comments coming in 24/7, how do you scale that engagement? How do you continue to have this conversation with your customer?

So, BrandBastion to me is the perfect candidate to bring this issue into the classroom. Every day they work at the intersection of branding, social media, and AI. So, in terms of how we kick this off, one of the decisions in the case is that there’s a brand, a personal growth company, that’s been using BrandBastion for three months now. They have three months’ worth of data provided to them via the BrandBastion platform. And Jenny Wolfram has to meet with the executives and make a case for why BrandBastion is worth the investment and why they should keep using it. So, the question is, You’re Wolfram. What do you tell the executives of the personal growth company about why this solution is worth the investment?

BRIAN KENNY: And we’re going to dig into that one a little bit. I have a specific question for you, Jenny, about that. But before we go there, can you just tell us a little bit about … This was, like, a career change for you. When you made the decision to do this, what did you see that prompted you to think this would be a good idea and a business that could grow?

JENNY WOLFRAM: Well, already back in 2013 when I started BrandBastion, we were seeing that there was being a huge shift happening in the world of marketing where a lot of ad budgets were shifting from TV, from print, from billboards onto social media. And at the very essence of that is the social nature of social media. So, I was seeing that there’s a lot of ad spend shifting. There’s also a lot more user generated content coming out every single day, year over year. So, the sheer volume of users talking across brand assets and the sheer amount of money that is being put into those brand assets, I realized that there’s something here that technology could really beautifully potentially solve.

And back at that time, I was a lawyer, and I was involved in a case where a pharmaceutical company was getting sued because of harmful comments that had been posted on their Facebook. And I was thinking that 24/7 nature of social media, this whole global world that is everyone’s getting connected, what can brands actually do to be aware of what’s happening and to also protect themselves? And I was then looking into options. Mostly there were PR agencies, marketing agencies, that would manually be able to offer some monitoring; or then there were some tech solutions, but nothing that was really customized. And that’s where I saw the opportunity and that’s where really BrandBastion stepped in.

BRIAN KENNY: Vesa, let me turn to you for a second. If we think about this from a financial perspective, BrandBastion is a little bit of a hybrid play. It’s not one of these pure Software-as-a-Service (SaaS) tools where people are using the software on their own to do this. It’s not a high-touch in-person intervention tool. You guys sit somewhere in the middle of that spectrum. Can you talk a little bit about why this gives you an advantage and how this works?

VESA RIKKINEN: Yeah. Of course. So, compared to some of the SaaS tools, pure SaaS tools, they’re of course more cost-efficient, but they are very hands off. And the trade for the brand in those cases is that you often need a huge in-house team to work on those tools and that can end up getting a little bit expensive at times. On the other hand, the agencies, they of course provide the people to work on the assets, but they can get expensive, and they are not that scalable at the same time. Now our solution where the cutting-edge AI that we’ve developed for 10 years already, it can scale with the engagement that the brand gets while keeping the cost efficiency down on closer to SaaS tool level.

BRIAN KENNY: Yeah. Jenny, how does it actually work for your clients? I’m wondering how BrandBastion executes on the mission that they have. I guess the question would be, there’s a lot of judgment involved here about whether something is harmful content or whether it’s a legitimate critique. How do you think about that?

JENNY WOLFRAM: So, a lot of the work we do upfront when a brand becomes a customer is really figure out, what’s their brand voice, who’s their audience, who do they want to have in their community? What do they want to protect their community from? And then a big part of the configuration of the whole system is to figure out these kinds of things. And then on social media, of course, context is everything. So, a key part of what our solution is able to do is look at the post, it looks at the context, it looks at the commentary, it looks at real-world events. And that way it takes all of that into account when making decisions. But it all is really derived from the brand itself where they decide what kind of content they are comfortable with and what they want to encourage.

BRIAN KENNY: And we were talking actually before we started to record here about AI and the impact of AI. It’s having impact on absolutely everything. But Julian, I’ll turn to you for a second because the case does talk about the mix of AI automation and human moderation that BrandBastion uses when they do this work. How do you think this reflects the broader themes around the limits of technology and managing trust and authenticity? Because we know that trust and authenticity are critically important for brand success.

