What you missed..."Trolley Wars"

The UK's retail war has been particularly bloody in recent years, yet the London Business Forum (LBF) managed to persuade two of its leading generals to leave the front-line temporarily and discuss their strategies.

The unusual setting was a cluster of marquees in Portman Square (used earlier in the day for another LBF event, "Inspiration in the Square"). Outside, London had sweltered all day under brilliant sunshine, but inside the main auditorium was air-conditioned and pleasantly gloomy. The 300 people in attendance comprised a veritable "Who's Who" of UK retail, and were already debating their sector enthusiastically by the time the compère took to the stage.

Judi Bevan is the author of a new book called "Trolley Wars: The Battle of the Supermarkets" (issued free to every delegate on the way home). She would draw on her own research to prise open the two speakers: Tim Waterstone, founder of the eponymous book-shop chain; and Justin King, the chief executive of Sainsbury.

It was the latter man that, primarily, everyone had come to see. They knew that in spite of his glowing reputation he had taken on a huge challenge at Sainsbury. They had seized this opportunity to get unique insights into his approach. Yet Waterstone couldn't have cared less. He was a charismatic "nice guy" with a self-effacing manner, an avuncular figure whose appearance was softening into old age. It was easy to imagine him sipping whisky by an open fire or bouncing a child on his knee.

"Don't be intimidated." This was the point emphasised repeatedly by Waterstone, who spoke first. "I'm not the least bit frightened about taking on corporates. In fact, I think it's easy to do. You simply make yourself better than the corporate in your area of expertise. Believe me, it's not all that difficult to knock them down." Waterstone spoke from experience having set up his first bookshop in 1992 with the specific aim of rivalling WH Smith, then the UK's leading bookseller:

"We felt the quality of the book stock in Smith's was of an absolutely derisory standard," he said, "and therefore if we took them on branch by branch, opening as close to them as we could... then by the sheer quality of our stock and our staff, and with our enthusiasm, drive and expertise in selling books, we would knock them over. And that's what happened: we did."

Clarity of vision is essential if you intend to take on one of the giants, Waterstone suggested. "If what you do can't be summed up in one sentence then you're screwed. The entrepreneurial mindset is one of under-managing rather than cluttering up the business with too much management." To illustrate the point, he offered the following anecdote, with apologies for name-dropping.

"I remember bumping into Greg Dyke when he'd been at the BBC for only two or three weeks... He said: 'I've never been anywhere in my life that is so over-managed and so under-led'. Leadership is about setting great dreams, getting people to follow you and having complete clarity about what you're doing."

Waterstone concluded there will always be room for entrepreneurs who can move quickly, capture or create market niches and differentiate themselves, provided their standards are high enough. Indeed, he is putting his money where his mouth is for a second time with a new concept - Daisy and Tom, a retailer of children's clothing and educational toys, pitched as an up-market rival to Mothercare.

"If you have an entrepreneur who has real knowledge of an industry and surrounds him- or herself with people with real knowledge of the same industry, you can give a corporate the most god-awful fright, because your decision-making is so fast," he said. "Also, your recruitment is sweet in the sense that the entrepreneur is doing all the recruitment him or herself so immediately there's a commonality of purpose and vision between the hirer and the hiree."

King stepped up to the podium a short time later, and began his speech with a polite acknowledgement of the role played by entrepreneurs in shaking up markets so that a "rising tide lifts all boats". He would later point out that Sainsbury, with its huge purchasing power, could usually absorb the products necessary to see off specialist rivals - as Bevan points out in her book, the rise of the supermarket giants in the UK has been driven in part by their ability to make what used to be luxurious and exotic seem commonplace. However, his first priority was to announce that Sainsbury was on the road to recovery, based on a recent rise in quarterly like-for-like sales figures for the first time in two years.

How did he intend to "Make Sainsbury great again"? Essentially, he said, by restoring a customer-focused culture. "This sounds like - indeed it is - a platitude. But bad news is very difficult to listen to when you listen to it for a long time. The way most people deal with it is to stick their heads in the sand. Sainsbury had had to deal with bad news for a very long time, and it dealt with it, in essence, by stopping listening."

King had previously been at Asda, where he developed a plan specifically to replace Sainsbury as the UK's number-two supermarket. At the start of his new quest, he therefore needed to act fast to preserve customer loyalty. His first step was to write to a million customers, asking them what was wrong, and around 250,000 people replied, suggesting two things: (1) plenty of things were indeed wrong, but (2) the customer base cared enough about the brand to respond. At the same time, King began a suggestion scheme for staff, whom he refers to as "colleagues", and says he now gets and personally reads about 7,000 ideas per month.

Many of the problems identified by these initiatives boiled down to supply chain issues. "When I look at the last four years in particular, what the business was grappling with was a supply chain that was not future-equipped," King says. "The key mistake was to think that, while we dealt with [the supply chain], we could stop serving customers well. The change was to say: it's going to take a number of years to structurally sort out the supply chain, but we can no longer ask our customers to pay for that. So we started at the shelf edge and worked back, and we changed processes, changed the systems in stores, and put an extra 3,000 colleagues in stores. This for us is an extra £50m cost, so we put our money where our mouth was."

King proved himself a master of spin at the podium, putting the emphasis on all the right aspects of Sainsbury's heritage and revival. But could the question-and-answer session afterwards put him under pressure? After a useful debate about the merits of on-line retailing, and the way it has augmented supermarket and high-street shopping without supplanting them, one Sainsbury rival stood up to complain that King was strangling his business.

The delegate in question was a grocer with a handful of stores in the north of England. He apparently sold several hundred product lines, but had no way of competing with the variety of the supermarkets. Unfortunately, his options seemed few, particularly in light of Waterstone's advice. The day of the independent generalist was over, the speakers agreed: the time has come to differentiate or die.