Management in 10 Words by Terry Leahy
TERRY Leahy was the CEO who turned British retailer Tesco into the country's biggest and most successful retailer, and also expanded it into a global enterprise.
He did this by focusing on 10 attributes managers and enterprises need to focus on. They are simple but hardly simplistic, and while he applied them to retailing they most definitely have currency in any business.
The book is record of Tesco's growth over the 14 years Leahy was at the helm. The first of the "words" referred to in the title is truth, and companies and people do not have a great record for confronting the truth of their situation.
In 1992 Leahy was invited to take the position of marketing director. He set out to discover why Tesco's share price was in the doldrums, and why it was losing market share to both upmarket and downmarket rivals.
To get to grips with this problem, Tesco commissioned an enormous piece of research and Leahy and his team travelled the country talking to customers.
The cause, they discovered, was hardly surprising – customers need a reason to shop with you and if you haven't given them a good one, they will go elsewhere. The problem was grave, but the understanding allowed for repair, and repair they did.
They knew what the customers wanted and set out to satisfy their needs, down to having stores designed with customer input to ensure that the architects didn't get carried away and that their specific customer needs were satisfied.
The chic low ambient lighting was exchanged for bright lights because the customers said so. The twists and turns in the floor layout were altered because customers found it confusing.
All this is a 180 degree flip from relying on head office experts who are hampered by their distance from the problem.
Aside from ground truths, there was the issue of the bigger truth asked by the question What is Tesco for? It is widely accepted that people pour their hearts into organisations that stand for something they can care for.
Leahy defined that as creating value for customers to earn their lifetime loyalty. Customer loyalty is the biggest driver of profit in any industry.
The longer you keep customers, the less you have to spend trying to replace them and in the case of retail, there is evidence that they purchase more from you over time.
To assist in identifying what customers really want so that value can be added to their lives, Tesco launched its Clubcard in 1995. It served a twofold purpose: rewarding customers for shopping at Tesco, and as a medium to gather vital data about the products customers buy.
Tesco was the first retailer to do this, and is arguably the most successful user of this technology.
The descriptions of caution and the care the company took with this initiative and all others is worthy of study. The scheme was trialled quietly in just three stores, and then rolled out to 10 more to get meaningful results.
This was coupled with intense analysis that yielded insights that could be monetised. Of the 26 million households in the UK, 10 million are now holders of Clubcards.
And Leahy wonders what impact such care for the opinion of the public could have on services rendered by schools, hospitals and the government. Don't we all? "Courage" is not a word one generally associates with running a business, but it certainly should be.
Leaders are always facing the unknown and the unknowable, and have to act.
Taking Tesco to the largest and wealthiest market in the world, the USA, was an act of courage. Focusing the company on non-foods which then constituted just 3% of sales was an act of courage.
The desire to be the largest retailer in the UK was no less an act of courage than entering the arena of services from banking to telecoms.
Courage without caution is recklessness and despite all caution taken, Tesco's Fresh and Easy US stores opened in 2007, the start of the worse recession the world has seen in 70 years.
It is a tribute to the caution aspect of courage and the solidity of Tesco's business model and values that the venture looks most likely to be a great success.
Leahy's Catholic upbringing was the foundation for his commitment to values, respect for others, integrity, perseverance and a clear understanding of right and wrong.
"In our wish to end discrimination, we began to tolerate everything," he reflects. Tesco had grown with little structure and when Leahy joined the company he found that even senior management meetings devolved into a semblance of a school playground with the same bullying and teasing.
When he became CEO, he was determined to reinforce the changes that were already appearing. He formulated the second Tesco value, "Treat people how we like to be treated", inside the company and out.
Just as the value "No one tries harder for customers" informed practice in relation to customers, so too did that of treating people well inform their practice. Tesco's decisions to continue the company's commitment to the staff's defined pension scheme was an expensive demonstration of values in practice.
The Tesco story is inspiring and getting some insight into how it happened is extremely valuable not only for retailers, but for any organisation that serves the general public.
Readability: Light ---+- Serious
Insights: High -+--- Low
Practical: High --+-- Low
* Ian Mann of Gateways consults internationally on leadership and strategy.
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