Saturday, July 2, 2011

Managing innovation: story of Tesco India

Last week I got an opportunity to listen to Sandeep Dhar, CEO of Tesco Hindustan Service Centre (HSC) on how Tesco India manages innovation at CII Innovation Forum. Tesco is the third largest retailer in the world by revenue and the second largest in terms of profits. Tesco HSC is responsible for standardizing all back-office processes impacting Tesco business globally and it currently employs 4000 associates. Sandeep demonstrated with examples how Tesco has made innovation an every day practice. How is it different from other places? Let’s see in this article.

Idea qualification: At Tesco, like everywhere else, every idea needs to have a business case which typically means cost saving for an idea from HSC. However, at Tesco, it needs to meet two additional criteria: One, it should improve or maintain customer experience. Two, it should simplify or at least maintain employee work complexity. Several ideas end up getting dropped for not meeting these criteria.

Continuous improvement track: Small ideas are taken seriously at Tesco. In fact, if an idea can reduce average time taken to handle a customer at the TIL by one second, it saves the company 2 million pounds a year in UK alone. How to keep people motivated for doing continuous improvement? At Tesco HSC this is ensured by how the team KPI or SLAs are set. For example, there is a team in India which receives calls when particular equipment like a refrigerator or air-conditioning unit is malfunctioning. Team’s job is to call the relevant vendor of the town and the vendor would send people to the Tesco store for servicing. Typical KPIs of such call-centric team would be percentage of calls serviced in 90 seconds, percentage calls tracked to closure etc. With these metric the improvements would be directed towards improving the efficiency of handling calls. They deliver limited value. Tesco changed the KPI of the team to “reduce the amount of money Tesco spends on maintenance”. With this the orientation of the team changed. They started looking into the reasons for equipment failures, some of the early warning and on preventive maintenance measures. Two years after this change the maintenance budget has come down by 40 percent.

Another team in India is responsible for making payments for the traffic violations of the truck drivers carrying Tesco supplies. Typical KPI would be timely payment of the fine and the accuracy of the payment. This KPI was changed to “figure out ways to reduce the fine”. One of the team members visited the traffic authority web site and found out a mechanism to challenge the fines. He and a couple of his colleagues started looking into the data and started challenging the fines selectively. At times the challenge would be successful, at times it wouldn’t. Then the team went one step further and analyzed the reasons for the traffic violations. They identified some commonly made mistakes and sent the information to the drivers. They were able to identify drivers who were more prone to making traffic violations.

Problem solving track: This is the track where the businesses are asked to share some of their chronic problems. Tesco India sets up cross functional teams to work on them. One such problem was related to Tesco’s online website. Tesco is world’s largest e-grocer. The web site has a favorites list which currently includes all the items a customer had shopped in the past. The drawback of this mechanism was that the favorites list becomes very long and inconvenient for the shopper. A Tesco India team worked with IISc experts and came up with a statistical algorithm that predicts what a shopper might be shopping on a day. For example, if you have purchased 3 gallons of milk on Monday, it would not show milk in favorites on Tuesday. But it may show it on Friday. This has resulted in reducing the favorites list to one third of the original size. This has been piloted and going into production.

In-store work experience: All managers in India go through Tesco Week in Store Together (TWIST) program whenever they visit a country with Tesco stores. For Sandeep a TWIST a year is mandatory. He said if he doesn’t spend a week working the store, his KPI goes down by a notch. When Sandeep spends a week in the store, he may spend a day at check-out counter, another day stacking products, third day he may be doing stock count, on the fourth day he may be going out with the delivery van.

Retail test lab: In 2007, Tesco HSC established retail test lab where recreated all hardware environments that exists in different Tesco stores. For example, sales counters and handheld devices etc. When IT develops a software it is tested in this simulated environment which improves the reliability of the deployment.


  1. I knew that tesco is doing very well,especially in UK seeing the figures and year on year sales. They are far behind in US but still trying to compete with supermarkets like Walmart.

    I used to think its the idea of opening small stores with different names like Express and Metro making them more reachable to people but then now many supermarkets does that yet can't make profits like Tesco.

    Thanks for the article, this explains how small things are taken care in Tesco and especially having office in India making it cost -effective.

  2. Thanks, Ranjit. Yeah, I liked the way Tesco India is encouraging small ideas. Also I liked their emphasis on actual in-store experience for the employees.

  3. And annother innovative way to grab Customers

  4. How about india ??? when can we get to see such excellent service

    1. I agree, Anonymous. Customer experience has not been the strength of Indian service industry. But who knows? The biggest grocery store near our house (Total Mall) has exchanged hands a few times in the last 4-5 years. On the other hand, M K Retail, a relatively smaller store is doing very well. To add to it the competition from players like Let's see when I get to see a senior manager at the check-out counter in India.