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Published: August 24, 2010
 / Autumn 2010 / Issue 60

 
 

Growth through Focus: A Blueprint for Driving Profitable Expansion

Consider the example of Oreo cookies, one of Kraft Foods’ billion-dollar brands. Oreo was a strong brand in the United States but had historically been weak in the rest of the world. One reason was the assumption that what was good for Oreo in the U.S. was also good in China, the U.K., and elsewhere. The company learned from experience that this was not the case. To grow the brand in China, Oreo cookies were made less sweet to suit local consumer tastes. Oreo packages were made smaller, and new forms, like wafers, were introduced. Heavy emphasis was placed on local promotions and on-the-ground marketing activities unique to China. This localization, however, was carried out within the global brand positioning for Oreo. After implementation of the new strategy, Oreo became the market leader in China, and the Oreo business outside the U.S. began growing about 30 percent per year. Through the global category teams, Kraft Foods now has an energized, highly motivated community of employees around the world who sleep and dream Oreo.

This approach of matching skills with priorities and connecting communities to get the best mix of global and local ideas, within a clearly defined strategy, has a powerful effect in leveraging scale and expertise.

7. Metrics: Manage Numbers and Tell Stories

As the execution and organization processes get under way, it is important to keep score. Scorecards should be objective, and they should be kept simple. Overly complex metrics take attention away from the measures that really matter and can obfuscate execution priorities. At Kraft Foods, Chairman and CEO Irene Rosenfeld asked that the businesses create a one-page scorecard system that included three key measures — sales, profits, and cash flow. These three measures were made the basis for bonuses to all employees. This simple scorecard dramatically reduced reporting complexity and created clear accountability for results. Kraft Foods’ international business also uses a single-page scorecard to monitor the progress of the 5-10-10 strategy. Simplicity begets focus, because everyone knows what numbers the executives are looking at.

Managing growth requires a focus on numbers, but numbers alone are not enough. Storytelling is a powerful tool for propagating the culture of winning in the organization. A conscious effort should be made to write up and disseminate success stories from around the world. Leadership should make it a point at every large internal meeting to put successful people on the stage to share their stories with their colleagues. Success stories become part of the culture, and successful people become heroes in the eyes of their peers and managers. Moreover, highlighting the achievements of successful teams creates “positive shame”; the teams that are not on the stage feel strong peer pressure. This positive pressure is far more effective than the “negative shame” that would be created if the less-successful teams were berated in reviews.

Avoiding the Traps

With any transformation initiative, there are pitfalls to avoid and hurdles to overcome on the way to success. Here are a few to keep in mind in implementing growth through focus.

One common pitfall is to seek to build scale before fixing underlying problems. In choosing the markets and categories to focus on, for example, it is easy to get seduced by the size of the opportunity. Most large companies covet the hundreds of millions of consumers in emerging markets such as China, India, and Brazil. And they quote the minuscule per capita consumption of their products as an indicator of vast untapped potential. To convert potential into actual revenues and profits, however, you first need a business model that works. You must have the distribution reach, the supply chain, the manufacturing capabilities, and the right products before you can scale the business. Kraft Foods was in China for many years and had set ambitious targets that it did not achieve. In reality, the model was not working and the business was losing money. Scaling up the model simply made things worse. To fix this problem, Kraft Foods redesigned its business model, integrated its business with the acquired Danone biscuits unit, and got the appropriate talent on the ground. Only then did Kraft Foods’ business in China begin to grow and make money.

 
 
 
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Resources

  1. Irene Rosenfeld et al., “Inside the Kraft Foods Transformation,” s+b, Autumn 2009: A roundtable discussion of Kraft Foods’ overall corporate reorganization.

  2. Mohanbir Sawhney, Sridhar Balasubramanian, and Vish V. Krishnan, “Creating Growth with Services,” MIT Sloan Management Review, January 15, 2004: Perspectives on how companies can drive organic growth through services.

  3. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/strategy_and_leadership.

 
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