Smartphone punt shows there’s life in Tesco yet, but there are challenges ahead

Outlook

Hudl up Team Tesco. Quarterback Philip Clarke is about to take you further into the tech world with the Hudl smartphone. Gosh darn it, it might even work. Whatever next? Tesco as a dotcom stock? Steady on now.

A Hail Mary in American football is a last-gasp pass hurled into the end zone in the hope that one of the attacking team’s players will catch the ball, score a touchdown and snatch victory from the jaws of defeat.

Tesco is not yet in need of one. But having regularly won the retail Superbowl it now finds itself trailing its rivals in the third quarter with the game very much on the line. The old playbook of grab land, build warehouse at the edge of town, staff it minimally, has not been putting points on the board of late. Far from it.

Given that, the temptation to retrench and focus all its energies on sorting out the mess at the core of the operation would be entirely understandable. And yet, here’s Tesco taking a punt on launching a product into an already crowded and competitive field.

There is method in its madness. The Hudl tablet was launched into a similar situation. I was among many sceptics when the budget device made its debut. But critics like me have been proved wrong and it has quickly found a place in the market.

It has proved to be successful enough for Tesco to be lining up a Hudl 2, which will presumably boast a similar combination of ultra low price and impressive functionality.

Can Tesco repeat the trick with a Hudl smartphone? There are an awful lot of people who would welcome a low-cost basic product and there’s no reason to think that lightning won’t strike twice.

Hudls, whether the forthcoming phone or the tablet, might not make a vast amount of money, or any money at all (Tesco doesn’t provide figures). But they can still add value.

Tesco has been losing customers. The Hudl allows it to retain, or even re-establish, relationships with some of them. None of its rivals have anything like that. Morrisons, a supermarket group with even bigger problems, is certainly one which could use a way of reconnecting with its departing shoppers.

Of course, to capitalise on those relationships Tesco still needs to get its core offering right. Its ability to innovate like this, to push into new areas even at a time when it is struggling, is a demonstration that there is a creative spark within this business.

The challenge it faces is applying that spark to the meat of the operation, and getting investors to buy into its playbook.

The company is still struggling with both these issues, and the game clock is ticking fast. Mr Clarke badly needs to connect with a few more of his throws to avoid becoming the victim of another American football play. The one where the quarterback gets buried under the bodies of his opponents. That play is known as the sack.

Balfour’s latest chief could do with a sharper focus

Compared with some of its fellow contractors Balfour Beatty’s problems might seem rather mild. Profit warnings are a nasty business, especially when you have to tell your investors that your earnings will be 20 per cent lower than they’d been expecting.

But they hardly compare with fraud investigations for tagging dead prisoners (Serco, G4S) and the reputational hit that accompanies them.

Nonetheless, while Balfour’s symptoms may appear to be milder, they are caused by a disease that is remarkably common among government contractors the world over. A string of deals, a bewildering array of contracts, poor oversight of important parts of the business.

That Balfour is in the active stage of this sickness can be seen by the fact that it has lost two chief executives in just over a year. First Ian Tyler departed on the heels of a profit warning, now his successor and former number two Andrew McNaughton has followed him out of the door.

The company complained about its UK business facing a difficult market, and there’s something in that. But the admission that it has lost out on contracts due to “poor operational delivery issues” speaks volumes. Poor management issues are often at the heart of those.

The worry is that there will be more of this to come. There are certainly question marks hanging over the men charged with fixing them. Take the finance director Duncan Magrath, and Steve Marshall, the chairman. They assumed their current roles in 2008. Now, the focus tends to be on chief executives when things go wrong, but big business is a team sport and as such these men can’t escape at least some of the blame for what’s gone wrong. They have overlapped both chief executives, after all.

And yet, with Mr McNaughton having left immediately, it is Mr Marshall who has assumed control of the business as executive chairman, at least until a successor is appointed.

His docket includes fixing what ails the UK business, while looking into the possible sale of Parsons Brinckerhoff, the engineering consultancy which was supposed to transform the group when it was bought in 2009 for $626m (£371m). The deal may have left the group with too many fingers in too many pies.

Worryingly, that’s a description that could easily be applied to Mr Marshall. In addition to his job at Balfour he’s also chairman of logistics group Wincanton and waste management firm Biffa Group. And he’s a non-executive director of Halma, the safety company, as well.

If he’s going to ensure that the group is more focused, he might want to start with himself.