The CEO's role in leading business transformation

Published on: 21 Nov 2014

Dave Lewis has a significant job on his hands. The new Chief Executive of Tesco takes the leadership role in the wake of the company's confirmation that it had overstated profit by £263m.

Tesco's market share is being affected by not only 'discounters' such as Aldi and Lidl, but also Waitrose, which is attracting wealthier customers. The full extent of the challenge facing Lewis becomes clear when looking at this analysis of Tesco's downwards trends by the Financial Times. It is Lewis who must lead the strategy to turn Tesco around. Having worked at Unilever for 27 years he may be new to the supermarket business but not to managing companies on a large scale.

Upon his arrival at Tesco, Lewis wrote a letter to all members of staff. Included in that were phrases steeped in language which will strike a chord with all CEOs - 'focused on delivering the best possible experience for our customers'; 'looking at all parts of the business'; 'the decisions I take will be based on what's best for customers, for shareholders, for colleagues and hence the whole Tesco business.'

The challenges Lewis faces are typical of an CEO. Tasked with leading business transformation, or leading business recovery, it is the CEO who must guide a company, steer it forward, push it into profit. Re-organising, re-structuring, re-focusing. Prepared to make key decisions, even if unpopular. During his time at Unilever, Lewis earned the nickname 'drastic Dave' for cutting 300 jobs in 2007 but he also gained a reputation as a leader who could turn businesses around.

As the figure who sits atop the organisational pyramid, the CEO must possess a strategic vision for the company and be able to communicate that vision to everyone else: staff, customers, clients, investors. In this regard, leadership and organisation are also prized qualities. A CEO cannot be everywhere at all times, so needs to construct a strong management team and empower these managers to lead their own teams. The CEO may be responsible for recruitment selection in the more senior positions of the company structure.

It's also imperative that a CEO keeps pace with industry trends. The most successful and productive companies adapt, evolve and change according to developments in technology, the economy, the marketplace, consumer buying habits. A CEO who is slow to react to change runs the risk of seeing his or her organisation falling behind its competition - as Tesco is now in danger of doing.

Harvard Business Review has just compiled its list of best performing CEOs in the world in 2014. There are 100 names on the list; John Chambers of Cisco Systems, Reed Hastings of Netflix, Lord Simon Wolfson of Next, Nick Hayek Jr of Swatch and Howard Schultz of Starbucks all feature in the selection.

Next's Wolfson is undeniably a CEO success story. He was the youngest chief executive in the FTSE-100 when appointed in 2001, aged just 33. In March the UK retail giant announced record profits for the fifth consecutive year with pre-tax profits rising to £695 million. In April it was reported that he shared a £4m bonus with the company's 20,000 staff, therefore effectively giving each of them a 1.5% pay rise.

In at No.1, unsurprisingly, is Amazon's Jeff Bezos, who once famously said, 'If you never want to be criticized, for goodness' sake don't do anything new.' Bezos has never been afraid to adapt and embrace new directions. His leadership of Amazon saw him transform the online shopping experience in a way that has changed consumer culture. What started out primarily as an online books retailer has expanded into multiple products and into spin-off businesses, such as Amazon Fresh.

It's an extreme example of a CEO leading business transformation but an aspirational example, nonetheless.