NRF: Tesco CEO Sir Terry Leahy's 10 lessons for success

NEW YORK ―Sir Terry Leahy is one of the most respected people in the retail world. Knighted in 2002, he started his career stocking the shelves at Tesco, gradually working his way up to his current post as CEO, which he has held since 1997. In 2007, The Guardian named him the most influential non-elected person in Britain.

He addressed a packed house Tuesday morning at the 99th Annual NRF Convention & Expo, where he shared 10 essential management lessons.

1. Find the truth

"All research is problematic, because it's historical," Leahy said. "It's like looking out the back of a car."

He also noted the basic human tendency to overlook information that points toward a non-desired outcome ― and gave a practical solution. "We don't often honestly represent the threat outside," he said. "The best place to find the truth is to listen to your customer. They'll tell you what's good about your business and what's wrong. And if you keep listening, they'll give you a strategy."

2. Audacious goals

At the beginning of his stint with the company, Sir Terry helped set some big goals for Tesco: To become the No. 1 retailer in the U.K., to be as strong in non-food as in food, and to invent services retailing. All of them were audacious, but the company achieved them, because they were appropriate and just dramatic enough to motivate everyone.

"They tapped into what the people in Tesco wanted to achieve," he said.

3. Vision, values and culture

Strategies are important, but people are more important, Leahy said.

"It's the people in the business that have the huge potential to create, to achieve. But you've got to galvanize within them a vision of a better place."

He said the company polled thousands of workers, asking them two questions: What do you think Tesco stands for, and what do you wish it stood for? To the former, the question was almost uniformly, "Nobody works harder to treat customers well." To the second question: "I wish we were treated that same way." Those answers, Sir Terry said, would become the company's vision.

4. Follow the customer

"Businesses change slowly, customers change in an instant," Leahy said. "All you can do is stay very close to the customer, and be ready when you see that change."

In practical terms, that means spending time ― lots of time ― with actual customers. In Tesco's case, that time spent with customers revealed a change in shopper behavior, from the well-planned once-per-week grocery trip to the more hurried, several times a week shop of increasingly busy people. Noticing that societal change, he said, enabled the company to create the successful Tesco Express concept to meet the emerging demand.

"A whole opportunity came out of simply observing how people's lives are changing," he said.

5. The steering wheel

Tesco uses an internal tool it calls the "steering wheel" to unify all of its big goals, and break them down into smaller, more manageable pieces of action. The tool shows what those big-picture goals mean to specific departments, specific stores, specific teams.

"It is a way that you can hold the whole organization together," he said.

6. People, process, systems

Sir Terry noted that every organization involves these three elements ― the people doing the work, the workflows behind the scenes, and the systems driven by those workflows. Too often, he said, they are not connected to one another ― workflows are seldom written down and firmly documented, he noted, meaning systems will often fail.

"The key is to see those three things as one," he said, pointing out that the retailer that probably does this best is his competitor Walmart. "One of the key elements of Walmart's success is recognizing the importance of people, process and systems in making change."

7. Lean thinking

In the early 1970s, Toyota faced a crisis, Leahy said. It had a limited range of engine sizes, and looked upon Detroit with trepidation. So the company did an in-depth study of its processes, and discovered huge bottlenecks in productivity. Addressing those bottlenecks, and making everything more lean, led to a company renaissance.

"They learned that if you fixed those disconnects, you make a step-change improvement in productivity," he said.

Tesco applied lean thinking in a similar fashion, he said. When the company launched its program where customers shopped online and in-store staff picked products, it learned that 8 times out of 100, the product was out of stock ― while the computer said that happened only 4 times out of 100. In response, he said, the company looked at its processes in the "Japanese way."

"We've moved that problem of 8 out of 100 being unavailable to 2 out of 100," he said. "To a customer, that's a step-change in satisfaction."

8. Simple beats complex

Sir Terry invoked Moore's Law, a principle of computer science which describes the rate at which things will become more complex. That's a natural tendency in business as well, especially in recent years which have seen information proliferate for both retailer and customer.

But he said his company has learned a lot from the newspaper industry, especially when it comes to internal communication. Tesco often sends employees to spend time with journalists, he said, to learn how to better communicate with more clarity and using fewer words.

9. Competition is good

"Nobody likes the idea of a competitor getting up every morning to steal your customers," he said. "But they're actually good for you. They get the best out of you. The trick is to learn from them faster than they learn from you."

And just like customers, he said, competitors are a source of education and inspiration that come free of charge.

10. Leadership

Sir Terry wrapped up his speech with simple but inspiring thoughts on leadership, applicable to all levels of an organization:

"A leader takes you further than you would go on your own," he said. "[Leadership] gets the message across that it's not just what you do, but what you get other people to do."