In 2007, Kraft Foods Inc. was facing a major challenge with Tang — the powdered breakfast drink that had long been one of its iconic brands, made famous in the 1960s when the National Aeronautics and Space Administration included the drink in the rations for U.S. astronauts. The brand was caught in a cycle of underperformance — a situation that commonly bedevils companies as they seek to drive organic growth. In 2007, the leadership team of Kraft’s developing markets identified Tang as one of their top 10 focus brands, and came up with an unusual strategy for boosting the brand’s sales back into the stratosphere: Tang leaders in key countries such as Brazil were given a “blank check,” essentially urging them to dream big and not worry about resources. The results have been astounding. In the last five years, Tang has doubled sales outside the U.S. and become a profitable, US$1 billion brand there (in comparison, it had taken Tang 50 years to reach the $500 million revenue mark). The transformation of brands like Tang helped grow Kraft Foods’ developing markets business from $6 billion in revenues in 2007 to more than $15 billion in 2011, significantly improving margins.
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The secret of Tang’s turnaround was to free the team from resource constraints that could limit their imagination, inspiring them to achieve unprecedented results that would create a virtuous cycle of growth. This, of course, ran counter to one of the gospel truths in management, that people need to live within their means. Managers have always been taught that they have to work with the limited resources available. Unfortunately, resource constraints limit more than plans. They also limit the creative potential of people.
What if resources were not a constraint? If managers were free to dream and act big without worrying about busting their budgets, they would be limited not by resources, but by their imagination. We believe that business leaders can unleash tremendous untapped potential by unshackling their people and their businesses from resource constraints (while still, of course, holding them accountable for results). The key insight is that business leaders, instead of defining budgets and resources, should focus on defining ambitious goals, while leaving it to their managers and their teams to ask for whatever resources they need to achieve these goals. When teams decide their own budgets, they act as owners and are inspired to achieve the impossible. At Kraft Foods (where coauthor Sanjay Khosla is president of the developing markets group), we call this idea a “blank check” initiative.
The Concept of a Blank Check
A blank check is a metaphor for the freedom a team is given to determine for themselves the financial resources they need to achieve a set of agreed-upon goals within a defined time frame. Blank checks exhort teams to “shoot for the moon,” while giving them the rocket fuel they need to break free of the gravitational pull of predetermined budgets and business as usual. However, blank checks are not a license to spend without limits, without guidelines, or without consequences. Teams have to define the resources they need — they must fill in the amount of the blank check. Every blank check initiative needs to be consistent with the company’s overall business strategy. And it needs to have the potential to produce sustained, profitable growth. (See “Driving the Virtuous Cycle of Growth.”) Blank checks are not meant to produce “one-hit wonders” that bring a short-term spike in results. The idea of the blank check is to empower big ideas that drive a virtuous cycle and change the business’s trajectory for the long term.