Just when it couldn’t get any worse for Tesco, it does.
It wasn’t so long ago that we all marvelled at Tesco – the benign behemoth with the rock solid share price. Sure most people didn’t love Tesco, but at the same time they couldn’t live without it either.
This year the share price has tanked 50%. Profit warnings are spewing out faster than 3 for 2 deals. Senior managers are disappearing. All the love has gone. Can it get worse? Probably. We’re not in Flowers-style territory yet but who knows…..(secretly hoping…)
What to make of all this? What’s gone wrong? Was Terry Leahy a magician – or was there something a bit awry with the whole system?
It’s not a few bad apples, it’s the system
I’ve recently been in India with those lovely Leaders Quest people. They had gathered an extraordinary crowd of leaders from different fields – US military, activists, musicians, bankers, writers, entrepreneurs – to come together to explore some of the big questions we collectively – and individually – face. More of this another time – but one thing was striking: everyone was talking about the need for big, systemic, change. There was the beginnings of a realisation that the challenges we face – environment, inequality, disease, war, the future of – well – everything – simply cannot be addressed through slow incrementalism. What was needed was a root and branch rethink – particularly of business, of finance, of leadership.
Again and again stories emerged of heroic individuals battling against the system, within the system to effect change. Again and again these heroic individuals felt shockingly burnt out, almost unable to continue or to reconcile the huge personal cost associated with their effort.
And that’s what’s wrong – systems can’t be changed by individuals. Not quickly anyway. And we don’t have time for slow. Mark Carney has said as much about the banks – the succession of scandals “mean it is simply untenable now to argue that the problem is one of a few bad apples. The issue is with the barrels in which they are stored.”
So what needs to change is the system, and to make that happen we have to rethink leadership of and within systems.
Here are a few thoughts:
A big good business is great, but a big bad business is really bad
Peter Thiel, in Zero to One, thinks that monopolies are great, or at least can be great, if they do good things that benefit everyone. They are monopolies (or near monopolies) because they are uniquely good at what they do (he’s talking about Google etc.) and they operate in a dynamic world. And he’s right – if a business does good, and has a purpose that benefits everyone, and is focused on that purpose, then being big is no problem at all – provided it keeps on doing that good stuff uniquely well.
Tesco is big. But it isn’t uniquely good at anything any more. And I’m not sure that it has been focused on any kind of purpose for a while. Tesco is simply not good enough to deserve to be big any more. Maybe breaking it up into lots of smaller businesses might help it get back to its roots.
Business models have to change
It’s impossible to be good, to do good, if the business model doesn’t support the purpose. Most prevalent business models were designed in a world without resource constraint. They are designed for unfettered growth, the achievement of ever more scale. The car business is simply (according to conventional wisdom) not viable at anything less than humungous scale – so factories keep on churning out more cars than the world demands (even counting the Chinese).
It’s impossible to provide decent food at affordable prices if, at the heart of the business model, there is an incentive to drive up volumes of those products from those suppliers you can strong arm into ever greater discounts (or worse, pay to remain listed)
Dave Lewis, Tesco’s (heroic) new CEO has recognised this:
“Rather than looking for discounts in the volume that we buy at any particular point, so we can put disruption through our suppliers’ supply chain, and Tesco’s supply chain, what we are looking for is a more consistent and more even demand signal.”
(Which means – according to the FT’s excellent jargon buster – “let’s sell what people actually want rather than the stuff we can buy cheaply”)
But most of all leadership has to become systemic, not heroic
Above all we don’t have time for superhero leaders any more. Systemic change requires systemic leadership. But for reasons that baffle me our idea of leadership remains rooted in autocracy. We look to one super hero after another to come and save us, the company, the system – when what is required is someone – or better someones – to come and change the system.
Systemic change cannot happen with the lone autocratic leader.
Any business that aims to change the world for the better, whether a nimble purpose driven start up, or a behemoth with immense power, requires leadership that catalyses collective thought and collective action. It doesn’t matter how good or well intentioned the leader is – if they see it as a lone effort, no matter how humble, it simply won’t work.