Six years ago, Walmex—a publicly traded subsidiary of Walmart Inc. and one of Mexico’s largest retailers and employers—was a very different company from the one it is today. Since 2017, Walmex has opened more than 400 new omnichannel stores, with home delivery, drive-through pickup areas, and in-store commercial kiosks where even customers who transact in cash can access online shopping.
Today, Walmex stands strong across metrics. Revenue in 2022 reached more than $40 billion and has grown at 8 percent per annum, with margins that have expanded each year. It has more than 1,000 stores with on-demand capabilities and more than 1,400 with in-store pickup services. The company’s media business, Walmart Connect, which was launched in 2019, offers physical and online advertising space and has become the fourth-largest media player in Mexico, with more than $100 million in revenue. The company’s telco and financial-services businesses have 7.8 million and 5.4 million total users, respectively.1
Walmex CEO Guilherme Loureiro, chief growth officer Beatriz Núñez, and former COO Cristian Barrientos (who is now CEO of Walmart Chile) say success hinged on a comprehensive transformation that required reimagining not just the company’s omnichannel strategy but also fundamental approaches to hierarchy, teamwork, and leadership. When the transformation began in 2017, Walmex’s more than 200,000 employees worked either in the 2,300-plus brick-and-mortar stores or in online sales, with only a few people dedicated to integrating the two channels. Because millions of customers across Latin America transact purely in cash, these customers were locked out of online shopping, which requires a credit or debit card.
As Loureiro observed digital challengers gradually creeping up on Walmex’s business, he knew the company would need to reinvent itself as an omnichannel enterprise to be ready for the future. But as they analyzed the scope of the challenge and the creativity and agility required to meet it, Loureiro and his fellow executives realized a cultural transformation had to happen first.
Before 2017, the company operated in silos, with a traditional hierarchical structure. The leadership style across these silos might best be described as “command and control,” Loureiro said. Digital talent and knowledge that developed within one silo tended to stay there, instead of permeating other parts of the company. To make the most of innovative people and ideas, the executive team sought to reorganize silos into entrepreneurial “squads” that could collaborate with one another. In some cases, fresh talent steeped in digital solutions needed to take the reins from longtime leaders whose expertise was old-fashioned retailing. Across the company, mentoring and coaching were deployed to help people assimilate the changes into how they worked.
Leading a cultural and operational transformation—while simultaneously pursuing results from the existing structure—demands courage, creativity, and flexibility from those in charge, as Loureiro, Núñez, and Barrientos can attest. They say the result—a delayered and customer-centric organization offering an omnichannel shopping experience—has been worth the deep and sometimes humbling introspection required. The three executives spoke with the McKinsey Quarterly to reflect on how they themselves had to transform in order to pursue this mission, providing a candid look at how a company reinvented itself.
The Quarterly: What shape was the company in at the start of the transformation journey?
Beatriz Núñez: I arrived at Walmex as chief digital officer in August 2018. The company had begun this profound transformation process in 2017, in line with Walmart’s global corporate strategy to make the company digitally enabled. With little understanding of what this could mean, Guilherme—or Gui, as we call him—began a process of discovery. He read books, dedicated himself to understanding the digitally born, and the executive committee reached out to other companies and organizations to gain a full understanding of what we needed to do.
Cristian Barrientos: It was a very successful company, with a strong track record of delivering results year after year. We went through a difficult patch in 2012, but the company began to make changes from 2013 onward, including big changes at the management level. We recognized that, as our customers were changing rapidly, we needed to transform and add different avenues of growth to be able to connect with our customers.
Guilherme Loureiro: When we started the transformation, the company was doing well in relation to the market. On the surface, it was difficult to grasp that we needed to change. However, a dear mentor taught me that in everything you do, you have to think ten, 15 years ahead. I have used this methodology in both my professional and private life. But merely recognizing this was not enough—I had to be prepared, and I had to change. The shift required a move away from the normal leadership model of command and control. I had to listen to people and let them participate. I couldn’t do it alone. So, I called a coach and told him I was clear about what had to be done but needed him to help me convince my team. This coach told me, “Just because you know where you want to go doesn’t mean you’re ready.” The work began with me and that was very hard.
A dear mentor taught me that in everything you do, you have to think ten, 15 years ahead.
The Quarterly: How did the new focus on agile ways of working play out?
Beatriz Núñez: We started by drawing up our own problem statement, which asked how we could transform the company to become more customer centric. Months later, we added associate centric to the strategy, as we recognized we not only had to put the customer at the center but also our associates. We also needed to deliver end-to-end solutions and be data driven to exponentially improve our results. Through this process, we aimed to maintain our double-digit growth rate, while achieving efficiencies beyond our traditional year-over-year gains. In this way, we set our aspiration as a company in February 2019. The executive committee met to examine hypotheses on where we could start this process. We decided to start with the merchandising area, because as the heart of the organization, it could provide lessons that could be scaled to the entire company.
Guilherme Loureiro: Today’s customers are different from those of the past. They are moving toward the online, discount, and club channels, and can more easily compare prices online to ensure they are getting value. If we didn’t make a change, we would be using outmoded tools to serve our customers. To spark the change and become more agile, we needed multidisciplinary teams with autonomy. But we had an organizational structure based on silos. What was gained in silos—a more efficient way of organizing people and functions to provide services across the organization—was lost in the speed and quality of our products or services. So we had to stop working in silos. But if I was going to create multidisciplinary teams with an end-to-end vision, these people required autonomy. Did this mean that as CEO, I had to give up command and control? Yes, and how wonderful that has been! The way we work now is much more fun and far more efficient. A good leader does not need command and control to lead his people.
The Quarterly: How did the executive committee learn the new ways of working, and what changes were personally challenging?
