Why Tesco must learn that less is more

It’s just over a year since Sir Terry Leahy stepped down as chief executive of Tesco and was replaced by Philip Clarke. But what a year it has been. Tesco has suffered more instability in the past 12 months under Clarke than in the previous 14 years under Leahy.

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And the pain is only likely to intensify this week as Clarke faces a potentially crucial results presentation on 18 April. Clarke has already shocked investors with one profit warning this year and many analysts now openly doubt his ability to revitalise Britain’s biggest supermarket. He will reportedly use next Wednesday’s meeting to not only announce Tesco’s full year results but also outline a new strategy to turn the business around.

Another new strategy, however, is arguably the last thing Tesco needs right now. In contrast with the single minded focus of the Leahy years, Tesco now appears to be a brand increasingly beset by a disabling inability to focus on the core priorities ahead of strategic distractions.

Clarke set that tone with the initial seven-part strategy that he introduced when he took the helm at Tesco. Not content with Leahy’s more simple focus, Clarke announced an ambitious plan to create a series of “venture brands” that would exist as standalone entities on the shelf. These brands, which include ice cream brand Chokablok, Nutricat pet food and Carousel toys, have been well received by shoppers, but strategically they are surely an unwanted distraction from the core business of running a world class supermarket.

Tesco has taken its dominance and belief in its brand too far. It does not have a core competence to create true, standalone brands. Take the recent debacle with Tesco’s clothing line F&F and its hilarious attempt to produce a Couture range. The dresses were a total disaster but more importantly they indicate that the once infallible marketers operating inside Tesco are clearly out of touch with both their brand and their consumers. Couture? From Tesco? Come on!

It’s a similar story with one of Clarke’s other stated objectives – to grow Tesco’s retail services. Last week, we learned that Tesco is intent on becoming the “home of gaming” and has launched a major advertising push to highlight this offer to consumers. But is this another diversification that detracts from rather than delivers future success?

While Tesco fiddles with new launches, its retail empire is gradually burning. The holy grail of retail is same store sales – and Tesco’s are going backwards. The lack of focus under the Clarke regime is probably the biggest reason for this decline.

The lack of focus under the Clarke regime is probably the biggest reason for Tesco’s decline

As Richard Black from Legal & General, one of Tesco’s biggest shareholders, put it: “Tesco needs to think long and hard about what it wants to be – can it be everything to everyone, or should it focus on its gem, the British grocery business?”

The analysts clearly understand the issue, the big question is whether Clarke also now grasps the message that less is more. Will he use his presentation next week to announce even more new strategies and diversifications or will he use it to cut back on distractions and return to a more simple focus on the fundamentals?

It might be clichéd, but Clarke should take a tip from a great CEO – Steve Jobs. If there is one key insight from Jobs’ tenure at Apple, it was his maniacal zeal for focus. Doing less was always at the heart of Apple’s success. Jobs would famously ask for new product suggestions and then cross all of them out save one or two, which he left at the top of the list.

It was a lesson Jobs learned early in life while pruning the apple trees that would one day inspire his company’s brand name. Jobs’ lifelong interest in Zen philosophy further strengthened his belief in doing less to have more impact.

Seven days is probably not long enough for Clarke to take up Zen meditation or learn how to prune orchards correctly, but he could make a fruitful start by reading Walter Isaacson’s masterful biography of Apple’s founder or the Harvard Business Review article he recently completed on Jobs’ leadership lessons.

Near the end of his book, Isaacson recounts a meeting between Jobs and Larry Page, who was about to resume control of Google. “The main thing I stressed was focus,” Jobs later recalled. “Figure out what Google wants to be when it grows up. It’s now all over the map. What are the five products you want to focus on? Get rid of the rest because they’re dragging you down.”

It was sage advice that Page used to drive Google forward. And it’s equally applicable to Tesco’s current predicament and the enormous leadership challenge that Clarke now faces. Doing less has never been more important.

Every little helps might be a great brand essence, but when it comes to brand strategy, it points to the exactly wrong direction for Tesco. Every little strategy and diversification it embarks on is harming rather than helping the brand in its attempts to return to its formerly imperious position.

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