JULIAN DE FREITAS: So, a large part of the discussion we’re having in class is whether brands are being more authentic or less authentic by using these types of tools. And as you might imagine, there’s one argument that says, well, if I’m engaging with a bot, and I don’t know it, that feels less authentic. But there is another view, which is that if the brand has certain promises that it makes to consumers, and if it’s guaranteeing a certain level of customer experience, and it’s able to deliver on that better by using these kinds of tools, which might be providing additional insights and then augmenting the brand’s capabilities, and in some ways it’s being more authentic to that promise than it could have been in the past. So, in some ways it depends on the definition that you have of authenticity. So, that’s one thought.

I think another one is in the class discussion we think about where is AI going to be best because of its strengths, and where are humans going to be best? And some of the examples concretely of how BrandBastion delivers its solution really show us those limits. So, as one example, one of the new offerings that they provide is something called “outbound engagement,” where they’re not just protecting on the owned assets, how the brand shows up, but they’re also now searching for new trends beyond the owned assets that might be relevant to their target customer base. And then finding ways to, in a culturally savvy way, insert the brand into that conversation. And this is something that is still mostly led by the customer success managers, who are of course humans at BrandBastion. And it points to what’s the frontier, and what is it about this task of being maybe culturally savvy, maybe spotting new trends that is still hard for AI? And then what does that mean in terms of how we divvy up the duties? Where do we want to play to AI strengths? Where do we want to play to human strengths?

BRIAN KENNY: Vesa, how do you think about that from a business model perspective? I would imagine that it’s certainly much more cost-effective to have the AI moderation much more so than the human intervention. But how does that parse out for your clients?

VESA RIKKINEN: So, automation is really in the center of our unit economics. Using AI that way, we can process millions of comments, messages, without the cost to us or our clients ballooning out of control—while we can still keep the people in the focus of the edge cases that need that human judgment. For example, last year on Black Friday, we saw one of our retail clients get millions of comments in under 48 hours. With the people approach, it would be impossible to even tackle that kind of a scale, or at least not tackle it profitably for anyone. But our AI was able to handle the scale without any delays. And that is the key that allows us to serve the Fortune 1,000 brands at scale.

BRIAN KENNY: What’s the tipping point where you move from the AI intervention to the human intervention? Is there some sort of a red flag that goes up where you say, Oh, we got to kick it over to the human intervention now?

VESA RIKKINEN: Well, that’s really about the type of engagement. There are some very cutting edge or some very nuanced type of engagement that AI can’t yet handle that well. When the AI is a little bit uncertain on something, then it gets pushed into the human process.

BRIAN KENNY: Jenny, let’s go back to the CFO question, because as a marketer, I always have to make the case with my CFO about why we should or shouldn’t invest in something, and they’re always looking for the tangible results. How do you make that case with a CFO?

JENNY WOLFRAM: This is something we talked about today in the lecture to quite some degree because all marketers know, of course, that having a community on social media is better than not having one. And also, that having a positive engagement is great, and not having a PR crisis is also good. But putting numbers attached to these social media metrics, it’s really complex and hard to do.

So, something that we tend to do when approaching this is thinking about, how can we decrease costs for our clients, and how can we increase their revenue? And in terms of increasing the revenue, if a company is investing a lot in social media advertising, we’ve done a lot of A-B testing, and we’ve come to see that especially if a company is in an area where there is a lot of questions or there might be some skepticism, then responding very quickly to any comments showing purchase intent, it can really improve the return on ad spend. So, there are certain metrics, especially in performance marketing, that we can point to that are showing how beneficial it is managing social media. And then on the cost-savings angle there, we usually look at what … If we think about what Vesa was mentioning with Black Friday, Cyber Monday, these kinds of surges are super common on social media. So, for someone to be able to staff actual in-house people, to be able to manage them, comes at a really high cost, and it’s very hard to navigate. So, there we often talk about the savings by using a technology like ours. But there’s still a lot of areas where I think some of the research that Julian is doing will be very impactful, and that is really tying more of those broader social themes to actual ROI.

