Thursday, May 30, 2013

Can Packaging Innovation Revive Carbonated Soft Drink Sales?

Fast Company features a story this week about Coke's innovative new "sharing can" featured in the video below.  It makes you wonder:  Can packaging innovation revive sagging carbonated soft drink sales?  In developed markets, health and wellness concerns, coupled with many new alternative beverages, have dragged down sales of colas.  We have seen packaging energize other mature brands in beverages.  Take, for instance, the Coors Light cans where the blue color of the Rocky Mountains on the bottle indicate that the beer is very cold.  Coors Light rode this focus on "cold" to a stronger market share position in the US beer market - a market where sales have been relatively flat for some time.  Of course, Coors Light didn't just innovate on packaging... they truly have owned that market position as the "cold" beer.  The combination of positioning and packaging is what made their strategy successful.  Can Coke pull something similar off in the days ahead?

Wednesday, May 29, 2013

Bill Marriott Jr. on the Lesson He Learned from Ike

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In this week's New York Times Corner Office column, Adam Bryant interviews Bill Marriott Jr., Executive Chairman and former CEO of Marriott International.   The hotel company's longtime leader and founder's son offered this interesting anecdote about a time when he met President Dwight Eisenhower. 

In 1954, I had just finished Supply Corps School and came home for Christmas to our farm in Virginia. Dad’s best friend at the time was Ezra Taft Benson, who was secretary of agriculture and later became president of the L.D.S. church [Church of Jesus Christ of Latter-day Saints]. And he invited Ike and Mamie Eisenhower. So here’s the president and the secretary of agriculture, here’s my father, and here I am. They wanted to take Ike to shoot some quail, but it was cold and the wind was blowing like crazy. My dad said, “Should we go and shoot quail or should we stand by the fire?”And Eisenhower turned around and looked at me and he said, “What do you think we should do?”  That made me realize how he got along with de Gaulle, Churchill, Roosevelt and others — by including them in the decision and asking them what they thought. So I tried to adopt that style of management as I progressed in life, by asking my people, “What do you think?” Now, I didn’t always go with what they thought. But I felt that if I included them in the decision-making process, and asked them what they thought, and I listened to what they had to say and considered it, they usually got on board because they knew they’d been respected and heard, even if I went in a different direction than what they were recommending. 

I found the anecdote fascinating, because it confirms my conclusions about Eisenhower as a decision-maker.  In Chapter 9 of Why Great Leaders Don't Take Yes for an Answer, I examine Eisenhower's leadership during the months leading up to the D-Day invasion.    Here is an excerpt:

General Dwight Eisenhower commanded one of the most powerful military forces ever assembled in human history during World War II.   Under his skilled leadership, the Allied Forces stormed the beaches of France, defeated Hitler’s army, and liberated Europe.  Several years later, the American people elected the popular war hero as their President.   Naturally, not everyone believed that the retired general would make a smooth transition to the Oval Office.  During Harry Truman’s final months in the White House, he reflected on the challenges awaiting his successor: “He’ll sit here, and he’ll say, ‘Do this! Do that!’ And nothing will happen.  Poor Ike – it won’t be a bit like the Army.  He’ll find it very frustrating.”[i]  

Truman spoke from experience.  Getting his ideas and decisions implemented had been a formidable challenge at times.  The obstacles did not always prove to be his opponents in Congress; at times, Truman encountered resistance from members of his own administration.[ii]  Political scientist Richard Neustadt, who worked for Truman and several other chief executives, once observed, “The President of the United States has an extraordinary range of formal powers… despite his ‘powers’ he does not obtain results by giving orders – or not, any rate, merely by giving orders.”[iii]   Even the leader of the free world needs to build commitment and shared understanding if he wants his decisions to be executed in a timely and efficient manner.    

As it turns out, Eisenhower could not simply issue dictums from on high, even as Supreme Commander of the Allied Expeditionary Force in World War II.[iv]   He needed to hold a complicated alliance together and balance the competing demands of many strong-willed individuals on both sides of the Atlantic including the two heads of state, Churchill and Roosevelt; each nation’s military chief of staff, Marshall and Brooke; and powerful field commanders such as Montgomery, Patton, Tedder, and Spaatz.   Historian Stephen Ambrose has pointed out that Eisenhower’s diplomatic skills often proved to be more important than his strategy-making prowess.  He observed:

“Although none of his immediate superiors or subordinates seemed to realize it, Eisenhower could not afford to be a table-thumper.  With Montgomery’s prestige, power, and personality, for example, had Eisenhower stormed into his headquarters, banged his fist on the table, and shouted out a series of demands, his actions could have been disastrous.”[v] 

