Every Little Helps

Leadership

Thursday 7 October 2010

Sir Terry Leahy

Every Little Helps: Tesco's CEO talks business

Odeon Leicester Square, London

Due to legal reasons we are unable to make audio of this event available.

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If you're interested in business Sir Terry Leahy needs little introduction. Under his leadership Tesco's turnover has quadrupled from £16 billion to an anticipated £64 billion, profits have increased by six times from around £532 million when he started to an estimated £3.2 billion this year (2010), and earnings per share have increased by more than three and a half times.

So what makes Sir Terry tick? One thousand people poured into the Odeon Leicester Square for this London Business Forum event to find out. Leahy is widely regarded as a low key leader but it is clear that he eats, sleeps, lives and breathes Tesco, which he joined after graduating from the University of Manchester Institute of Science and Technology (UMIST) in 1977.

Our two hours in the company of Britain's most successful business leader kicked off with a presentation from the man himself. When Leahy joined the board of Tesco in 1992, the market was dominated by Marks & Spencer and Sainsbury's. The recession of the early 90's had hit Tesco hard and the consumer attitude at the time was summed up, said Leahy, by The Times: ''If you want quality, shop at Sainsbury, if you want price, go to the discounters: who needs Tesco?''

Tesco proved its critics wrong, overcoming its competitors in "one of the most remarkable turnarounds in British business history." Ten management lessons, Sir Terry revealed, have guided both him and Tesco during their meteoric rise:

  1. Find the Truth
  2. Audacious Goals
  3. Vision, Values and Culture
  4. Follow the Customer
  5. The Steering Wheel
  6. People, Process, Systems
  7. Lean Thinking
  8. Competition is Good
  9. Simple beats Complex
  10. Leadership

Finding the truth argued Leahy is essential to progress, no matter how ugly that truth might be when you find it. If you fail to identify what is really holding the business back then, he suggested, "You are condemned to go in the wrong direction."

Once you've worked out the company's starting point, "setting big, stretched targets for an organisation is very motivational, people are always capable of more than they think," he told the London Business Forum. Recommending Jim Collins' Built to Last: Successful habits of visionary companies, Leahy explained that setting "audacious goals" unites people to share the company's vision and values, embedding it in company culture: "You've got to paint a picture of the future that they really get excited about."

A marketing man, Leahy always begins with the customer. "The customer is a great place from which to run a business," he explained to event host and Founder of the London Business Forum, Brendan Barns. Leahy emphasised that no one should be a slave to a business model because a successful business has to be prepared to change "completely as customers' needs change." This he warned can happen overnight.

The customer determines everything that Tesco does. When Leahy first joined the Tesco board in 1992 they needed to re-engage with customers. Despite benchmarking Sainsbury's and Marks & Spencer they still hadn't quite succeeded in overtaking the rival retailers. Instead, Leahy explained, they looked "back to the origins of the business" reworking Jack Cohen's "Pile it high, sell it cheap" ethos and launching the Tesco Value line. This, Leahy explained, offered something different to their competitors and succeeded in reconnecting with Tesco's "core customer base."

What was striking about Leahy was that whilst he is clearly visionary he also has an eye for detail. During his presentation, he emphasised that whilst it may seem "a bit techy," thinking about any business in terms of people, process and systems, it is key to making big ideas happen. Detailed planning is essential to ensure that everyone knows their role and that any given project is scalable. Leahy credits his own detailed knowledge of retail and Tesco to his long career in the same company, "I recommend people grow up in a business and really get to know it [...], you can absorb all the detail and it's from that detail that you can then look out, look forward, and know the strategic direction to go in."

Any change or new venture must also be done with simplicity in mind. Tesco's motto said Leahy is, "Better, simpler, cheaper." Everything they do, Leahy explained, should be "better for the customer, simpler for the staff and cheaper for Tesco." This culture of simplicity also encourages lean thinking. Businesses should always think lean because even in a successful business there is still "an awful lot of waste." Leahy cited The Machine that Changed the World as a book which explores a great example of lean thinking from the Japanese car industry and Toyota in particular, who demonstrated how to find strength in weakness and compete with the industry giants of Detroit.

"A competitor is the best management consultant you'll ever get and they're free," Leahy told the London Business Forum. He argued that you should look for the strengths in competitors rather than the weaknesses, or you miss a great opportunity to learn. Returning to customers, he said that competition is good for business because it is also good for customers: "It empowers a customer who can make choices between businesses based on the service they receive, that's a very empowering thing in a modern society, it's a big part of democracy."

Encouraging others to have ideas is for Leahy a crucial part of any leader's role. "What is important is what a leader causes other people to do," he told the London Business Forum. Creating other leaders throughout the organisation ensures not only its longevity but also motivates people to reach big targets.

He explained that he tries to "stay as quiet as possible at the centre of the business," so he can let others lead while he focuses on what is important and can step in only when necessary: "If you're leading, don't feel you need to justify your leadership role by being hyperactive, mainly you just get in the way of people."

Leahy is confident that Tesco will be in safe hands when he leaves in March 2011. He may have a reputation as a quiet leader but, he asserted, "Tesco stays, chief executives go." He believes that he will be leaving a company that employs half a million capable people, all of whom have the experience and knowledge to move it forward.

Before jumping back into his hectic schedule, he asked the London Business Forum a question of his own: "Business should be fun and is fun, it's creative, it's competitive, you're solving problems all the time, you're trying to make things better, what can be more satisfying than trying to make things better?"