BRIAN KENNY: Yeah. Julian, how are you looking at this? Because the case does talk about the importance of trust versus community. I thought that was very compelling what Jenny just said, but I’m not a CFO. So, as you look at this more broadly, not just in the social media realm, but in the technology realm in general, what are you looking at?

JULIAN DE FREITAS: Firstly, thanks to Jenny’s collaboration, we’ve been able to analyze some of the data from these campaigns that she mentioned and document that for the academic community and then run follow-up studies on that. So, that’s also moving that field forward. But this is a very cutting-edge area. I think people look at notions of brand trust and community as being a little bit fluffy. They have this—

BRIAN KENNY: CFOs do for sure. I know that.

JULIAN DE FREITAS: Yeah. They think that social media is all vanity metrics. And I think one of the concrete things we do in class is point out that that’s not a problem with social media per se, but it’s a matter of what you do with those data. So, a large part of BrandBastion’s solution is all about tagging the comments so that you have meaningful categories that you can then use to quantify whether you think this is working. And in particular, in the case of community, what we know from the research is that community adds a lot of social value. So, I can also influence the purchasing of others. I can tag them, which lowers how much the brand has to spend to acquire them. And by virtue of being connected to me in the community, you might actually stay longer as a customer. And so, there’s one more reason for you not to leave.

JULIAN DE FREITAS: And so, we talk about, what are some of the specific tags that you would use to actually quantify that idea of social value? And then we do a similar exercise for something like brand trust. How do you really boil down whether these members have high brand trust? So, there are tags like fan community, where people are talking in a positive way about the brand. There are people promoting the brand, this sort of thing. And so, it allows us to take this almost evanescent concept and boil it down to a few key tags and then get really concrete and nitty-gritty about how would you define that and make it happen.

BRIAN KENNY: It’s always been challenging to measure brand perception, but this is one of the things that brand managers have to do and understand because you want to know what people think about your brand. So, some of the things you’re talking about make more sense than some of the tools that I think have been available to us before, which is great.

Jenny, I’ll come back to you. The case talks about a specific incident where a healthcare app was accused of exploiting a tragedy. Maybe you can give us a little context for that and then talk about, how do you advise a client in a situation like that? How should they be thinking about sensitivity and transparency when they’ve also got a business to run and they’re trying to meet their business objectives?

JENNY WOLFRAM: Something we often see on social media is that things can start from something small, like one influencer making a statement or one comment, and then it can very, very quickly snowball. And the first thing that is really important is just really active, granular listening to really know what are people actually saying in addition to knowing that there’s, for example, a spike in negative sentiment. What are the topics that are being discussed? Who is discussing it? Is it isolated to a specific campaign or a post, or is it across the board? So, really gathering as much information as possible is always important on social media in general.

And then something that a lot of our clients tend to do is to really go back to their brand values when they’re thinking about, should they make a statement, or should they get involved? And really thinking about what they’re looking to do. In this specific case, the health app for them, it’s really important to protect their community. So, the decisions they decided to take, they were really driven from that as the core value.

And then in general, what we see is that often being silent about something can be harmful on social media just because it’s perceived by people as perhaps the brand either not caring or the brand not actually having a relationship with its audience. So we do often encourage brands to take action when they can, and that could look like, for example, curating the conversation to protect their community, or it could look like deploying a big one-on-one response strategy where they’re actually interacting with every person who’s spreading false information or every person who has an opinion in a very authentic and nice way. So, it really depends a lot on the situation.

BRIAN KENNY: Julian, what are you seeing as you look more broadly across sectors and industries about how brands think about should we respond, should we shut down comments? That’s something we have conversations about a lot because comments can be super harmful, but if you do that, then you’re not being authentic, and you’re not allowing a conversation to play out. It’s a really difficult thing to deal with.

