Tesco: strategy, implementation, brand and sports metaphors

LONDON — ‎In America they call is being ‘an armchair quarterback’. I’m fond of the term back-seat-driver. I think there are more.

 

Yesterday for UK football fans the sight Glaswegian misery that is Sir Alex Ferguson ‎sitting in a Man City armchair watching his old team Man United lose was enough to make everyone in the building feel about 2 inches tall.

 

Today it’s Terry Leahy’s turn. His contribution to the Tesco debate is to say that his successor at the controversy-hit food retailer is a bit rubbish. And, perhaps more importantly, not Leahy.

 

Although reports on Leahy today come from a call organised by one bank for other financial analysts, the contents are still sharp and stinging. You know that the parts of that discussion that have emerged in black and white are either planned, or they should have been. And the handbags between old and new CEO seem likely to help no one.

 

Strategy and implementation

 

Sir Terry says that Tesco has pursued the wrong strategy. In commerce that is the equivalent of a schoolyard invocation‎ on someone’s mother. Your strategy is what you are there for. And it’s also the easiest target. Those close to Tesco talk about the extent to which the business was limping into its final days of Leahy’s 16 year reign. Exhausted, angry and over-stretched. A new and more coherent strategy may have been just what they needed, or it may not.

 

However, blaming strategy‎ is somewhat akin to blaming the Manager for poor play on the field. The strategy needed to be effectively implemented for it to be successful. And over the last 5 years Tesco has started to lose its ability to implement. When that happens then very little can go right.

 

Donut brands

 

Leahy also levels the accusation at his successor that the business has failed to protect its core. And is instead focusing too much on things for which it is not know. “What it is, is a very big brand in the centre of the market, and clearly if you’re weak in the centre you can get attacked from all sides,” Leahy said.

 

And it is a compelling picture. How to manage and profit from your brand is a major issues for many great companies. And one that many of our clients are also taken with. However, Sir Terry was famously known for the Tesco venture into America that went horribly wrong. And the business in the UK has expanded so quickly in recent times that the modest management provided from 1950s offices in Cheshunt hasn’t been able to keep up. Like the city of Atlanta, the centre had probably become so unliveable that everyone flocked to the suburbs.

 

Keep moving

 

Businesses like Tesco, in vital and dynamic markets that don’t slow down and constantly change, need to be forever agile. There’s no hanging around. You may need to keep adjusting and fine-tuning the strategy‎. But you have to keep implementing. You cannot stand still.

 

Similarly you have to approach your brand more like a crumpet than a donut. Keep your focus broad but with space for air to get in‎ at every part. The brand strength is definitely at the centre but can most easily burn value at the edges. And it needs to be open and receptive enough to accommodate whatever comes its way.

 

Sir Terry surely set out to cheer on his old business. And his ‘quiet’ chat with analysts was undoubtedly set out in good faith. The issues the business face are institutional and need the support of everyone: team, Manager and spectators.

Scotland, referenda, business units and change management

 

LONDON — Clearly there is a disturbance in The Force. Our old ‘sovereigntist’ leader of Quebec, Jacques Parizeau, has called it out thus:

“Sovereigntists today stand before a field of ruin,” Mr. Parizeau said in excerpts obtained by Radio-Canada. “There is confusion in their spirits that I have not seen in a very long time.”

If you’re not familiar with M Parizeau, imagine a cross between Alex Salmond and the Monopoly Man. He’s probably an economic genius of sorts who set up one of the first Sovereign Wealth Funds, the Caisse de dépôt et placement, in Quebec almost 50 years ago.

And almost 20 years ago he stood on a stage in Quebec as our second independence referendum went down by a score of 50.6 to 49.4% and said that it was all the fault of “money and ethnics”. He was, as the British press would say, very tired and emotional at the time.

There are people who study and speak bravely on the power and risks of nationalism, like Anglo-Canadian Michael Ignatieff. And great books on the topic of liberal nationalism, like the recent one by my friend Dr James Kennedy. But the issues raised by the recent Scottish referendum can also be seen reflected simply in business.  They are about ownership and belonging.

