CEOs and CIOs will learn from Terry Leahy

Investment guru Warren Buffett admonishes investors to invest only in companies whose business they understand and also to "beware of geeks bearing formulas". It's true that in the run-up to the financial meltdown, too many managers made some spectacularly bad decisions based in part upon computer models they didn't understand. But ultimately the fault lies not in our geeks but in ourselves. Because computer models don't make bad decisions, managers do. And the opposite is true, the best bosses make the best decisions.

As Sir Terry Leahy steps downfrom Tesco he will leave an enviable legacy that many CEOs and CIOs aspire to – and might have saved them a lot of blood, sweat and tears during recent years. The mission of the company under his leadership has been to earn and grow the lifetime loyalty of its customers. To do this he has tasked his employees to 'understand customers better than anyone'. Tesco's approach has been driven by analytics, creating a culture of fact-driven decision-making.

Many C-levels across multiple industries have aspired to the insight-driven approach that Leahy has created. What was apparent during the economic meltdown was that too many had been choosing to ignore any facts that didn't fit with their own preconceptions, or cynically use analytics only to justify their decisions. Decisions based only on instinct came home to roost.

This may explain why so many managers are still making decisions based purely upon their 'gut.' Research by Accenture indicates that 40 per cent of major business decisions are based solely on gut-instinct rather than systematic data analysis. The result is often dangerously flawed decisions made for all the wrong reasons.

Analytics are not perfect, but they are superior to the shoddy alternatives—bias, prejudice, self-justification and hunches. Leading companies like Tesco are strong advocates of the use of predictive analytics to help managers make better decisions about whom to employ, where they market their products and how they manage their organisation.

Tesco'sapproach has benefitted customers directly. The access to customer information helps Tesco know much more about what its customers want and think. But it has also given its customers the ability to compare prices and buy online at the click of a button. They can look at a retailer's ethical environmental policies and find out any sort of information that is being shared online. Hence Tesco's vision of having world-class customer knowledge.

All organisations can reap significant benefits by becoming more analytical. The Royal Shakespeare Company, for example, examined seven years of ticket sales to optimise its share of wallet among its existing customers—and to identify new audiences. The RSC's targeted marketing program increased the number of "regulars" by more than 70 per cent.

1 2 Page 1
Page 1 of 2
7 secrets of successful remote IT teams