A Better Way of Doing Business
Andy Street, Managing Director of John Lewis spoke at Aston Business School in March 2012 about the partnership, and how it has been able to remain a consistently good performer through difficult times.
Andy’s presentation looked at the origins of John Lewis, how it fared during the 2008 financial crisis, and how its particular business model has been applied and reaped benefits since then.
John Speden Lewis took over full ownership of the company from his father in 1928, and drew up the constitution and trust settlement which are still in force today. He thought it morally wrong that his family should take over 50% of the profits from the business, and instead championed a more sustainable capitalism, which, with some prescience, he called the Third Way.
His business ethic demanded genuine partnership for all – managers and managed – and a strong belief in the common good. He described the purpose of this partnership as ‘the happiness of members through their worthwhile and satisfying employment in a successful business’.
Andy outlined the advantages of this mutually beneficial model, noting firstly that there are no external shareholders involved. This means that John Lewis can do what is best for all its partners and the long-term health of the business, and is not beholden to the City. In addition, there is no conflict of interest between the various parts of the business. Through an elected Council, management are held to account across the company and the common good is upheld.
The 2008 financial crisis
During 2008, John Lewis saw significant drops in retail sales and overall profits, along with other retailers. In deciding how to move forward together, the watchword was “doing the right thing for the long-term”. This meant:
- Resolving that there was to be no compromise on quality, service or value
- Taking tough decisions, including making roles redundant (but re-deploying 60% of staff involved)
- Investing for growth, for example in the development of johnlewis.com, in order to give partners confidence for the future.
Andy was clear that great leadership was crucial as the company navigated the crisis. He cited honest and consistent communication, prompt, visible and considered action, emotional connection and reflective empathy with all partners, and the ability to inspire and give hope for the long-term.
Building the brand since 2008
Three factors – strategy, authenticity and marketing – have been important in securing John Lewis’s strong position in the last few years. ‘Doing the right thing for the long-term’ has included:
- investing (eg the new store which will form part of the regeneration of New Street here in Birmingham)
- innovation and brand leveraging (eg the introduction of insurance products)
- defending and reinforcing their services and reputation
- increasing personalisation (ie rejecting a mass-market approach)
Andy stressed that the one word he wants people to understand about John Lewis is ‘trust’. It is important that the brand resonates with people as a constant in a changing world, and their marketing in recent years has been very much values-based, as Andy illustrated by showing some of the recent John Lewis TV ads.
In conclusion, Andy re-iterated that John Lewis has always had a different goal to its competitors and has gone about achieving it in a different way. It is not a ‘softer’ business model, but a better one. It sustains the company’s performance and all John Lewis partners share the rewards.