As a business growth strategist, it is not unusual for me to see excited businesses jumping up and down about an opportunity or new direction it is about to undertake. They may have undertaken a SWOT (Strengths Weaknesses Opportunities & Threats) analysis where management and team have come up with a great idea and everyone in the room thinks it is going to be fantastic. The Boss has already started looking at Ferrari brochures!
Sometimes it is worth getting a second professional opinion just to make sure there are no downsides. See the thing is, if a business person or the business is excited about a new strategy it is hard to see any downsides.
This month, Tesco a very large UK Supermarket business declared a $12bn loss because it undertook a strategy which I felt in 2009 could cause problems.
So the question is – Is your strategy really the right one to follow and how do you avoid ‘Being a Tesco?’
The story of Tesco goes something like this. It had many out of town large shopping stores. They were highly successful and customers flocked to it because it was easy and convenient – lots of parking and a majority of the stores were open 24 hours. At one stage, statistics showed that for every $16 spent on the high street $2 were taken at a Tesco till. Not a bad business then!
So what happened?
Well the strategy changed. The logic was that with smaller nuclear families and with more couples working full time, Tesco decided to open smaller stores locally and in town. They were opening stores at an astonishing rate. In 2008 when I left the UK, there were hardly any. By 2010, I could not miss one even if I tried.
What went wrong?
The strategy on paper was fine. After all, they were changing their strategy which would address a new problem and environment, which every business strategist would advise. But what actually started to happen was that people started shopping locally. Many started to pick up a few items on the way home from work. This meant that they would do this a few times a week and not really need to do the big large shop. The problem was they were buying a lot less. After all, not many people I know want to carry a large shop or travel on the train with a large box of laundry powder!
It also caused a logistics issue for Tesco. Smaller stores require more stock deliveries and in town rents are higher. In many ways, the success of the local store strategy actually killed it’s much bigger and profitable out of town stores. Sales are down and profits decimated.
There were other issues too. Tesco became so big that it was doing everything from insurance to banking. I think the only thing they could not do is send you to the moon. People just got turned off and in the end nobody really knew what the business stood for.
The strategy is an excellent example of a great idea not working for the business. After all there was a market for it. It just did not realise that this opportunity was a massive threat too. Maybe it was just bad luck or they became too big and arrogant that they were simply not listening.
So what should you do? If you are thinking of undertaking a SWOT, do it with an external advisor. They will try to look outside the box and pick up downsides you may have not thought about. It could be the difference between actually buying the Ferrari or passing by a Ferrari showroom and saying ‘If only ……..’