Eisenhower learned the importance of persuasion from one of his mentors, Brigadier General Fox Conner.  Eisenhower served on Conner’s staff in the Panama Canal Zone during the early 1920s.  Conner shared stories and lessons about his time on General Pershing’s staff during World War I.  He made the young Eisenhower study history extensively.  Eisenhower explained what he learned: 
“He laid great stress in his instruction to me on what he called the ‘art of persuasion.’  Since no foreigner could be given outright administrative command of troops of another nation, they would have to be coordinated very closely, and this needed persuasion.  He would get out a book of applied psychology and we would talk it over.  How do you get allies of different nations to march and think as a nation?  There is no question of his molding my thinking on this from the time I was thirty-one.”[vi]  

As Supreme Commander of the Allied Expeditionary Force many years later, Eisenhower indeed proved quite adept at bringing people together and finding common ground. The enemy too recognized Eisenhower’s strengths as a leader; the Germans once wrote that, “His strongest point is said to be an ability for adjusting personalities to one another and smoothing over opposite viewpoints.”[vii] Consider how Eisenhower chose the D-Day invasion strategy amidst much contentious debate among the heads of state and military commanders.  He built commitment to the final plan by leading a fair and legitimate decision process.   During often heated deliberations, Ambrose points out that Eisenhower “acted as chairman, listening judiciously to both sides, then making the final decision.”[viii]   He insured that everyone “received a fair hearing.”[ix]  Moreover, “his basic method was to approach all problems objectively himself, and to convince others that he was objective.”[x]  

[i] R. Neustadt. (1980). Presidential power. New York: John Wiley and Sons. p. 9. 
[ii] Reflecting on the inefficiencies of decision-making within the U.S. government, Truman once said, “When you have an efficient government, you have a dictatorship." 
[iii] Neustadt, (1980). p. 10. 
[iv] This discussion of the decision-making process leading up to the D-Day invasion draws from historian Stephen Ambrose’s book on Eisenhower’s war years.  See S. Ambrose. (1970). The supreme commander: The war years of Dwight D. Eisenhower. New York: Doubleday.  For instructors wishing to teach about Eisenhower’s approach to planning the D-Day invasion, they might consider asking students to view a film about the decision-making process that the general led during the first half of 1944.  See R. Harmon. (2004). Ike: Countdown to D Day. Columbia Tristar.
[v] Ambrose, (1970). p. 323.   
[vi] Jean Edward Smith. Eisenhower in War and Peace.  2012.  New York: Random House. pg. 66.  
[vi] Ambrose, (1970). p. 324. 
[viii] Ambrose, (1970). p. 371. 
[ix] Ambrose, (1970). p. 373. 
[x] Ambrose, (1970). p. 664.

Friday, May 24, 2013

What Should Lafley Do Now?

Yesterday, we learned the shocking news that embattled P&G CEO Bob McDonald had resigned abruptly, and that former CEO A.G. Lafley had been hired to replace him.  P&G's performance had lagged investor expectations during much of McDonald's tenure.   Activist investor Bill Ackman had been pressuring the company to make significant changes.  

What should Lafley do as he resumes command of the company he led successfully for many years?

First, he has to streamline his other professional commitments, accumulated since he left P&G.  Why?  Ackman criticized McDonald heavily for holding many board seats at other organizations.  Ackman claimed that McDonald held more than 20 board positions at other institutions!  P&G claimed that Ackman was incorrect.  Yet, the company admitted that McDonald held 7 other board positions. Yikes! Even 7 board positions sounds very, very high to me, particularly for a CEO whose company is not performing as well as expected.   Lafley has to show his people and outside investors that he is giving P&G his undivided attention.  

Second, Lafley should consider streamlining the P&G portfolio.  During his tenure, he divested a number of brands that he considered non-core products or businesses.   More work needs to be done.  I believe two strong candidates for divestment are IAMS (pet food business) and Duracell (battery business).  Why?  P&G has divested nearly all of its food brands over the past decade or so.   IAMS is an anomaly.   In fact, if you go to the company website, IAMS falls under the category of "household brands" - along with the company's large stable of soaps, detergents, and household cleaners.  How does dog food fit in that category?   The US pet food industry is less consolidated than the European market.  It could consolidate further.  Lafley ought to seek a buyer for the business.    He also ought to consider divesting the Duracell business.   It also seems like an outlier amidst the company's other household care brands.  Duracell is a leading brand in its category and surely would fit better at a company selling other similar products.  Having divested these brands, Lafley can reinvest in innovation efforts to ignite more top line growth in P&G's core categories. 