Business units, divisions, offices, regions, brands can all often see good reason to go it alone. How long did AutoTrader have to support The Guardian? How does Xbox feel about Windows hogging the limelight? And there are companies like Baxter Healthcare that are choosing to split themselves in half voluntarily.  And some who have already done so successfully, like AbbVie and Abbott Laboratories.

However those seem to be the exception.  Most businesses, like most countries, tend to manage their internal struggles within their borders. Brands, business units and offices are generally made to believe that managing scale and sharing back-office resources is more effective and will lead to greater prosperity than by doing it yourself.  Clearly there are times when those goals and those results are in question — and that’s when management and often change management comes to the fore.

In Scotland, like in Quebec, like in businesses, it is about managing expectations and understanding the implications of change. My wife recently lamented that as a family we have been involved in three independence referenda and have never yet been on the ‘cool’ side. Unfortunately, doing something new and breaking away, saying an emphatic ‘yes’ to breaking with the past, is the coolest thing to do. Who wants to vote for the status quo?

“Sign here if you’re completely satisfied with your life…”

Not a lot of takers.

Like in the politics, businesses have often been going the other way.  We have found ourselves advising an increasing number of clients on how to bring things together, rather than take the apart.  That’s not to say that we are fundamentally ‘centralists’, because we’re not. However, separatism, in business and in nations needs to be more than a romantic idea.  And often the sums don’t add up.

I should maybe have said that to Jacques Parizeau the only time I met him.  But somehow the St Andrews Ball, which he loved to attend in Montreal, didn’t seem like the right occasion to do so.

/df

Delivering organisational change across the silos

 

An illuminating article in TIME magazine recently looked at the problems of insular management and poor accountability in large organisations, using GM’s ignition-switch problems as a case study.

The article struck a chord with us, as it would with anyone who has had experience of working with large and established businesses. Insular management. Siloed operations. Endless meetings that fail to result in action. Individuals not held to account. In the case of GM, this had tragic consequences, with as many as 74 deaths having been attributed to the ignition-switch fault. Last week, plaintiffs filed a lawsuit against the company seeking as much as $10 billion in damages.

If you are interested, like we are, in delivering organisational change in challenging corporate environments, the subsequent investigation and report by former US Attorney General Anton Valuka will be required reading. Ineffective communications between departments, blamed for conflicting and poorly informed decisions at GM, has been cited in numerous investigations into industrial accidents. Poor communication between contractors was cited as a factor in the Deepwater Horizon oil spill. And as far back as 1951, the US Air Force Inspector General published a report entitled Poor Teamwork as a Cause of Aircraft Accidents, with the recommendation of mandatory teamwork training programmes as a means of improving safety in the airline industry.

Managing people, programmes and organisational change

There are also lessons for other organisations. In our experience, the same challenges that led to disaster at GM – siloed working and poor accountability – are the same challenges that can slow or derail any transformation programmes. We were recently engaged by a client that was mid-way through a major transformation programme. Despite the backing of the CEO and despite the urgency – investors clamouring for a step-change in performance – the programme was in real danger of collapsing, without having delivered any of the required benefits or savings. We witnessed a culture of poor accountability across all layers and departments in the business. Worse still, the day-to-day business decision-making had ground to a halt as senior managers were tied up in endless meetings, few of which resulted in any tangible decisions or actions.

As the article notes, there are various means for breaking down internal silos. Establish a set of core values or a mission-statement that everyone can understand. Apply an external perspective to challenges. Hire outsiders, and particularly women and minorities, who often communicate better across departments. At Able and How, we would echo all of these – while emphasising the importance of underlying organisational change capability. We have worked with many of the world’s leading organisations in using our Change Index to assess and monitor their ability to drive change across their business. Using the resulting information, together with our experience in supporting major business transformation, we then help our clients deliver the required interventions to ensure their programmes perform.

Author Rana Foroohar concludes with the point that silo-busting at GM – or any other organisation – requires starting at the top. In our experience, we would say the same is true for anyone wishing to drive meaningful change in their business. Visible leadership and having an effective change management strategy can make the difference between delivering successful, sustainable change – or failure. In the case of GM, the cost of failure has been significant.

Alan Macdonald

01 July 2014

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