 "<b>Book Extract:</b> Wooing the Chinese consumer")
Probably nothing encapsulates successful execution better than the Oreo experience in China. Mark Clouse, who headed Kraft China before Lorna Davis, calls Oreo the "trigger point to get the other pieces done," so it's worth digging deeper into how Oreo helped set off Kraft's Chinese surge.
Kraft had introduced the iconic American cookie to China in 1996, and sales poked along at a reasonable rate, but it was far from a hit, capturing less than 4 per cent of the market. "We were selling an American brand and American business to Chinese people," Clouse explains.
Kraft's R&D operation had actually come up with some possible enhancements for the Chinese market. For example, almost by accident - more on that later - researchers had produced a version of the cookie that was slightly less sweet and might connect with the Chinese consumer, who doesn't have the sweet tooth of the typical American. Clouse and his colleagues also came up with a plan to offer Oreos in smaller packages to produce a lower price point. "Initially, I think the belief was that this is a premium product," Clouse says.
But the plans never got the approvals needed from higher-ups. Things got so bad that the word finally came down from headquarters: Take Oreo off the market in China; it's not working.
All that changed when Oreo was named one of the ten priority brands, and Kraft's leadership pushed the decision-making authority down the ladder. Suddenly Clouse - and later Lorna Davis, working with Shawn Warren - had the authority to decide how to run Kraft's Chinese business from the front lines. Given that freedom, the China team recognised the need to change the product and the price to fit the lives of more consumers.
That led to the introduction of a cookie package with a more alluring price point. By offering Oreos in smaller packages (seven cookies instead of fourteen), the company was able to penetrate a far larger proportion of the Chinese population, which was growing more affluent. "The Chinese consumer saw global-brand purchases as part of their own personal journey of growth and prosperity," Clouse says.
The China team also introduced the less sweet Oreo. The backstory to that success turns out to be a bit convoluted, however - and also teaches something about successful execution. "The R&D people tell me that they were actually kind of embarrassed about the formula in China because they were trying to match the US exactly, but the flour was different," says Lorna Davis. "Everything's a little bit different [in China], and they sort of ended up slightly less sweet - and thank goodness for that."
In other words, dialing back the sweetness of the Oreo in China was partly a function of luck. "I had this boss in England who used to tell me that whenever something happens, people think that it's either a conspiracy or a cock-up," Davis adds with a laugh. "People love to believe conspiracy because it's more elaborate, but the reality is that most of the mistakes or most of the things that happen in life are cock-ups. The longer I'm in business, the more I realize that there are lots of things that are simply luck."
She's right - but it was only with the local focus and the willingness to test that Kraft could capitalize on the new flavor. In other words, it took careful execution to take advantage of the luck.
The Kraft China team continued to produce a stream of Oreo innovations. The cream filling in the Chinese cookie now comes in a variety of local flavors, including strawberry and green tea. And the marketing effort has both expanded and changed. The China team wanted to hire Yao Ming, the former NBA star, for a series of lively commercials. Who decides? After all, it's a global brand, and the famous face appearing in a commercial can affect the brand's reputation. Kraft China decided. The higherups in Northfield were simply informed. The decision paid off, as the new commercials caught the growing wave of Chinese response to emotional (as opposed to rational) advertising.
FEWER, BIGGER, BOLDER: FROM MINDLESS EXPANSION TO FOCUSED GROWTH
AUTHORS: Sanjay Khosla, Mohanbir Sawhney
PUBLISHER: Penguin
PRICE: Rs 699
ISBN: 9780241014004
What is the basic premise of Fewer, Bigger, Bolder...?
Globalisation has intensified the seduction of more: Our research shows that in the quest for growth, many companies are spreading themselves too thin. However, the expansion has not paid off well because companies are not focused. So we came with a simple idea in the book: How do you go from seduction of more to the wisdom of less. To enable this we have devised a seven-step framework: how to focus where you can win, prioritise resources, when to stop, how do you unleash the potential of people, the concept of blank checks and, finally how to execute. We applied these principles in many companies such as Kraft Foods and dairy company Fonterra. At Kraft Foods, the execution of the framework led to 50 per cent increase in profitability in the developing market business within six years (2006 to 2013).
Companies like Amazon and Google have expanded into several unrelated categories. For example, Amazon started with selling books and now it sells everything. Or take Google that started from search and has gone into smart phones and smart dashboards. Is adoption of a broader brand perspective the secret to growth in times of constant change?
The important thing is how do you build a brand with a soul. There are three principles: first, building not just a functional but also emotional connection with a consumer enables you to get a premium for your product or service. Second, be clear what your brand is and be very clear what it is not. This will help you avoid unnecessary categories. Third, be consistent across media, touch-points. That doesn't mean you don't evolve. But if you go flip-flop, consumers will get confused.
Yahoo! CEO Marissa Mayer has famously said employees should come to office to facilitate water cooler conversations as it enable companies to become more innovative. What is the right organisation structure and culture that can foster innovation?
There are three principles of organisational structure: First, there is no such thing as a perfect organisation. Second, based on the strategy, you decide where your centre of accountability will be. For example, I decided at Fonterra that the centre of accountability will be country of operation. So the head office was less powerful. This required quite a mindshift. Third, break silos. Put a high premium on teams and not on individual superstars. For instance, when Kraft acquired Cadbury's in February 2010, in 100 days we built a leadership team to lead Cadbury's across all 65 countries. As an individual you can go faster but as a collaborative network you will go further.