Finally, Lafley has to make a decision about the competitive positioning of the company's portfolio of brands.  During his first tenure as CEO, Lafley divested many low cost brands and focused heavily on products with a differentiated, premium position in the market (think Gillette, Braun, and many high-end fragrances, for instance).   During the recession, the company found itself struggling in some categories, as customers opted for lower price alternatives.   Pressure built to offer lower-priced options.  Meanwhile, Ackman pressured the firm to cut costs.  There's danger in this situation.  Is P&G determined to be a differentiated player in many markets or a low cost player?  Or, is it stuck in the middle, muddling along with an unclear position between the high and low ends of many markets?  Lafley needs to make some tough decisions about the firm's competitive positioning.  

Thursday, May 23, 2013

When Protecting Your Brand Goes Too Far: The Nutella Story

Photo credit: Teymur Madjderey
I remember being introduced to Nutella when visiting my grandmother in Italy as a kid.  I loved Nutella then, and I still do today.  Apparently, Sara Rosso REALLY loves Nutella.  In fact, she founded World Nutella Day, which takes place on February 5th each year, in case you are interested.  Rosso also has an extensive website featuring recipes and lots of other information about the product. 

This year, though, Rosso announced that World Nutella Day would not take place.   Apparently, she received a "cease-and-desist" letter from lawyers at Ferrero, the Italian company that makes Nutella.  The company sought to protect its copyrights and trademarks.  It worried that Rosso was infringing on its intellectual property rights. 

When Rosso revealed the news about the cease-and-desist order, her many fans (also big fans of Nutella) became upset.  They began to write about their frustrations with Ferrero's action on Rosso's Facebook page.  Nutella had a brewing controversy on its hands.

Fortunately, the company reacted fairly quickly.  They caught wind of the negative feedback from many fans of the product, and they backed off.  Rosso was free to orchestrate World Nutella Day each year and to feature recipes and other information on her website.

What an amazing story.   Here's a woman who is the ultimate brand evangelist, and the lawyers almost stifled all enthusiasm.   Leave it up to the lawyers to mess up a good thing!   Actually, there is a great lesson here.  Companies do want to watch carefully for copyright and trademark infringement.  On the other hand, what's better for a brand then an authentic customer evangelist?!  When a company has diehard fans, and not just customers, it should very pleased.  A customer evangelist can provide the type of authentic promotion that a company would have a very hard time creating. 

Tuesday, May 21, 2013

2nd Edition: Why Great Leaders Don't Take Yes for an Answer

I am very pleased to announce the publication of the 2nd edition of Why Great Leaders Don't Take Yes for an Answer.   I published the original edition of this book 8 years ago, and since that time, I've continued to conduct research and teach about how leaders and teams make decisions. Throughout the book, I have included more current examples, as well as the findings from recent research.   The book begins with a terrific example of leadership from Alan Mulally of Ford Motor Company.  It also features a new chapter on how to become a more effective devil's advocate.  In the 1st edition, I wrote about the potential benefits of devil's advocacy.   However, I've seen many firms struggle as people did not employ this technique effectively.  This chapter offers some advice as to how to play the role of devil's advocate in a constructive manner. 

The McDonald's Theory of Brainstorming

Jon Bell has a good post about brainstorming this week.  He outlines his "McDonald's Theory" of how to improve team brainstorming.  According to Bell, he has used an effective technique whenever folks at work are trying to decide where to go to lunch.  He will throw out the idea of going to McDonald's.  Everyone immediately recoils at the idea, and then they begin trying to come up with better ideas.  Bell argues that teams should approach brainstorming the same way.   Be willing to throw out some crazy ideas in the early going.  Get the creative juices flowing.  If nothing else, you have given the group a notion of what they don't want to do.   In some cases, the seemingly ridiculous idea will trigger some other quite interesting and useful notions. 

The McDonald's Theory is quite consistent with one of the mantras espoused by leading product design firm IDEO.  They argue that leaders must, "Encourage wild ideas" - particularly during the early stages of brainstorming.   I would simply add one key point to Bell's thoughts.  In his lunch example, people often reject the McDonald's suggestion outright. In a good team brainstorming session, people should resist rejecting those crazy early ideas.  Instead, they ought to adopt a key rule from improv comedy.  They ought to employ the "yes, and" approach to building on that idea.  Accept the idea, as crazy as it may be, but build on it.  Find some kernel in there that's useful and take the discussion from there.

SNL on the IRS Scandal - Hilarious!

