Sir Terry Leahy, the chief executive of Tesco, today revealed part of the secret behind the retailer's extraordinary success.

Sir Terry, speaking at the Leaders in London conference in London, credited Professor Robert Kaplan, of Harvard Business School, with inspiring the explosion in growth at the supermarket chain. Last month, Tesco revealed that half-year profits had surged 28 per cent to a record £805 million.

"I have paid Robert Kaplan the only compliment he is interested in: putting his teaching into practice," Sir Terry said. "He has had a big influence on Tesco."

Sir Terry revealed that Tesco had implemented Professor Kaplan's "Balanced Scorecard" approach to management through Tesco's "Steering Wheel" system.

The approach emphasises parts of a business that do not figure in conventional accounting. "The reason traditional business systems did a miserable job in helping companies to grow is because they ignore so called 'intangibles', such as customer relationships," Professor Kaplan said today at the same conference.

The approach was meant to be an antidote to a culture "where everything is about selling more and spending less and anything else is background music," he added.

Tesco's version of the plan divides the business into four sections. Managers are asked to monitor customers, operations, staff and finances using a "traffic light" system where green indicates that targets are being met and red flags a problem.

Sir Terry said that the method had been integral in differentiating the "two Tescos" – the unfashionable chain of the early 1990s, which held the No3 spot in Britain and operated only in the UK, and the modern day company, which leads the UK market and ranks No3 in the world.

"This system literally steers our business and our people," Sir Terry said, adding that he was deeply suspicious of "management gobbledegook".

Professor Kaplan first developed the idea in a Harvard Business School article in 1992. Four academic papers and three books later, the theory has been adopted by organisations as diverse as the Canadian Royal Mounted Police and Mobil, the oil giant.

Dr David Pendleton, Chairman of Edgecumbe Group, the corporate psychology consultancy, said: "Professor Kaplan was one of the very first people to realise that there is more to running a business than financial metrics and has been very successful at expanding that idea.

"The success of Sir Terry Leahy at Tesco underlines how effective it can be when rooted in clarity of thought."

Sir Terry learnt of the approach when he picked up one of Professor Kaplan's books. But some of Tesco's competitors in the UK look to be behind the game.

Sainsbury's and Marks & Spencer have struggled to match the pace set by Tesco in the retail sector and have floundered amid falling sales. According to the organisers of today's event, neither retailer thought to send somebody to note down Sir Terry's tips for success.

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