strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: August 6, 2012
 / Autumn 2012 / Issue 68

 
 

Blank Checks: Unleashing the Potential of People and Businesses

The Tang case illustrates several insights about blank checks. The aggressive targets forced the team to realize that the strategy they had in place at the time, creating new variants of Tang, would not be enough. They also realized, as teams frequently do when taking on a blank check challenge, that they did not have all the answers. They reached out to different types of outsiders, including packaging experts, supply chain experts, and marketing and advertising agencies. They held workshops to discover the essence of the brand, what was different and special about Tang. The packaging experts pointed them to the patented Boato machine from Italy that could mass-produce single-serving sachets of Tang. The team also discovered Tang’s core asset: It tastes better than water, and it is environmentally more sustainable and cheaper than carbonated beverages. This led the team to broaden the positioning of Tang by setting it up to compete against water rather than other powdered beverages. The team decided to “attack water” with the brand positioning “Tang makes water exciting.”

Breaking the mold in China. The Tang example was focused on brand success, but the blank check approach can also transform an entire business. Kraft Foods China shows how this can happen. Early on in its experience in China (beginning in 1984), Kraft had aspired to make Kraft Foods China a $1 billion business — to match the 1 billion people in the country. But by 2006, the company’s China business was still very small, about $100 million in annual revenues. And worse, it was plagued by low gross margins; growth for the sake of growth was a waste of time because there was no hope of making money. There seemed to be no point in scaling up something that was not working. It was time to take the way the company did business in China and flip it on its head — and a blank check initiative was the catalyst for that change.

“We knew that Lorna Davis, who was China’s new business leader, and Shawn Warren from our region office, who knew our categories and brands well, would make the perfect pair to lead this transformational initiative,” recalls Pradeep Pant, president of Kraft Asia Pacific. “Both had the drive, the creativity, and an inspiring leadership style to make it happen.”

With a blank check in hand, Davis and Warren rose to the challenge. In eight weeks, the team came back with what many would consider a risky proposal that seemingly defied logic. Instead of continuing to pour money into the business to chase after unprofitable growth, the team proposed a counterintuitive approach to scale back the business they were trying to expand. “The business was stuck in a vicious cycle,” recalls Davis, who is now senior vice president in the company’s global biscuits category, “and we knew that expanding our current business model was not going to work. The principle of giving trust and support to the local management team with blank checks allowed us to break out of that cycle and transform the business.”

Their proposal aligned squarely with the company’s 5-10-10 strategic framework; the team decided to focus their portfolio on a few things that mattered, like biscuits (cookies). The team invested in deepening their local talent pool so they could get closer to Chinese consumers. And they tossed the “not invented here” syndrome out the window by leveraging a “glocal” approach that combined the best of global technology and expertise with local market know-how. Finally, they gave themselves an aggressive time frame to turn the business around. “Our proposal aligned with our 5-10-10 strategy,” says Warren. “Biscuits were one of five key categories, and the brands, like Oreo, were among our 10 power brands. Having the freedom of a blank check helped us take risks, think bigger, and look at the business with fresh eyes.”

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

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.
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close