Tesco needs to listen to new blood

TescoCEO and former CIO Phillip Clarke is stepping down in October to make the way for Dave Lewis from Unilever.  Much has been made of Clarke having stood on the CIO bridge. But his three years as CEO have seen the once much lauded retailer struggle with falling sales.

So why is Tesco reporting another profit warning?  It is my opinion from meeting business technology leaders that have at various times worked for or been involved in Tesco is that Tesco has failed to embrace ideas from beyond its own back yard.

As CIO authors Richard Sykes and Martin Veitch have detailed elsewhere in these pages, Clarke is a Tesco man through and through and spent his nearly 40-year career at Tesco, working up through leadership roles, including that stint as CIO.  The same story is true for many of the Tesco leadership executive.  Progression through an organisation to the very senior level is highly important, but at every level of an organisation you need new ideas from people with experience beyond your own operation.

Much is being made today of Dave Lewis being the first “outsider” to take the helm at Tesco. True he is the first person from another organisation to take the very top role, but Lewis is not the first executive to enter Tesco from another vertical market. A number of business leaders have taken senior roles at Tesco and struggled. Originally hired to inject new ideas into the organisation, these business technology leaders have then found their innovations cut off by an organisation beset by doing things in what I can only describe as “the Tesco way”. I have heard countless stories of business leaders being told “good idea, but we don’t do things that way here”.

It is easy to understand how Tesco began to see its way as the right way. The early years of this Century seemed to be a yellow brick road to success for Tesco. Its brand name became global with successful launches into Asia and Eastern Europe. It was a pioneer in online shopping and expanded its shop floor footprint across the UK.

But as the credit crisis struck and the digital revolution gained pace Tesco lost its way. The age of austerity has seen low cost supermarkets Aldi and Lidl become part of the UK consumption behaviour in the same way as low cost airlines have usurped the old national flag carriers. This behaviour change isn’t only the result of the financial crisis, the rise of low cost airlines largely took place during healthy economic times, consumer behaviour never stops changing and retailers must always be tuned into the change taking place.

As CIO author Richard Sykes said in response to the Philip Clarke news today: “Even a mastery of what the technology can deliver is not sufficient when the battle ground is a different one – what really drives peoples’ preferences when it comes to choice in the supermarket space. Thus the new CEO has a very different experiential background in the consumer goods space that looks to be relevant to extracting Tesco from the Waitrose/Lidl squeeze!”

Tescois not alone in finding the current economic and retail climate challenging. Marks and Spencer (M&S) continues to struggle and its recent troubles online have not helped. Sainsbury’s too, perhaps to a lesser extent, has found the rise of low cost and high end retailers challenging.

Tesconow has to begin listening and experimenting with new ideas. It is interesting to note that the while Tesco and M&S struggle, rivals with a better track record of being close to their community (John Lewis Partnership) are reporting continual growth.

New CEO Lewis has a good track record, but the challenge is for Tesco to listen and be bold in its adoption of new ideas. The fact that it has sought out and successfully recruited Lewis suggests the culture is changing for the better.