The Making of Tesco - book review

‘The Making of Tesco’ by Sarah Ryle, Published by Bantam Press

It was not a good start to read on the cover that the author is from Tesco’s Corporate Affairs team.  I was therefore quite surprised to find it to be an excellent book, surprisingly open and objective about the many challenges on the way to Tesco’s success. It is true that the self-criticism is stronger when it refers to the distant past but it is still more than would normally be expected from a company sponsored publication.

I may not be typical because of past involvement with Tesco but I found this to be a compelling story of rags to riches and of a brilliant entrepreneurial founder - Jack Cohen - who had to be displaced before the company could grow to its present size and reputation.

The turning point was the decision to discontinue Green Shield trading stamps in the late 1970s and launch 'Operation Checkout' which was the beginning of their rise to be number one in UK retailing.  This decision was won by a narrow vote of the Board against the wishes of the Cohen family and was the end of their control of the company.  Ian McLaurin, who by then was CEO, firmly resisted the attempts by Cohen’s assertive daughter, Shirley Porter, to become a director and the rest of the extended family soon faded from the picture

One secret of Tesco’s success has been their willingness and ability to copy other companies’ successful strategies.  First there were the early visits to the USA where their senior managers saw the beginning of the trend to self-service.  Even more significant was their admitted admiration - even jealousy - of their two biggest competitors - Marks & Spencer and Sainsbury's.  They observed the success of Marks & Spencer in fresh foods and copied the same formula; they monitored the progress of Sainsbury’s first out of town store and went for rapid expansion on this basis, even faster than Sainsbury's could themselves.

This reminds me of my own early exposure to the senior management of Tesco in the mid-1980s.  It was the most challenging assignment ever, a series of seminars to help the Tesco board to understand finance, at a time when their Financial Director - as described in the book - did not want his colleagues to know too much about financial concepts.  Apart from the constant challenge to every point I raised, my most vivid memory is the directors’ interest in seeing the financial ratios of other retailers, particularly Marks & Spencer and Sainsbury's.  Whereas managers from other companies used to say 'you can’t compare us with them, they are different', the Tesco senior team said 'what do we need to do to become like them?'

Another secret of success was being one of the first retailers to adopt a marketing approach and take away the power of the buyers that was typical of retailing in the 1970s/80s.  This was started by Terry Leahy who went on to become CEO and the book describes how he helped Tesco to lead the way in detailed analysis of customer trends and new product development.  They again copied the success of Marks & Spencer in own brand foods, looking abroad for suppliers when Marks & Spencer and Sainsbury's suppliers refused to deal with Tesco.

The history of the company is well told through the eyes of a number of key people who were part of that history, with lots of personal backgrounds and anecdotes that bring the story to life.  These come from people at all levels and are not always complementary.  It is made clear that Tesco was not always a nice place to work and that people skills were not evident among senior managers in the early days.  This applies to suppliers as well as employees and the stories of tough negotiations as told by former Director John Gildersleeve will have a familiar ring for those who dealt with Tesco in the early days.  Whether all current day suppliers would agree with his assertion that things are completely different now is another matter.

As I read the book I was impressed with the objectivity and the willingness to be self-critical but was waiting to see how the highest profile overseas venture - the expansion to the USA - would be treated.  Would the author be as open about the problems with this expansion as she was about the failures in the early days?

It was perhaps convenient that the story of the USA venture stops shortly before the final decision to exit and talks at the end of the chapter about a ‘strategic review’.  But the description of what happened shows that Tesco had, by the time of the decision to start their 'Fresh & Easy' venture in 2005, were no longer trying to copy other successful operators; they felt that they could lead the way in a country where so many others have come to grief.  It is made clear that it was Terry Leahy who was the driver of the project, deciding not to acquire an existing US retailer in the belief that Tesco was ahead of its USA counterparts.  It suggests an arrogance that was not present in the early days and which will perhaps have been countered by such an ill-starred and expensive venture.  It was unfortunate that the worldwide recession came exactly at the time when the venture was to be launched but a close reading of the text reveals other mistaken assumptions that probably made failure inevitable.

I would recommend this book as an entertaining read for anyone who is interested in the development of UK retailing and an essential read for anyone who has dealings with Tesco.   It is much more than a PR puff; it is a well-written piece of business history in the twentieth century.

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