‘Learn from your competitors’

How did Tesco manage to become the world’s number two retailer? “While retail may seem to be a slow-moving business, data is key to transforming performance,” advised Tesco’s former CEO Sir Terry Leahy during an international congress on Business Analytics, organised by software supplier SAS in Amsterdam on 9 May 2012. He highlighted nine management lessons as the basis for success.

When Leahy took on the role of Chief Executive Officer at Tesco in 1993, Marks & Spencer was the world’s most profitable retail chain and J Sainsbury was the largest grocery retailer. Whereas Tesco’s stock market value was only half that of those two competitors at that time, it has since grown to more than three times as much as theirs.

Finding the truth was the first management lesson Leahy outlined for transforming companies successfully. “It’s normal to want to reinforce the good news and filter out the bad. You look to each other for reassurance and you don’t really want to change. The most reliable voice for a CEO is that of the customer, because no one from within the company will speak freely.” Only by listening to the customer, he says, can you discover the truth.

“Set audacious goals and push people farther than they want to go,” continued Leahy. Tesco wanted to become number one in the UK, develop a non-food business that was just as strong as food, launch new retail services such as travel, telecoms, insurance and banking, and become a leader in global retailing. “Vision, values and culture matter more than the hard side of management,” said Leahy as the third lesson.

Follow the customer

“People are changing constantly; companies move much more slowly,” stated Leahy. “Nowadays, you can suddenly find yourself losing as a company – just look at Kodak and Nokia. Use hard data to know what’s going on in customers’ lives. Retail used to be all about bigger stores. But people are feeling increasingly busy and don’t have time to plan for the big shop and the big store. That’s why we started building Tesco Express, miniature supermarkets. It seemed to be counter-intuitive, but it has become a huge success.” This concept has been successfully copied elsewhere, including by Albert Heijn in The Netherlands.

As a steering wheel, Tesco has had a balanced scorecard for many years, for customers, the community, operations, people and finance. “If you want to turn a strategy into reality, you need a process with roles, systems and a huge amount of data. Keep in mind that people are not robots.”

Data is priceless, according to Leahy. “The Clubcard has transformed Tesco into a community. It not only enables you to hear what customers are saying, but also to see how a bank and a telecoms provider have built themselves up around the club. Companies who use data thrive because they can sense what is happening around them.”

Free advice

Leahy sees competition as a good thing: “It forces you to do a better job. The trick is to learn from your competitors by looking for their strengths, not their weaknesses. That’s the equivalent of getting free consultancy advice.”

The former CEO concluded his management lessons with his definition of leadership: “It’s all about the impact you have on other people. You need to have thousands of leaders who will stand up and shoulder their responsibilities.”

Tesco’s innovations

November 2007: Tesco launches supermarket chain Fresh & Easy for local communities in the USA. It builds new factories and distribution centres to ensure timely deliveries. The stores have self-service checkouts, and no back office because the IT is run from India.

Spring 2011: Together with Unilever, Tesco develops a 3D planogram to optimise on-shelf presentation. This includes the use of ‘eye tracking’ technology which monitors housewives looking at real products on shelves in a laboratory environment.

March 2012: Tesco introduces the virtual store in a metro station in Seoul, South Korea.