What Does Walmart Really Hope to Gain By Appointing Instagram's CEO to Its Board?

There is this belief that when someone with specific expertise is appointed to a company's board, their personal insights and experience will somehow change the way a massive global enterprise operates.

This seems wildly optimistic at best and absolutely delusional in cases like Walmart which has $476 billion in revenues and approximately 2.2 million employees (though no one is probably really sure day to day or even year to year).

Which is not to say that Kevin Systrom, Instagram's co-founder and CEO, a Stanford grad and former Google project manager will not add value as a Walmart board member, it's just how he does so that could be interesting.

Walmart's sales and profits have faltered for a couple of years now, not the least because its target customer no longer has the financial wherewithal to shop there. But if the company is going to successfully broaden its appeal and possibly move up-market to start attracting a somewhat more affluent clientele, it is going to have to do some things differently. We will leave the reputational embarrassments aside (abusive employment policies and the like) but we do know that the digital customer likes speed and convenience. Those are things Mr. Systrom knows something about:after all, he sold Instagram to Facebook for $1 billion when it had 13 employees. The Walton family will undoubtedly be interested in his views on wealth preservation. 

Walmart management has also traditionally had something of a chip on its shoulder: it's been their rural pragmatism and intelligence versus a superior-acting world. When the company was really growing in the 1980s they were advised to move headquarters to a bigger, more sophisticated city like Dallas. They purposely chose to stay in Bentonville, Arkansas as a statement about their values and ambitions. But that sort of pugnacious self-justification can only take you so far. Instagram represents one of many start-ups that grew to scale by recognizing that they had to leave certain ideological or philosophical predispositions behind - if they wanted to grow.

But his real contribution may be in helping Walmart get faster and nimbler. That is no easy task for an enterprise of its girth. But his entrepreneurial acuity in starting sustainable operations, identifying customer needs and acting on them quickly and growing to scale - all essential elements in a Walmart revitalization plan, whether on or offline - could be handy insights in a hyper-speed economy. JL

Shelly Banjo reports in the Wall Street Journal:

Wal-Mart generated only 2% of its $476 billion in revenue from Web sales last year, but it expects them to grow more than 20% this year, becoming the retailer's fastest-growing business area.

Wal-Mart Stores Inc. named Instagram Chief Executive Kevin Systrom to its board Monday in a bid to expand its technology expertise to better compete with Web rivals like Amazon.com Inc.  AMZN in Your Value Your Change Short position

Mr. Systrom, 30 years old, is Wal-Mart's youngest director since the company went public in 1970. He also has little experience working at a gigantic company like Wal-Mart, which had nearly half-a-trillion dollars in sales from 27 countries last year. He spent two years as a product manager at Google Inc.  GOOGL in Your Value Your Change Short position but hasn't been a top executive or director at a public company.

Mr. Systrom co-founded the photo-sharing website Instagram in 2010 before selling it 18 months later to Facebook Inc. FB in Your Value Your Change Short position for $1 billion in cash and stock. Instagram had just 13 employees and no revenue when he struck the deal with Facebook founder Mark Zuckerberg in 2012.

Wal-Mart said Mr. Systrom is expected to serve on the board committee that sets executive compensation and oversees governance and compliance. He will also join the technology and e-commerce committee alongside Yahoo Inc.  YHOO in Your Value Your Change Short position CEO Marissa Mayer and Greg Penner, who is vice chair and the son-in-law of Wal-Mart's chairman, Rob Walton.

Beverly Behan, president of the corporate governance firm Board Advisor LLC, said she advises retailers to look for younger directors with technology expertise but "being that young and never serving on a board before is a bit of a question mark, especially for a company as large and complex as Wal-Mart."

Driving Web sales and incorporating digital features into its stores are top priorities for Chief Executive Doug McMillon, who took over in February and is trying to focus more on technology. Wal-Mart generated only 2% of its $476 billion in revenue from Web sales last year, but it expects them to grow more than 20% this year, becoming the retailer's fastest-growing business area.

Wal-Mart spokesman Randy Hargrove said the board didn't have a previous relationship with Mr. Systrom. It started searching for a new director with technology experience this past summer.

The search followed the departure of two directors in June. Wal-Mart's board chose Mr. Systrom as its 15th director during a Sept. 26 meeting. Mr. Systrom didn't respond to a request for comment. Wal-Mart declined to make him available.

While Instagram operates somewhat independently of parent company Facebook, Wal-Mart's appointment of Mr. Systrom marks the latest development in a close relationship between the social-media giant and the world's largest retailer.

Facebook and Wal-Mart forged close ties four years ago after Accel Partners venture capitalist Jim Breyer introduced former Wal-Mart CEO Mike Duke to Facebook Chief Operating Officer Sheryl Sandberg at a technology conference held at his office.

Facebook appointed Wal-Mart Chief Marketing Officer Stephen Quinn to a client council that consults on its advertising business. It also began sending a team of employees to Wal-Mart's Bentonville, Ark., headquarters to work on big marketing campaigns. Wal-Mart has encouraged its suppliers to get more involved with Facebook's advertising platforms.

Mr. Breyer also introduced Ms. Sandberg to Wal-Mart's CEO, and the two remain in touch, people familiar with the executives said. Mr. Breyer, an early investor in both Facebook and Wal-Mart's e-commerce arm, last year stepped down from both company boards.