Tesco has moved from being service-led to engineering -based firm: CEO

UK-based retail giant is 'at the table with the leaders' in Indian business services industry, says Sumit Mitra.

UK-based retail giant Tesco has had a captive centre in India since 2004-05. What started as a simple outsourcing unit has morphed into a global services centre which is core to the retailer’s operations. Sumit Mitra, CEO Tesco Business Services & Tesco Bengaluru, spoke to Shivani Shinde about how the company’s Bengaluru campus is increasing value for shareholders and using technology for its global plans.
 
Edited excerpts from an interview.
 
How has Tesco Global Business Services’ (GBS) unit changed over the last four or five years? How is it becoming more significant in Tesco’s global road map?
 

Tesco Bengaluru’s outsourced operations started in 2004-05. In early 2015, Tesco went through a huge write-down. Dave Lewis, then the CEO, wanted a new way of transforming the business. Tesco was losing market share, negative in cash and running into losses. While looking at solutions, they also looked at the GBS unit and brought me to this centre. The thinking was, how do we leverage the global business model? As part of the transformation, 10 processes were created, standardised and led by an executive. I approached the board and said, we need to build a global business rather than a Bengaluru centre.

 
So I led that transformation journey -- Vision 2020. It was about setting up the fundamental building blocks of the next generation of business services, to create a transformation capability using artificial intelligence (AI), machine learning and robotics to drive process digitisation and build a continuous improvement culture within the organisation using Kaizen methodology. The idea was to be a centre that gets a place at the table with the leaders.
 
We moved away from a service-led organisation to an engineering-based organisation, where we went from 80 per cent service-led people to almost 80 per cent engineering resources. This meant we were looking at innovation and working with our colleagues across the globe in the technology function to create value for the group.

 
In 2020, we released our next-three-year strategy, to build intelligent business services. Mission 2023 is digitally driven, an edge that transforms the core of the business, drives cost transformation for the group, creates an engine of data science and data analytics that delivers business insight -- that’s where the intelligence comes from. We are building a centre of excellence in robotics, AI and applied research, so that we can work with the ecosystem around us, bring in new technology and new capability and incubate them within the organisation and build the next generation of business services. We created an experience-driven GBS, where we are leveraging the 18 years of experience that we have in Bengaluru and using that to build our centres in Budapest, Ireland, and other geographies. We’re looking at customer experience, supplier experience, business partner experience, brand experience, and organisation experience, rather than just at a final table design approach. That’s the kind of evolution over the last four and a half years.

 
With other centres being set up, what role does India have?
 
Bengaluru becomes the major hub, the centre of the scale. Anything that we want to pilot, learn or test, starts in Bengaluru. We use that scale to build anything for the rest of the business, whether it’s the Tesco Bank, Tesco mobile, the book or wholesale business. Two, India also becomes the centre of excellence for technologies like robotics, for continuous improvement, AI and data science. In terms of team size, Bengaluru has about 4,500 colleagues, Budapest has about 600, and Dundee about 1200. Bangalore is still the biggest centre that’s creating the biggest value back into the group business.

 
To give an instance of what Tesco GBS in India does is, 70 per cent of the entire finance activity across the group is done in Bengaluru. 100 per cent of all store design, any new store that needs to be opened up or designed is handled from India. During the pandemic, 100 per cent of the supplier payment was done from Bengaluru. So, it shows the critical nature of the work that was carrying on.
 
When the pandemic broke and Europe was worst impacted, we had almost 52,000 employees in the UK on leave due to Covid and our online business skyrocketed. We used to have about 647,000 orders per week online, which went up to 1.2 million orders a week. Which meant that we had to create capacity to do the picking in our stores. We have to go back to the market to rehire people, and this is where Bangalore played a huge part. With 48,000 new hires in three weeks, the volume of work that was created on payroll, finance and other operations was handled by India. And while supporting the UK operations, we also wanted to make sure our team in India was safe as we moved to WFH.

 
How are you making sure that the talent crunch in the industry does not impact you or is less?
 
We have been impacted mostly in hi-tech areas like engineering, data science, and robotic process automation. Some specialist functions have been impacted. This is mainly because of the high demand for talented individuals. We did an analysis on why people leave or want to leave, and the number one reason is that they do not feel valued by their organisation or their immediate line manager. Two, there is a lack of sense of belonging. A lot of hiring that has happened during the pandemic, these people do not know the company. Many would never know what Tesco is, as they have never been to our campus. Third is work-life balance.

 
We’ve created a ‘daily pulse survey’ of three seconds that helps us understand where our colleagues are feeling the crunch. It gave us deep insight on the interventions needed within our business interventions around how to include colleagues in decision making. One of the things we’ve done is that we don’t shelter toxic leaders. During the pandemic our attrition was 5 per cent and at present it’s in the 21 per cent range, much better than many players.
 
What is the road ahead for Tesco GBS?
 
We have a clear vision and a strategy in terms of what we want to do with Tesco GBS globally. It’s how we continue to evolve our culture -- meaning, how we become more and more connected to the purpose of Tesco. The purpose is to serve our shoppers, communities and planet a little better every day. This also means building a company that is sensitive to sustainability. We want to focus on skilling and digitising our colleagues, so that they can get into more value-added roles.

 
The other aspect we are focusing on is, how to improve the leadership capability, the line management capability. The second piece is unlocking the potential around digital transformation. We need to keep reducing our cost to serve so that we become competitive. And we need to do more things with less, but more value-added stuff with less. The third pillar is using data and science to drive deep insight back into the business and create new value.
 
My Group CEO does not measure me on labour arbitrage benefits or cost savings. He’s interested in how much I contribute to increasing profits and revenue, and how much the centre can improve cash generation through innovation and technology. We are already among the top 20 most admired GBS in the world, and we want to be number one.