Graduate Plus: Why grocers must learn to spin plates
Roger Trapp reports on a new book which gives insight into the intensively competitive world of supermarket retailing, where even the biggest companies maintain a tenuous grip on success.
Thursday 25 September 1997
According to Walter Goldsmith and David Clutterbuck, who devote a chapter of their recently published book "The Winning Streak Mark II" to an "action case study" of what went wrong, a key problem was complacency. The other was a leadership transition that turned out to be unexpectedly disruptive. Mr Goldsmith has highlighted the fine line between complacency and pride, and Sainsbury - understandably perhaps in view of its success - had slipped across the divide.
It is also easy, he suggests, to see how the leadership change caught it unawares. After all, David Sainsbury, who in 1992 replaced his cousin Lord John Sainsbury as chief executive, was on the one hand a family member, on the other propounding no theories that were not commonplace in many boardrooms.
All this points to, he says, how tenuous a company's grip on success can be, especially in a sector as intensely competitive as supermarket retailing.
The company, which opened Britain's first supermarket in 1950, was featured in Goldsmith's and Clutterbuck's original book, "The Winning Streak" and they had every intention of including it in this follow-up as an example of solid performance in a tough industry. However, events leading up to the January 1997 profits warning that severely depressed the share price led to the decision to analyse the organisation, to test the authors' theory of the basis for continued success.
That theory basically says that business success is all down to balance. Where many gurus tend to push the notion that one magic trick will produce the desired result, they hold that the real skill of senior executives is in keeping several plates spinning at once.
Accordingly, the Sainsbury study was designed to discover "how an excellent company copes when some plates begin to wobble". Does it, ask the authors, focus on regaining the spin in plates that have begun to slow, perhaps to the detriment of the rest; or on what is going well and allow one or two plates to fall; and does it react with calm planning or panic?
The lengthy study examined each of the authors' 10 balances - control versus autonomy, long-term strategy versus short-term urgency, pride versus humility, focus versus breadth of vision, values versus rules, customer care versus customer count, challenging people versus nurturing people, leaders versus managers and gentle versus abrupt succession. It concluded that, despite everything, Sainsbury remained a force to be reckoned with. The good news, say the authors, "is that no plates have dropped or seem likely to do so". Moreover, the company is already recovering financially. This is put down chiefly to the strong underlying characteristics that made it a high-performer in the first place.
Interviews with the company's managers suggest that they both understand and value "simplexity", a concept used to describe the knack of tackling complex issues by creating simplicity. They also perceive and respond to the challenge of their jobs, keen to incorporate new challenges within the constraints of consistency. And, for all the recent problems, there is a "sense of rightness" about what the business stands for.
But maintaining these balances is a task for top management. And the senior managers did - in the authors' view - fail to pay sufficient attention to the balances identified; "as some plates lost their impetus, so did the business as a whole".
It all goes to show that in business, it is impossible to relax. And nowhere is that more true than at the top of retailing, where, says Mr Goldsmith, every day somebody is doing something new.
A recent development explored by the book is the resurgence of Asda. Having been in dire trouble as a result of what Goldsmith and Clutterbuck call a "misguided strategy to go upmarket", the company has been well and truly turned round in the 1990s. Hitherto, that success has largely been associated with Archie Norman, a former McKinsey management consultant who claims that the upturn in Asda's fortunes is really down to working with the company's strengths and recognising its limitations, or "trading where you are".
Stressing that the company's basic beliefs are built around "a single idea of the type of store we run for customers", he has restored confidence. Customers have flocked to an organisation offering value, which claims to be set on becoming Britain's second family clothing brand after Marks & Spencer.
But is it all tied up with Mr Norman himself? It is now up to Allen Leighton, the former right-hand man who became chief executive when Norman retreated into the chairman's position earlier this year.
`The Winning Streak Mark II, How The World's Most Successful Companies Stay On Top Through Today's Turbulent Times', published by Orion Business Books, pounds 20.
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