JULIAN DE FREITAS: It is difficult, especially because companies want to protect their hard-won brand equity. They want to maintain control. And the challenge is that when you move on to social media, people are not necessarily there to interact with brands. They’re there to interact with each other. And so, what you often see is that there’s this trade-off between how much control the company has and how much people are going to then resonate with the brand community. And what the literature suggests is that the communities where people are really posting and engaging with each other, not just with the brand, are the ones where brands are playing more of a facilitator role. So, they’re helping you connect with others. They’re giving you the sense that you own the community. And if they’re talking at all, they do it in a way that is mindful of the community norms. They’ve earned citizen status. And so I think what’s interesting about how automation is affecting this is that in some ways now brands have more control than maybe they’ve ever had before, where they can at least keep out some of the really pernicious types of comments, give people a sense that this is still a space for your community, but at the same time, protect that hard-won brand equity.

BRIAN KENNY: And having those community norms is really important, I think, right? You’ve got to make it clear what the norms are and what it means to overstep those norms and what the consequences are of that. So, that’s up to the brand to do that.

Vesa, I’ve been talking about CFOs as if I didn’t have one in the room, but I do, and that would be you. So, let me turn to you and ask, in the case, you draw some parallels to financial rumors sinking banks. I’m wondering from your vantage point, how do you think about the cost of saying nothing, like we were just talking about, versus the risks of engaging?

VESA RIKKINEN: Well, in finance, of course rumors spreading; and if you say nothing, panic often takes over, and you end up with the bank run. Not a great situation. Brands really the way we see it face the exact same dilemma in social media. And silence often breeds mistrust and escalates that negativity and panic. Of course, there is a risk in engaging with something. You might accidentally give validation there. But the upside of being proactive and responding early enough almost always outweighs the risks. And engaging early protects both your reputation as a brand, but also their long-term value in the end.

BRIAN KENNY: And risk management is something every brand thinks a lot about, and I think it’s probably the cause of, frankly, a lot of tension in the C-suite about how you deal with these kinds of incidents when they happen.

This has been a really fun conversation. I knew it would be. We’re coming close to the end of our time, so I have one question left for each of you, and I’m going to give Julian the final word because he’s the professor, and that’s how we roll at Harvard Business School.

So, Jenny, let me start with you. We were talking earlier about AI and how it’s impacting so many different things. I’m wondering, as you look at the evolution of AI and the social platforms that we’re all engaging on, what do you see as the biggest risks and opportunities for BrandBastion in the next several years? And how would you advise your clients to think about where to invest going forward?

JENNY WOLFRAM: Already 10 years ago, we started with BrandBastion using natural language processing and categorizing data. And now of course, things in the AI space have … Every single day there’s new updates. So, one of the big opportunities is, of course, from our perspective, that brands more and more are embracing AI, and they’re excited about AI, which is great. We’re also seeing that trust and credibility, they’re more important than ever. We were just earlier talking about the new deep fake videos and the amount of content being created. So, trust is hard-earned for brands, and it’s going to be even faster to lose than it has been so far. So, there’s a big opportunity there for companies like BrandBastion to help brands in that area. I think a big risk is, of course, for any company or any person is not staying agile and not being able to continuously innovate and utilize AI in the best way. So, that’s something that we’re focusing a lot on at BrandBastion, really focusing on the R&D, really focusing on implementing the new things that are possible. So, I think lots of opportunities definitely for everyone, but also some risks for sure.

BRIAN KENNY: And a lot of that innovation R&D falls on your plate, Vesa. How do you think about where you need to be investing for the future, where you see challenges? There’s always an opportunity, right? That’s the flip side of a challenge, but it’s got to be done in a strategic way. So, as you look ahead the next five years, where are you thinking you’re going to need to invest to be able to continue to serve your clients in the right way, but also to have some distinctiveness in the marketplace?

VESA RIKKINEN: Well, we’ve always invested a significant portion of our cash flows into R&D, and we are in a very rapidly evolving environment, so it’s a must to have a sustainable company in our space. We will keep investing and growing our know-how on technology as well as the new ways of AI helping into the future. And we believe that it really gives us longevity as a company.