Reprinted with permission from "Fewer, Bigger, Bolder: From Mindless Expansion to Focused Growth." Copyright Sanjay Khosla and Mohanbir Sawhney 2014. All rights reserved
Kraft had introduced the iconic American cookie to China in 1996, and sales poked along at a reasonable rate, but it was far from a hit, capturing less than 4 per cent of the market. "We were selling an American brand and American business to Chinese people," Clouse explains.
Kraft's R&D operation had actually come up with some possible enhancements for the Chinese market. For example, almost by accident - more on that later - researchers had produced a version of the cookie that was slightly less sweet and might connect with the Chinese consumer, who doesn't have the sweet tooth of the typical American. Clouse and his colleagues also came up with a plan to offer Oreos in smaller packages to produce a lower price point. "Initially, I think the belief was that this is a premium product," Clouse says.
But the plans never got the approvals needed from higher-ups. Things got so bad that the word finally came down from headquarters: Take Oreo off the market in China; it's not working.
All that changed when Oreo was named one of the ten priority brands, and Kraft's leadership pushed the decision-making authority down the ladder. Suddenly Clouse - and later Lorna Davis, working with Shawn Warren - had the authority to decide how to run Kraft's Chinese business from the front lines. Given that freedom, the China team recognised the need to change the product and the price to fit the lives of more consumers.
That led to the introduction of a cookie package with a more alluring price point. By offering Oreos in smaller packages (seven cookies instead of fourteen), the company was able to penetrate a far larger proportion of the Chinese population, which was growing more affluent. "The Chinese consumer saw global-brand purchases as part of their own personal journey of growth and prosperity," Clouse says.
The China team also introduced the less sweet Oreo. The backstory to that success turns out to be a bit convoluted, however - and also teaches something about successful execution. "The R&D people tell me that they were actually kind of embarrassed about the formula in China because they were trying to match the US exactly, but the flour was different," says Lorna Davis. "Everything's a little bit different [in China], and they sort of ended up slightly less sweet - and thank goodness for that."
In other words, dialing back the sweetness of the Oreo in China was partly a function of luck. "I had this boss in England who used to tell me that whenever something happens, people think that it's either a conspiracy or a cock-up," Davis adds with a laugh. "People love to believe conspiracy because it's more elaborate, but the reality is that most of the mistakes or most of the things that happen in life are cock-ups. The longer I'm in business, the more I realize that there are lots of things that are simply luck."
She's right - but it was only with the local focus and the willingness to test that Kraft could capitalize on the new flavor. In other words, it took careful execution to take advantage of the luck.
The Kraft China team continued to produce a stream of Oreo innovations. The cream filling in the Chinese cookie now comes in a variety of local flavors, including strawberry and green tea. And the marketing effort has both expanded and changed. The China team wanted to hire Yao Ming, the former NBA star, for a series of lively commercials. Who decides? After all, it's a global brand, and the famous face appearing in a commercial can affect the brand's reputation. Kraft China decided. The higherups in Northfield were simply informed. The decision paid off, as the new commercials caught the growing wave of Chinese response to emotional (as opposed to rational) advertising.
FEWER, BIGGER, BOLDER: FROM MINDLESS EXPANSION TO FOCUSED GROWTH
AUTHORS: Sanjay Khosla, Mohanbir Sawhney
PUBLISHER: Penguin
PRICE: Rs 699
ISBN: 9780241014004
| Put a high premium on teams: Sanjay Khosla |
| |
Sanjay Khosla
As an individual you can go faster but as a collaborative network you will go further, co-author Sanjay Khosla tells Ankita RaiWhat is the basic premise of Fewer, Bigger, Bolder...?
Globalisation has intensified the seduction of more: Our research shows that in the quest for growth, many companies are spreading themselves too thin. However, the expansion has not paid off well because companies are not focused. So we came with a simple idea in the book: How do you go from seduction of more to the wisdom of less. To enable this we have devised a seven-step framework: how to focus where you can win, prioritise resources, when to stop, how do you unleash the potential of people, the concept of blank checks and, finally how to execute. We applied these principles in many companies such as Kraft Foods and dairy company Fonterra. At Kraft Foods, the execution of the framework led to 50 per cent increase in profitability in the developing market business within six years (2006 to 2013).
Companies like Amazon and Google have expanded into several unrelated categories. For example, Amazon started with selling books and now it sells everything. Or take Google that started from search and has gone into smart phones and smart dashboards. Is adoption of a broader brand perspective the secret to growth in times of constant change?
The important thing is how do you build a brand with a soul. There are three principles: first, building not just a functional but also emotional connection with a consumer enables you to get a premium for your product or service. Second, be clear what your brand is and be very clear what it is not. This will help you avoid unnecessary categories. Third, be consistent across media, touch-points. That doesn't mean you don't evolve. But if you go flip-flop, consumers will get confused.
Yahoo! CEO Marissa Mayer has famously said employees should come to office to facilitate water cooler conversations as it enable companies to become more innovative. What is the right organisation structure and culture that can foster innovation?
There are three principles of organisational structure: First, there is no such thing as a perfect organisation. Second, based on the strategy, you decide where your centre of accountability will be. For example, I decided at Fonterra that the centre of accountability will be country of operation. So the head office was less powerful. This required quite a mindshift. Third, break silos. Put a high premium on teams and not on individual superstars. For instance, when Kraft acquired Cadbury's in February 2010, in 100 days we built a leadership team to lead Cadbury's across all 65 countries. As an individual you can go faster but as a collaborative network you will go further.
Sanjay Khosla
Management consultant & senior fellow Kellogg School of Management
Management consultant & senior fellow Kellogg School of Management
Reprinted with permission from "Fewer, Bigger, Bolder: From Mindless Expansion to Focused Growth." Copyright Sanjay Khosla and Mohanbir Sawhney 2014. All rights reserved