Stay restless, says retail veteran
Embracing and leading change is the key to business growth, says former Tesco CEO Sir Terry Leahy. And the steps couldn’t be clearer.
“Find the truth about what customers think of you, paint a vision of where you need to be, then make a plan and do it.”
Those were the clear steps to survival and growth in any business offered by Sir Terry Leahy, the former, long-standing CEO of supermarket giant Tesco, on his visit to Linney recently.
They perhaps sound obvious, but they’re based on solid experience. In his 14-year tenure as head of the grocery chain, which he joined in 1979, he helped it become the UK’s largest and the world’s third-largest retailer by revenue, growing its market share from 20 to 30%.
His achievements have earned numerous industry accolades, the freedom of the city of Liverpool and a knighthood. So he knows a thing or two about spotting opportunities and steering a course to growth.
Speaking to a full house at Linney, Sir Terry said: “Ultimately, a winning business strategy is about three things: more customers who spend more with you and remain loyal for longer.”
Find the truth
The first step, he said, is to find the truth of how customers see you, not how you’d like to see yourself.
“Companies delude themselves, thinking customers will always want what they do, that they’re better than they are, or that their competitors are worse than they are. All of that can come back to hurt you.”
He added that CEOs must lead the search for the truth, interviewing staff and customers themselves to find out how things really feel on the ground, why they behave the way they do, and what drives or damages their loyalty to the brand.
“Go much deeper with the data that’s available. It can tell you lots you never knew about your customers – and theirs should be the loudest voice in everything you do.”
“Watch the different growth rates in your business. Keep realigning resources behind them to stay on top of change and in front of the market. And measure the markets you’re not in, as there may be growth there you can take advantage of before others do.”
Paint a vision
The next step is to plot a course to where you need to be. “That’s much easier once you know your starting position. And once you as a leader know that, your people will follow.”
As to what that vision should involve, Sir Terry was in no doubt on a common characteristic.
“Disruption. It’s mandatory. You need to constantly think about reinventing yourself and your market. Doing things your competitors don’t expect, don’t want you to do or can’t see you doing. The digital economy is disrupting all businesses anyway.
“But the bigger the business, the more you have invested – be it in a retail estate or an established strategy – and the more you want the status quo. So the upstarts are better placed to disrupt the market.”
Allowing the time to do the analysis and paint a picture of the future was the foundation of successful change at Tesco, he added.
“There was no secret formula or technology. We just viewed the changes in our environment differently to our competitors – and it paid off.”
Make a plan
On building the plan to help achieve the dream, Sir Terry suggested revolution was rarely necessary. Often simple innovations could make a massive difference.
The introduction of the Tesco Clubcard, for instance, was relatively inexpensive. But it offered a way to reward customers for their loyalty, gather data about them to target offerings and messaging more effectively, and set a precedent all major supermarkets still follow today.
Another trend the chain set was the need for a new Tesco Express arm for those ‘too busy’ to visit established ‘big supermarket’ sites. Bucking the notion that all grocery retail took place away from communities and high streets, it established a local convenience format that’s still its most popular today.
“Markets become a habit. When you break them, good things happen. And you can sell your traditional business on the back of that innovation.”
The change, he said, could be as simple as introducing bigger trolleys – a move that drove up incremental spend at Tesco almost overnight. Those fast to follow, improving and driving down the cost and lead times of established leaders’ models, can also try things and correct course as they go, he said.
“Digital is key whatever your business,” he added. “It lets you find, target, engage, incentivise and reward customers like never before, acquiring them at a much lower cost.”
“Whatever your plan, make sure others know it so they can get behind it, and that you put enough time and resource into it. Don’t underestimate that. The mistake to avoid is saying ’I’d like to be like that’ and not investing sufficiently in that vision.”
Don’t wait – do it
The last step, Sir Terry said, is to deliver on your plan – something he’s seen the leaders of large businesses fail to do time and again, to their cost.
“Have the courage to make the leap and deliver on your plan,” he said, “even if things don’t work out quite as you expect.”
“I’ve been hugely impressed by the Linney business, its longevity and investment in staying relevant to its customers, and staying local and contributing to its community. All in a fast-changing environment for marketing services.”
“It’s fascinating to see how digital has evolved what you do, and the fantastic position that puts you in to help your customers on the journey from offline to online. I think you’re doing a lot right.”