BRIAN KENNY: Again, from my brand management role, it’s almost daunting to think about how quickly these things change. When I started at Harvard Business School, Facebook had just launched. That’s how long … I’ve been around for a long time here at HBS. Facebook had just launched; I think Twitter launched to the year that I started here. So, none of these tools existed, and the ability for people to become either advocates or detractors from your brand didn’t exist in the way that it does today where everybody has a bullhorn. So, I think brand managers are always trying to keep abreast of what’s happening, and it almost seems like it’s impossible to do. Julian, I’ll give you the last word here. I’m wondering, as you look ahead and you think about the BrandBastion case, but also the evolving role of AI and how it’s shaping online discourse, how would you advise people who are listening to think about corporate responsibility in this really uncertain realm?

JULIAN DE FREITAS: So, firstly, I think what’s fascinating about BrandBastion is that maybe more than I’ve ever seen in another case study, here we see that AI is not just being used at the back end for operational efficiencies but it’s really influencing how the brand shows up and even how the discourse of the brand community evolves. And the brand even has the opportunity to influence the culture of that community from an early stage. I think that in terms of responsibilities that brands have, I think that in some ways, thanks to these tools, they’re more equipped than ever to really enact their marketing strategy, to really allow their values to show in the community and feed those positive impressions of the brand that they would like to see. At the same time, I think this technology, with great power, raises new questions about what the bounds of corporate control should be, including whether we should allow companies to control the discourse that happens on social media more broadly. It’s not a question we’re going to solve here, but it’s certainly one that I think also is made salient by this.

BRIAN KENNY: Yeah. That’ll take another whole case. You’re going to have to write another case on that last piece.

JULIAN DE FREITAS: It’s just my roundabout way of finding my way back here.

BRIAN KENNY: We would love to have you back. Jenny, Vesa, Julian thank you so much for joining me on Cold Call.

BRIAN KENNY: If you enjoy Cold Call, you might like our other podcasts: Climate Rising, Coaching Real Leaders, IdeaCast, Managing the Future of Work, Skydeck, and Think Big, Buy Small. Find them wherever you get your podcasts.

If you have any suggestions or just want to say hello, we want to hear from you. Email us at coldcall@hbs.edu. Thanks again for joining us. I’m your host Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.

Stay informed with free updates

Simply sign up to the Technology sector myFT Digest — delivered directly to your inbox.

Here’s a number to conjure with: $1.3tn. That’s the amount of market capitalisation Google parent Alphabet has added since September 2 — and it is equivalent to nearly double the combined gain in the rest of the so-called Magnificent 7.

Why that date in particular? Because it’s when a US antitrust judge decided Google’s monopoly was no longer a potent threat in the age of AI. That decision left the company free to flex its muscles. With Alphabet’s market capitalisation edging closer to a colossal $4tn, the rest may soon be history.

Google’s monopoly in online search — the judge did at least call it what it is — did indeed seem at risk for a while. The launch of ChatGPT in late 2022 threatened to drain the moat Google had created around itself. Analysts at Wells Fargo estimated in 2023 that the shift to “conversational” search, with inherently lower margins, could wipe 14 per cent off Alphabet’s operating profit.

The reality has proved different. Users are searching more on Google, not less, and monetisation seems to be intact. It’s something like the principle of “induced demand” that explains why building more roads generates more traffic. Meanwhile, ChatGPT has, in recent months, handed back some of its market share gains to its larger rival.

Last week, Google slew another foe: the belief that it’s an AI also-ran. The launch of its Gemini 3 model last Tuesday showed a clean pair of heels to OpenAI’s offerings on a range of so-called benchmarking tests, including reading what’s on a user’s screen, a key competency for creating AI “agents”. Salesforce chief Marc Benioff, a ChatGPT user, says he tried Google’s new offering and is “not going back”.

There are three reasons Google has been able to make this leap. One is that it houses some of the world’s most sophisticated research capabilities, thanks mostly to UK-based DeepMind, which it bought over a decade ago. A second reason is that Google is training its models on chips of its own making. Rivals still depend on whatever allocation of they can get from Nvidia, which dominates AI chips as Google dominates search.

