Former Trader Joe’s president shares secrets to creating a business culture

Focus on culture, and then build a strategy. That was a key message that Doug Rauch, former president of Trader Joe’s, had for attendees Friday morning.

“This to me is the secret and basically the [one thing that can’t be copied] — culture. Culture is the DNA of a company,” Rauch told attendees during his keynote address titled, “Creating the right cultural and strategic framework for delivering a true health-and-wellness destination in the store.”

During his presentation, sponsored by the American Heart Association, Rauch reflected on his 31 years spent with Trader Joe’s, the last 14 years as president, and growing the business from a small nine-store chain in Southern California to a nationally acclaimed retailer with more than 340 stores in 30 states.

Rauch began at the chain’s inception, sharing with attendees what is probably a little known fact: Trader Joe’s owes its existence to the convenience store chain 7-Eleven.

“So how did this company that literally started as a chain of convenience stores in 1958 as a knock-off 7-Eleven, which wasn’t in California at the time, how did this company come to be the one that ends up on the front page of Fortune magazine a couple of years arguably as the hottest and most secretive retailer in America?” Rauch said. Rauch said that all good businesses have a clear sense of why they exist. Who would miss a company if it disappeared, and why?

“So, one of the things we did at Trader Joe’s is we wanted to deliver outstanding values and products that we think our customers would want that actually benefit their wellbeing. So, we had to do that by reinventing buying,” he said. Reinventing buying involved buying direct, private label, limited SKUs and viewing manufacturers as partners. The company also focused on creating destination products and creating a corporate culture that promotes the sharing of values, not rules.

“As you are looking at growing health and wellness, make certain you are focused. Make certain you know, ‘Who am I, and what am I doing in this marketplace for the customer?’” Rauch said.

“Only from scar tissue and experience do we start to learn that we really ought to focus on our culture to make sure it is ready to absorb and accept any changes in strategic shifts, he said. “Because try to put a strategy on a culture that is not ready for it, and you will get an automatic rejection and culture will win every time.”

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