Tesco is the world’s third-largest retailer in revenue ($96.8 billion), behind Wal-Mart ($466.1 billion) and Carrefour ($112.6 billion). Unlike the other mega retailers, it has the unique distinction of having a technologist as CEO.
Tesco has understood the power of data for a long time. It was a pioneer in the development of the Clubcard concept. In 1993, it introduced a card that incorporated a magnetic strip (and later a barcode) to identify the customer personally. This was followed two years later by an investment in Dunnhumby, a data analysis firm and early mover in the data warehousing technology sector. Tesco, then under the helm of Sir Terry Leahy, acquired Dunnhumby in 2010.
His vision of data-driven retail moved Tesco’s market value from £4.7 billion in 1992 to £29.9 billion by 2011. In an interview with Internet Retailing last month, Leahy acknowledged that data helped Tesco move ahead of competitors.
Data in the value chain
Tesco use this data-driven ability in all aspects of its value chain, from the supply chain to sales and service. Real-time data updates (such as information from the Broccoli Cam) can be combined with predictive analytics to pass early reorder warnings through the supply chain and logistics networks. Electronic shelf label data can be used to make national pricing changes at a moment’s notice (helping Tesco comply with a 2000 Competition Commission agreement).
Big data is also a powerful, effective force in the multi-channel strategy that Tesco sees as central to understanding the future of consumer retail behavior. This strategy addresses the consumer’s desire to use physical stores, mobile devices, and desktop computers in combinations. For example, a consumer could use an internet kiosk in the store to order an item for collection in the store the next day. A mobile device could be used to order groceries to be delivered at home. These combinations of retail channels require the company to understand not only the purchasing patterns of individual consumers, but also their channel preferences and logistics requirements.
Another example of Tesco’s big data multi-channel strategy is its 80 percent ownership of Blinkbox, a video-on-demand service provider. Blinkbox is tailored for Clubcard holders, who get free ad-supported movie and TV streaming. Michael Comish, Blinkbox’s founder and CEO, is Tesco’s group digital officer and leads its digital entertainment services group.
Tesco has clearly led the way in technology and big data, but its success isn’t limited to the ability to collect and analyze data. It sees that the execution of processes envisioned by this data analysis is the key to its success, and that these processes have to be created, innovated, and tried out. They are not off-the-shelf solutions; they are entrepreneurial in nature. Finally, Tesco understands that the data, the systems, and the processes are not static. They need to evolve and morph constantly, with more pieces added to the data collection and customer relationship channels as necessary.
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Technology thought leader and Harvard Business Review author, Dr. Robert Plant translates the tech-future into strategic execution for today’s executives.
A polymath thought leader on new technologies and their impact on business strategy, Robert brings to his lectures and writing a unique perspective. One gained from combining his formal training in theoretical computer science and a doctorate in Artificial Intelligence with a twenty five year career as a Business School Professor, during which he has undertaken teaching and research at leading universities around the world. He is based at the epicentre of the Americas, in Miami, where he is Director of The Intelligent Computer Systems Research Institute.