The third, and biggest reason? It’s a monopolist, and with that comes monopoly profit. Alphabet has made around $330bn in free cash flow over the past five years, according to LSEG. That gives it enormous leeway to invest for years in things that don’t obviously — and may never — produce revenue. Few companies can so easily accommodate massive spending on things peripheral to their core business. Certainly not OpenAI, which may make $20bn of revenue this year, if it is lucky.

The bigger Google gets, the stronger. As its cloud business grows, now making up nearly a fifth of revenue, it becomes less vulnerable to hiccups in global advertising spend. Future revenue streams could come from selling its chips to other AI combatants like Meta Platforms. Some features of Gemini 3 suggest the company will become a stronger contender in the enterprise software market too.

Of course, being huge on its own isn’t enough to sustain Google’s supremacy. It wouldn’t be where it is without smart ideas and products that people actually want to use. But the company’s impending $4tn valuation sends a strong message that anyone who thought AI would speed the end of tech’s most famous monopoly got it dead wrong.

john.foley@ft.com

In the past decade, drones have become integral to many sectors of the economy. Now, they are rapidly transforming agriculture too, helping farmers grow their crops and changing the way farming is done.

In a study published in Science, researchers at Michigan State University documented how agricultural drones have spread at extraordinary speed, first introduced in Asia then expanding to Latin America, North America and Europe.

Ben Belton is a professor in the Department of Agricultural, Food and Resource Economics at the College of Agriculture and Natural Resources, and Leo Baldiga is a doctoral student in the Department of Geography, Environment and Spatial Sciences at the College of Social Science.

Here, they explain how farms are putting drones to work, why drone use has accelerated so quickly, and what this development means for farmers and stakeholders.

How have drones moved from hobby gadgets to major tools in global agriculture?

Drones have become integrated into everyday life over the past decade — in sectors as diverse as entertainment, health care and construction. They also have begun to transform the way people grow food.

Just a few years ago, agricultural drones were expensive, small and difficult to use, limiting their appeal to farmers. In contrast, today’s models can be flown immediately after purchase and carry loads weighing up to 220 pounds — the weight of two sacks of fertilizer.

Agricultural drones are now akin to flying tractors — multifunctional machines that can perform numerous tasks using different hardware attachments. Common uses for drones on farms include spraying crops, spreading fertilizer, sowing seeds, transporting produce, dispensing fish feeds, painting greenhouses, monitoring livestock locations and well-being, mapping field topography and drainage, and measuring crop health. This versatility makes drones valuable for growing numerous crops and on farms of all sizes.

Where are agricultural drones used, and why has their use increased so quickly?

In a new study published in the journal Science, we show that use of agricultural drones has spread extremely rapidly around the world. In our research as social scientists studying agriculture and rural development, we set out to document where agricultural drones have taken off around the world, what they are doing and why they have traveled so far so fast. We also explored what these changes mean for farmers, the environment, the public and governments.

Historically, most agricultural technology — tractors, for example — has spread from high-income countries to middle- and then lower-income ones over the course of many decades. Drones partially reversed and dramatically accelerated this pattern, diffusing first from East Asia to Southeast Asia, then to Latin America, and finally to North America and Europe. Their use in higher-income regions is more limited but is accelerating rapidly in the U.S.

China leads the world in agricultural drone manufacturing and adoption. In 2016, a Chinese company introduced the first agriculture-specific quadcopter model. There are now more than 250,000 agricultural drones reported to be in use there. Other middle-income countries have also been enthusiastic adopters. For instance, drones were used on 30% of Thailand’s farmland in 2023, up from almost none in 2019, mainly for spraying pesticides and spreading fertilizers.

In the U.S., the number of agricultural drones registered with the Federal Aviation Administration leaped from about 1,000 in January 2024 to around 5,500 in mid-2025. Industry reports suggest those numbers substantially underreport U.S. drone use because some owners avoid the complex registration process. Agricultural drones in the U.S. are used mainly for spraying crops such as corn and soybeans, especially in areas that are difficult to reach with tractors or crop-dusting aircraft.