Cristian Barrientos: One of the things we learned was that years of work experience no longer carry the same weight as before. For me, personally, I realized it is necessary to combine experience with disruption, transformation, and adaptation to the real needs the client is showing you. And you must have the humility to incorporate new people with different visions into your day-to-day life.
One of the things we learned was that years of work experience no longer carry the same weight as before.
Guilherme Loureiro: You must perform to transform. Your biggest defense against doubters is to deliver your targets, because if you stop delivering at any point in the transformation process, the people who oppose you will come after you. And there’s a fine line between being a brilliant transformational CEO and being a bungler who took the company out of focus.
We asked ourselves three questions: Do I understand the transformation? Do I want to be part of it? And, can I be part of it? If you don’t answer yes to all three, you can’t be part of the transformation. On the first point, you must constantly communicate what the transformation is all about, so you give everyone a fair shot at understanding the goals. On the second point, I didn’t understand how someone could not want to be part of the change. However, there were people who didn’t want to be part of a more customer-centric, efficient organization, where people had autonomy; some people didn’t want to relinquish command and control. On the third point, there are people who want to be part of the process, and understand it, but for some reason can’t do it. And maybe I was initially one of those.
Personally, I learned a lot about true leadership. We went to visit the CEO of a company that underwent a similar transformation in Europe. He put forward the board, got the approval, and then resigned because he felt he was not the right person to carry it out. This shows that designing the transformation and convincing people does not give you the right to be the leader. You must stop doing the things that once made you successful. You must do things differently.
The Quarterly: How did the executive committee handle the talent changes that were necessary?
Beatriz Núñez: I remember a symbolic moment with the executive committee when we told the merchandising team we were going to start the transformation. We told them how it was going to work, with people from different areas, and that we were going to start from scratch to get the right person in the right role. We had to bring in people from different areas to lead different experiments. For example, what happens if I bring someone from marketing to lead one of the new category teams? What happens if you no longer call yourself vice president and now call yourself tribe leader? What happens if a vice president and a director are now peers from a hierarchical standpoint? Would people feel they had been downgraded or were being exploited because they had to do the same job as a vice president or a director?
We started in April 2019, with a small group of about 15 teams composed of 129 people. The rest of the company knew about this initiative and were watching the results of their work carefully. There was a lot of uncertainty and fear, because agility means being more efficient, and efficiency means fewer people. There wasn’t a place for everyone—only for the best. However, two important things were done in terms of retention and talent. First, we enabled the teams to achieve the skills required for this new organization. We tried to hire outside agility coaches to work with the company, but there were not enough in the market for a company of our size. So we put out a call for agile coaches within the organization. This essentially meant people would have to abandon their careers and sign up for a totally new role. Our big surprise was that 500 people signed up, and we were only looking for 50!
The other thing we did was bring in key people with differentiated talents, who then brought in other key people, with an increased emphasis on tech and digital skills. Roles and titles were changed to reflect this pivot, and the hiring process was also more digital. Work also began—and continues today—on understanding the nuances of differentiated talent management.
Cristian Barrientos: In the operations area, we underwent a profound change of leadership. In some cases, we had to choose new leaders with fresh skills and ideas. That can be painful, but sometimes it’s what must happen to create new ways of working.
Guilherme Loureiro: One important thing was reverse mentoring. I’m not a digitally native guy, but I didn’t need to be one to lead a digital revolution in business. We realized we needed to turn to younger, digitally savvy people to mentor older leaders. And these young people benefited from the experience by spending time with and learning from more senior people.
The literature told us that for a transformation like the one we were seeking, half the people had to leave—which was unfeasible. Contrary to what many people say about tech transformations, I believe that a person with a business background who could go digital would be much better than a digital-only person. I firmly believed that people could be transformed and that it was unfeasible to do what the recipe said. A person who has a lot of business experience, is minimally digital, and can lead a digital team is worth their weight in gold. This combination is worth much more than being solely digital. I think having to continue with people and transform them gives us a serious advantage. We now have people who are very expert in business who are also capable of leading digital teams.
The Quarterly: What has surprised the executive committee since you started this journey, and what have been the most important lessons?
Beatriz Núñez: I see the number of areas we had to create from scratch, such as the data office, product organization, new businesses. The product organization today is rapidly delivering technology and data solutions to the organization, all cross functional. Since its creation, Walmart Connect—which sells online and physical advertising space—has become the fourth-largest media business in Mexico. And it continues to amaze me how an organization like Walmex, which could have been a dinosaur, embraces this capacity for innovation from scratch. A great lesson has been that agility is only an enabling element. The goal was not the transformation itself, and the destination was not to be an agile company; it was to achieve the purpose of putting the customer and our associates at the heart of an omnichannel retail business.
Cristian Barrientos: Perhaps it is something new for many people, but Walmart, where I have been for 13 years, has always advocated that we be tough on the problem and not on the person. I think it is a phrase that illustrates very well not taking things personally, opening one’s mind to being able to work collaboratively, to receive feedback, and really solve a problem, rather than feel attacked.
Guilherme Loureiro: The transformation of Walmart taught me that no matter what you have done in your life, the world is changing, and you must change too. You must have the humility to accept that it doesn’t matter how successful you are, you must continue learning and growing.
The Quarterly: Finally, how would you describe the path you have been on to date, and where do you see it going next?
Guilherme Loureiro: We have grown from being a traditional brick-and-mortar retailer to adding an e-commerce business to becoming an omnichannel retailer. As we have learned more from our customers, we have capitalized on our assets and have added digital services like telco [BAIT] and financial services [Cashi].
We now aspire to become an omni-driven ecosystem. We must continue to learn, develop our people and, most importantly, listen to our customers to build the required capabilities and capacity to better serve them every day.