CVS and Target: Competitors turned Collaborators

Posted by on Jul 10, 2015

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Key Lesson:  Sometimes friendly competition can lead to shared goals and enhanced value for all stakeholders.

Target CEO Brian Cornell and CVS CEO Larry Merlo have known each other for a long time, and they’re in the habit of occasionally having dinner together to compare notes on running their respective businesses. It’s no secret that their retail sectors have been colliding more and more in recent years, so their openness to sharing their challenges with each other is remarkable in itself.

Recently, though, they went a step further and negotiated a $1.9 billion deal allowing CVS to acquire and run all of Target’s pharmacies and clinics — essentially functioning as “stores within a store.” As their teams cobbled together the terms of the deal, both CEOs came to the same surprising conclusion. Beyond the obvious advantages the deal brings to their businesses, Merlo confided to Bloomberg Business that they were “amazed at how close-knit our cultures are.”

That cultural connection may be the most critical part of their collaboration. Yes, Target is getting a nice cash infusion and will now be able to focus on its e-commerce and core retail businesses. And yes, CVS will be able to quickly expand its footprint by adding hundreds of locations nationwide. But the real advantage may be in the mutually rewarding relationship that Cornell and Merlo have built over the years — and the extension of that relationship to their burgeoning organizations. Cultivating mutually rewarding relationships is a key tenet of our Grounded Leader model, and that bodes well for their shared future. Mr. Cornell offers a clue to what that future might look like:  “Over time, I think we’ll continue to evaluate ways to work together. I wouldn’t rule anything out.”

Brian Cornell and Larry Merlo are our Grounded Leaders of the Week for their ability to look beyond their competitive positions and forge mutually rewarding relationships for themselves, their employees and their companies.