What risks and benefits do drones bring for farmers and the environment?

Shifting from applying chemicals with backpack sprayers to drones substantially reduces the risk of direct exposure to toxins for farmers and farmworkers. However, because drones usually spray from a height of at least 6 feet, if used improperly, they can spread droplets containing pesticides or herbicides to neighboring farms, waterways or bystanders. That can damage crops and endanger people and nature.

Drones spray and spread fertilizers and seeds evenly and efficiently so that less is wasted. They may also reduce damage to crops in the field and consume less energy than large farm machines such as tractors.

Are drones saving labor or displacing it?

Drones save farmers time and money. They reduce the need for smallholders — people who farm less than 5 acres, who account for 85% of farms globally — to do dangerous and tiring manual spraying and spreading work on their own farms. They also remove the need to hire workers to do the same. By eliminating some of the last remaining physically demanding work in farming, drones also may help make agriculture more attractive to rural youth, who are often disillusioned with the drudgery of traditional farming. In addition, drones create new skilled employment opportunities in rural areas for pilots, many of whom are young people.

On the downside, using drones could displace workers who currently earn a living from crop spraying. For instance, according to one estimate from China, drones can cover between 10 and 25 acres of farmland per hour when spraying pesticides. That is equivalent to the effort of between 30 and 100 workers spraying manually. Governments may need to find ways to help displaced workers find new jobs.

What could agricultural drones mean for future food production?

Drones may increase the amount of food that can be produced on each acre of land, while reducing the amount of resources needed to do so. This outcome is a holy grail for agricultural scientists, who refer to it as “sustainable intensification.”

However, much of the evidence so far on yield gains from drone-assisted farming is anecdotal, or based on small studies or industry reports.

The drone revolution is reshaping farming faster than almost any technology before it. In just five years, millions of farmers around the world have embraced drones. Early signs point to big benefits: greater efficiency, safer working conditions and improved rural livelihoods. But the full picture isn’t clear yet.

This article first appeared on GuruFocus.

• Revenue: $9.7 billion, a 2.4% increase year-over-year.

• Adjusted Operating Income Rate: 4%, 30 basis points better than expected.

• Adjusted Earnings Per Share: Increased 11% year-over-year to $1.40.

• Comparable Sales Growth: 2.7%, exceeding expectations.

• Domestic Revenue: $8.9 billion, a 2.1% increase driven by 2.4% comparable sales growth.

• Online Revenue: $2.8 billion, a 3.5% increase on a comparable basis, representing 31.8% of domestic revenue.

• International Revenue: $794 million, a 6.1% increase driven by 6.3% comparable sales growth.

• Domestic Gross Profit Rate: Decreased by 30 basis points to 23.3%.

• International Gross Profit Rate: Increased by 30 basis points to 22.8%.

• SG&A Expenses: Domestic adjusted SG&A decreased by $4 million.

• Shareholder Returns: $802 million returned through dividends and share repurchases year-to-date.

• Fourth Quarter Comparable Sales Guidance: Expected range of down 1% to up 1%.

• Full Year Revenue Guidance: $41.65 billion to $41.95 billion.

• Full Year Comparable Sales Growth Guidance: 0.5% to 1.2%.

• Full Year Adjusted Operating Income Rate Guidance: Approximately 4.2%.

• Full Year Adjusted Diluted EPS Guidance: $6.25 to $6.35.

Release Date: November 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

• Best Buy Co Inc (NYSE:BBY) reported strong third-quarter results with revenue of $9.7 billion, an adjusted operating income rate of 4%, and an 11% year-over-year increase in adjusted earnings per share to $1.40.

• The company achieved better-than-expected comparable sales growth of 2.7%, driven by strong sales in computing, gaming, and mobile phones.

• Online sales increased for the fourth consecutive quarter, supported by higher traffic and increased customer adoption of the Best Buy app.

• The launch of the Best Buy marketplace has been successful, with over 1,000 sellers and 11 times more SKUs available online, contributing positively to gross profit rates.

