Reinventing customer value. (Keynote).

I'm privileged to have inherited a wonderful growth machine with a tremendous culture. The company started with four stores in Atlanta, and now we have 1,300. On average, we open a new store every 43 hours, In 1990, looking at the top five companies, we represented about 5 percent of the market, We turned in about $46 billion last year. We're targeting to become a $100 billion company.

Six months ago, I introduced through every division a process called Strategic Operating and Resource Planning, or SOAR. It covers demographics, geographic growth and competition from a customer-centric standpoint. When I took over, there were three group presidents and nine divisions. We took out the group presidents to improve communications, keep me close to the customer, and as a new guy, immerse me in the business. Now every division president reports directly to me.

Every division is converting to a platform we call SPI - Service Performance Improvement. We've seen customer greets go up a factor of 2, and time in the receiving well go down 38 percent. A typical associate would spend 70 percent of his time on task and only 30 percent dealing with you when you came into our store. To differentiate ourselves through customer service, we separated tasks and transactions. All receiving tasks are now completed in the evening. So the associate on the floor spends 70 percent of his or her time in transactions, recognizing that there are still about 30 percent that we may have to pack down and pack out, to make sure the product you're looking for is available.

We also implemented SPI for the merchants. We changed from decentralized buy-in offices and brought all the tasks to Atlanta, keeping transactions in the field. We now have a VP of merchandising for each department, like lumber and building materials. We retained a district sales manager with total accountability for driving sales, not negotiating contracts. Suppliers are excited about having a single port of entry, not having to renegotiate nine different times in the field.

We have spent countless hours communicating and training through this major cultural change. SPI, totally focused from a customer standpoint, means we're providing more value, improving efficiency at delivering products and services, and effectively utilizing over 250,000 associates.

We've also launched the At-Home Service Initiative. You may remember last June, an article in the Wall Street Journal spoke of the death of the "do-it-yourselfer." I would submit that the "echo boomers" over the next 10 years are wedded to do-it-yourself. We must provide customer value so loyal customers that may have migrated from "do-it-yourself' to "do-it-for-me" can use us. God forbid that there might be somebody out there who's not a loyal Home Depot customer. Service represents about a $180 billion market opportunity, and you saw the demographic shift that says we must expand into services or risk losing the core product transaction.

Flooring, siding [and] roofing now have product line leaders. The service vice president reports to me, with points of intersect within every division. A division installation manager brings functional guidance from the individual leader across each division. It gives us a common platform and greater reliability in the delivery, and we focus more on selling and less on creating in the field, This new initiative, we think, represents a 30 to 40 percent growth opportunity over the planning period.

Then there's our PRO initiative. We're now looking at dedicated PRO stores, a higher-end professional set of merchandise products and services, and we're developing relationships with people building 100,000 to 200,000 homes a year. Builders really don't buy drywall; they buy the contractor and he buys the drywall. They really don't buy lumber; they buy the framer; the framer buys the lumber. We're providing the convenience of a distribution network with 1,300 stores, growing next year by a couple hundred more. We will have over 500 stores reset with PRO by the end of this year. This is a $230 billion market opportunity we've played in only modestly.

Of course, we are only as good as our people, so for the first time in company history, we're visiting every division. We go through leadership assessment, team assessments, succession planning, then round-table discussions with high potentials and a town hall meeting with 300 power lead associates. As we do this, it's not uncommon to pick up the phone and provide a promotion.

We just announced the Home Depot Learning Center, to develop leaders, to provide not only product knowledge, but also selling skills. We want them more engaged in qualifying a customer: "OK, you're buying a gallon of paint, but don't you need a brush, don't you need the drop cloth, don't you need the tape?" You can't assume with the massiveness of the organization that they know what is right. For many of these young men and women, it's the first job. We have to work hard to reduce the level of frustration of intimidation for them. Nobody wants to be perceived as not knowing what they're talking about, being in an awkward position serving the customer. When that happens is when we lose them, and turnover is very costly.

We're introducing e-learning to help train 250,000 associates. We launched our Six Sigma College with 25 of the brightest associates totally immersed as the first wave; we'll run it through our entire company. We're introducing a Store Leadership Program with a few hundred individuals at time in four rotations through merchandising, stores, logics, IT, all facets of our business. We'll dedicate a third of the program to junior military officers.

We will put metrics in place and a senior leader who can provide a golden thread of integration across every division. At Home Services or PRO, we have a simple, single page to distribute to all associates to talk about how we're running the company. We ask them to raise their hands if what they're doing every day can't relate to one of the strategic initiatives. We want to make sure they're contributing and their efforts are recoverable in our market price.