What’s the point of Tesco?

On 5 Live last night, the BBC’s Business Editor Kamal Ahmed gave a very pertinent judgment on the latest chapter of woe for the tallest, wilting poppy in British retail. He said, quite simply, “People are no longer clear as to what Tesco is for”. His implication was that its executives no longer understand its purpose, what it exists to do, what its core values and beliefs are.

This is clearly very true, inside and outside the organisation. Almost everything coming out of Cheshunt since Sir Terry Leahy retired after a hugely-successful 16 years at the helm – albeit at the surprisingly early age of 54 – has appeared to go off at half-cock. At best.

Leahy’s successor Philip Clarke seemed to have inherited a company at the top of its game. But the recession wrong-footed the lumbering giant (I mean the corporation), and it was stuck between the rock and the hard place of Finest and Value; between Waitrose (which quickly out-Essentialsed Tesco, while being untouchable on quality) and the German discounters, Lidl and Aldi (which undercut its prices at every step of the value chain). Tesco became neither fish nor fowl.

Whole swathes of Terry’s men and women retired early, moved on, and were encouraged to spend more time with their families. Tesco became embroiled – then mired – in the horsemeat scandal. Fresh ‘n’ Easy quickly raced past its sell-by date to become Stale ‘n’ Difficult. Earnings warning followed earnings warning. And eventually Phil had to take one for the team and step down from the helm.

New boy Dave Lewis brought in fresh hope from Unilever, and less than a month in, he seemed to be finding his feet. Until Friday’s whistleblower revealed the £250m “overstatement”; as @BBCKamal put it, “The accounts are wrong … by as much as 23 per cent.”

For several years, several years ago, it was my honour and privilege to give storytelling advice to Tesco. Before I started working with the business, I was naturally sceptical and came armed with preconceptions about the company’s ethics and business practice. I’d heard stories of producers – from all categories, but dairy farmers in particular – being treated unfairly.

The reality, I found, was really very different. I found a modest, understated business, almost embarrassed to be as successful as it was, taking one in every seven pounds on the British high street. A business that still recalled in its folk memory the stories of its legendary founder, Jack Cohen, selling NAAFI surplus from a cart in the East End in 1919, bought with his demob money. And a business whose purpose, front and centre, was to deliver value to its customers.

“The customer is king”, “The customer is always right”, “We are a customer-centric business”. Retailers trot these lines out like platitudes. Some modern, socially-driven retailers live and breathe them, like amazon and Zappos. And Tesco – until the last few years – grew with its customers and suppliers at the heart of its moral compass. Think replacing Green Shield Stamps in the late 1970s with Britain’s first experience of everyday low pricing, overnight. Think ClubCard.

Since Terry moved on, Tesco has done little but draw down the reputational capital it had spent 90 years building up. Today, the reputational carpet is threadbare, customers are less loyal (aka more promiscuous, trading up and down to both Waitrose and Lidl in single family shopping repertoires), and analysts’ patience is wearing thin. Shares fell 12% in one day yesterday, wiping £2bn – ten times the overstatement – off the company’s value at a stroke.

So what does Tesco need to do to get itself back onto an even keel?

I’ve got a simple recipe with five key ingredients, but I’m not saying it’s going to be easy.

  • Rediscover and restate its purpose – its essential “why” – and understand what it’s in business to do, who it serves, and how it talks
  • Be humble without being apologetic, getting on with the business of fulfilling that purpose
  • Put its customers at the heart of everything it does all over again
  • Recapture the spirit and customer-service culture that Jack Cohen more or less invented in Britain
  • Tell a single story, inside and outside the business, to every stakeholder

Moments of great stress and change can feel overwhelming. Tesco also needs to recall that, while it’s not as big as once it was and competition has worsted it at every turn for several years, it’s still the nation’s biggest supermarket, almost twice the size of its nearest competitor, satisfying customers across the land.

By the same token, if it doesn’t recapture and celebrate its purpose – if it fails to understand in Kamal Ahmed’s words “what it’s for” – customer desertion will surely accelerate. The brands we buy into, particularly for our daily bread, say a lot about us. And no-one wants to serve up food that has the subtext “I’m a loser”.