• Best Buy Co Inc (NYSE:BBY) continues to innovate with new in-store experiences and partnerships, such as immersive showcase areas for AI glasses and collaborations with IKEA, enhancing customer engagement and satisfaction.

• The company experienced declines in the home theater, appliance, and drone categories, which partially offset growth in other areas.

• Best Buy Co Inc (NYSE:BBY) anticipates a decline in fourth-quarter gross profit rate due to increased promotional investments and lower product margin rates.

• The appliance market remains challenging, with a high percentage of single-unit purchases and a focus on duress customers, impacting promotional effectiveness.

• Despite positive momentum, the fourth-quarter comparable sales outlook is expected to be in the range of down 1% to up 1%, reflecting potential challenges in maintaining growth.

• The company recorded pretax noncash asset impairments of $192 million related to Best Buy Health, indicating pressures in the Medicaid and Medicare Advantage markets.

Q: Can you discuss the puts and takes on Q4 guidance, especially in terms of sales and profit expectations? A: Matthew Bilunas, CFO, explained that the high end of Q4 sales guidance is similar to previous expectations, with a slight adjustment on the low end. The EBIT expectations were slightly lowered due to rate pressure and adjusted revenue expectations, but overall, the guidance remains consistent with prior discussions.

Q: How is the adoption of products like the Nintendo Switch 2 and iPhone affecting future momentum? A: Matthew Bilunas noted that computing and mobile phones are expected to continue growing due to replacement needs and innovation. The Nintendo Switch 2 will support growth in Q4, but other consoles may slow due to their lifecycle stages. Improvements in TV trends and marketplace initiatives are also expected to contribute positively.

Q: What is driving the deceleration in Q4 outlook despite momentum from Q3? A: Matthew Bilunas highlighted that Q3 benefited from strong back-to-school and October sales, but Q4 faces tougher comparisons. Categories like gaming and wearables may not grow at the same pace as in Q3, and the holiday season’s unpredictability requires a range of scenarios for planning.

Q: How is the new marketplace performing, and what challenges have you encountered? A: Corie Barry, CEO, expressed satisfaction with the marketplace launch, noting over 1,000 sellers and 11x more SKUs. Early indicators are positive, with high unit sales in accessories and small appliances, lower return rates, and strong customer experience metrics. However, the ramp is still early, and the focus is on scaling through Q4.

Q: Can you provide more details on the loyalty program’s performance and future plans? A: Corie Barry stated that the membership program is crucial, with nearly 8 million paid members. The focus is on driving value through personalized promotions and unique offers, such as discounts on NFL Sunday tickets. The goal is to increase engagement, share of wallet, and support the ads business.

Q: How are you planning store investments for the coming year? A: Corie Barry emphasized the importance of stores as crucial assets for experiences and fulfillment. Investments focus on store look and feel, vendor partnerships, and exploring smaller format stores. The goal is to ensure stores reflect immersive experiences and meet customer expectations.

Q: How are tariffs affecting pricing and average unit retail (AUR)? A: Matthew Bilunas explained that tariffs are included in pricing, but the promotional nature of the industry and product mix changes can mute their impact on AUR. The focus remains on offering products at every price point to meet customer budgets.

Q: How does vendor-supported labor in stores impact customer engagement? A: Corie Barry described the flexible labor model, which includes vendor-supported labor, as enhancing customer engagement. The model allows for specialized expertise while maintaining Best Buy’s service culture, improving customer interactions and satisfaction.

Q: What are the prospects for Agentic Commerce and instant checkout? A: Corie Barry indicated a fast timeline for integration, focusing on customer experience and ensuring seamless transactions, especially for scheduled deliveries and services. The goal is to enhance brand presence and customer engagement through Agentic tools.

Q: How are you managing SG&A expenses amid sales growth? A: Matthew Bilunas noted that SG&A favorability in Q3 was due to higher sales leverage, lower technology and labor spend, and smaller settlements. The focus remains on operational efficiencies and cost reductions to offset pressures and drive profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.