January, 2013

Fruits of Thought

Tesco, Fresh & Easy And The Price Of Being Alone

No joy should ever be taken in the failure of a business, for each business represents jobs, and every business is a customer to others. Each business, whether a small operation or a division of a giant corporation, represents some person’s dream, and for a dream to be extinguished is always a sad thing.

Yet the astonishing reaction to Tesco’s failure in America — the announcement that Fresh & Easy was not long for this world — is how many people are glad to see them go. Its own employees have been calling saying that, as Americans, they felt like second-class citizens working for the venture. Its own vendors call not with sadness over the loss of business but with ribald humor about how arrogant Tesco executives were and how they simply refused to believe anyone could know more than they about doing business in America, even though Tesco had never operated a business in America.

Even the editors of major news outlets call to chat not with sadness at losing a great story, but with little disguised joy that people who treated them so rudely should get their comeuppance.

Online, at PerishablePundit.com, we published an extensive piece detailing 20 lessons learned from Tesco’s failure — everything from the mistake of building a distribution center before they knew they had a valid concept, to opening without taking the American Express card. Yet, there is something more here, an even larger lesson.

Perhaps it is that all of us in business have to realize that we may think ourselves autonomous — the captain of our ship, the master of our fate — but, in reality, we are utterly dependent on others to create value.

Beyond all the specifics, it seems right to say that Tesco failed in America because, for all its money, all its expertise, all its influence and power, it had no friends.

Employees who feel oppressed don’t do their best work; vendors who feel marginalized don’t bring their best ideas; and consumer press editors whose phone calls don’t get returned don’t work hard to find an optimistic spin.

We think of business success as coming from brilliant strategy and exceptional execution, but strategy and execution depends on insight from employees and vendors who are often closer to the ground and thus able to glean information more quickly. Then there are always problems and how third parties, such as the media, choose to deal with your problems often determines how things come out.

One insight from the Fresh & Easy collapse is how unimportant most of our traditional levers are in gaining the allegiance of those we need to make our businesses a success. We have heard bitter anger at Tesco from employees, but not one complaint about salaries being too low. We fielded loads of complaints from vendors and, though some said that the issue was that volume was too low to bother dealing with Tesco’s nonsense, it wasn’t the nonsense — and vendors typically used a more explicit word for nonsense — that was the problem. The core of the complaint was a lack of respect. Even when the editors of major media complained about the executives at Tesco and Fresh & Easy, they didn’t complain that Tesco didn’t advertise; they complained that they were not treated respectfully.

Think of how many hours are spent determining compensation plans and how many meetings are held to hash out business terms between vendors. Think about how many dollars are spent arranging for press releases and PR agents to get material in the hands of the media. Then think about how little effort is exerted to make sure that everyone feels valued, that everyone has authentic opportunities to say their piece and that these contributions are taken seriously.

Tesco’s failure in America is shocking to many because Tesco had it all — money, expertise, influence. Perhaps the failure of Fresh & Easy stands as testimony to the danger of having it all. A less powerful and self-sufficient organization would have had little choice but to listen to investors urging it to hire local talent or avoid excessive capital expenditures.

Organizations with less self-sufficiency would have had to turn to vendors for expertise and market knowledge. If a company can’t pay its people so well, it has to make the work environment more satisfying by giving the employees a say, and if one knows one isn’t all powerful, well, if the local newspaper calls, you call back and hope to turn that reporter into a true believer in what you are trying to do.

The paths to success are doubtless many, but it is a great irony that the best interpretation is that Tesco did not fail in America because it lacked for resources. It failed because it had such an abundance of resources it thought it needed no one, and, in the end, it had no one in its corner when the last bell sounded.                 pb