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Published: August 6, 2012
 / Autumn 2012 / Issue 68

 
 

Blank Checks: Unleashing the Potential of People and Businesses

The typical first reaction to a blank check challenge is skepticism. People in corporate settings have been conditioned to fight for every resource. They have been trained to think in terms of budgets, cost cutting, and belt tightening. They have likely never been in a situation in which they can ask for unlimited resources, and may find the idea so foreign that it is difficult for them to believe it at first. Once the team realizes that their business leaders are serious, skepticism can easily give way to fear — fear of failure and fear of being in the spotlight. Fear is often followed by frenetic activity, when the team tends to focus on doing more of the same or doing the same things better. But the team quickly realizes that this linear and extrapolative thinking will not produce the breakthrough results that they need to achieve. This, in turn, leads the team to powerful insights because they are forced to focus on the essence of the business, the brands, and the market.

5. Monitoring results. As the blank check initiative begins, it is important to set milestones for key deliverables, and then to monitor them closely as the initiative proceeds. We recommend quarterly milestones, so that course corrections can be made quickly. As is true of a company’s startup phase, blank check initiatives rarely go according to plan. The team will run experiments and take risks, and some of these experiments will inevitably fail. Failing is part of the learning process. What is important is to fail early, fail cheaply, and learn fast from the failures. Metrics for blank check initiatives should be kept simple enough so that progress can be measured on a single-page report.

How Blank Checks Drive Growth

To see how blank check initiatives work in practice and the results they can produce, consider the following three case studies. They all describe recent Kraft initiatives in developing markets: The acceleration of the Cadbury business in India, the revitalization of the Tang powdered beverage business, and the transformation of Kraft’s China business.

Cadbury India’s sweet success. When Kraft Foods acquired Cadbury in February 2010, India became one of the 10 priority markets for Kraft. It had taken Cadbury more than 40 years to grow the business to $400 million by 2009. During one of management’s first visits with the regional team in February 2010, the leadership team offered Anand Kripalu, president of Kraft South Asia and Indo China, a blank check to make India a half-billion-dollar business by the end of the year — which meant accelerating the region’s growth plans for the year and increasing total sales by 25 percent. The Indian management team’s proposal called for expanding distribution, investing in sales, and increasing the marketing behind Cadbury Dairy Milk, Cadbury’s biggest brand in India. The team based these choices on their conviction that Cadbury Dairy Milk had momentum, offered attractive margins, and was material because it was the most important part of Cadbury’s Indian business.

“We turned around the proposal in just a few short days,” says Kripalu. “It was quickly approved, and the next day we shared our new $500 million target with our employees. At first, people thought we had lost our minds. But soon that fear turned to inspiration, once employees realized that we’d been given the freedom and resources to take our business to a new level.”

The team took the challenge and ran with it, innovating on several dimensions. When they evaluated distribution channels, for example, the team observed that in some retail outlets, Cadbury Dairy Milk was stored and displayed in “visicoolers” — special display cases that give Cadbury visibility at the retail location and keep the chocolate from melting in the oppressive Indian summer heat. The outlets that had visicoolers generated sales that were 15 percent higher than those at comparable outlets. On the principle of leveraging what works, the team decided to double the number of locations with visicoolers, from 20,000 to 40,000 retail outlets. They also doubled permanent in-store displays for Cadbury Dairy Milk, from 5,000 to 10,000. They expanded distribution into 2,100 additional towns and villages — bringing the total number of sales outlets to 550,000 in India — and increased investment in Cadbury Dairy Milk advertising and promotions by 45 percent.

 
 
 
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Resources

  1. Sanjay Khosla and Mohanbir Sawhney, “Growth through Focus: A Blueprint for Driving Profitable Expansion,” s+b, Autumn 2010: Rather than seek increased revenues and profits by expanding products and markets, companies should follow a seven-step strategy for achieving more with less.
  2. Irene Rosenfeld, “Inside the Kraft Foods Transformation,” s+b, Autumn 2009: Top leaders from the largest food and beverage company in the U.S. talking about their three-year turnaround and their campaign to reorganize for growth.
  3. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership.
 
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