Friday, May 17, 2013

Amy's Baking Company: From Bad to Worse

Gordon Ramsay recently featured a restaurant called "Amy's Baking Company" on his popular TV show, Kitchen Nightmares.  I have posted a trailer for the episode below.    Erik Sherman of CBS Moneywatch writes, "The clip actually does justice to the full episode. By the end, Ramsay has done something for the first time on the program: He walks away from the restaurant, declaring that the owners can neither accept criticism nor follow suggestions."   The company had itself a major public relations problem.  What did they do?   They took to social media to respond.  Things got worse.  Instead of accepting the criticism and trying to apologize and promise to make amends, they attacked their critics!   Then, when the public relations nightmare got worse, they claimed that their social media accounts had been hacked.  Amy's Baking Company then launched a new Facebook page.  What did they do?  They continued to attack their critics!  Now they have removed that Facebook page as well!   It's an unbelievable story.  What's the lesson?  Where do I begin?  Let's just say we could start with one piece of good advice when it comes to social media:  Take a deep breath.  Sit on that draft for awhile before you post it in a fit of anger or frustration.  Maybe even better... don't go on reality shows! 

Thursday, May 16, 2013

Clorox vs. P&G: How an Incumbent Deters Potential Entrants

Columbia Professor Rita McGrath recently tweeted a link to this interview of former P&G CEO A.G. Lafley, and she noted that it is a terrific example of competitive gamesmanship.  It sure is!  Here's what Lafley said, when asked to describe one of his failures at P&G:

"In the 1980s P&G tried to get into the bleach business. We had a differentiated and superior product—a color-safe low-temperature bleach. We created a brand called Vibrant. We went to test-market in Portland, Maine.  We thought the test market was so far from Oakland, California, where Clorox was headquartered, that maybe we could fly under the radar there. So we went in with what we thought was a winning launch plan: full retail distribution, heavy sampling and couponing, and major TV advertising. All designed to drive high consumer awareness and trial of a new bleach brand and a better bleach product.  Do you know what Clorox did? They gave every household in Portland, Maine, a free gallon of Clorox bleach—delivered to the front door. Game, set, match to Clorox. We’d already bought all the advertising. We’d spent most of the launch money on sampling and couponing. And nobody in Portland, Maine, was going to need bleach for several months. I think they even gave consumers a $1 off coupon for the next gallon. They basically sent us a message that said, “Don’t ever think about entering the bleach category.”

When teaching strategy, I talk to students about how incumbents can use various techniques to deter potential entrants.  In some cases, though, those moves to aggressively fight entrants can be very costly.  To cut prices substantially, for instance, can be very expensive.  If you are a large incumbent, and the entrant is quite small, a large price cut can be a costly way to try to keep a start-up out of your market.  Here, though, Clorox found a way to send a powerful SIGNAL that they were READY to fight aggressively, and that was enough to make P&G rethink their move into the bleach business.  The beauty of an effective signal, such as this one, is that it is far less expensive than ACTUALLY HAVING TO FIGHT THE WAR.   The neat thing about this story, of course, is also that Clorox was so good at scanning its environment that it was able to detect this move by P&G even at such an embryonic stage.  Great firms pay close attention to possible future entrants, and they have thought in advance about who might attack their position.  Clorox seems to have done so in this case.

Wednesday, May 15, 2013

I Can't Get No Satisfaction: The Rolling Stones & Ticket Prices

Rafi Mohammed has a good blog post at HBR about the Rolling Stones and their concert tour pricing strategy.  The Stones chose to price their tickets for this tour very high, and numerous reports indicate that they are discovering soft demand for those expensive seats.  What should they do now?  Should they simply cut their prices?   As Mohammed notes, brands often worry about simply slashing prices in the face of weaker-than-anticipated demand. They don't want to tarnish their brand in any way, or anger customers who previously paid full price.  How can the Rolling Stones proceed?   Mohammed offers numerous ideas, some stronger than others.  I found one particular tactic interesting and thought that I would share it.   Mohammed explains that companies can choose to add value to their product or service, while maintaining price, as opposed to offering a steep discount.  Here's his explanation: 

"The most common remedy to this malady is to maintain price but add value, so customers feel they're getting more for their money. Guitarist Keith Richards could casually drop in an interview that this may very well likely be the band's last tour (the "hedge" in the wording is intentional). Or, as the band did at its opening gig in L.A., they could bring in special guests such as Gwen Stefani and Keith Urban. These additions make the experience more memorable, so customers value it more." 

I don't agree with the point about promoting it as the last tour... music fans have heard that one all too often, only to discover that bands keep coming back.  However, the concept of adding value makes good sense, and the example of Stefani and Urban is a good one.   The Red Sox have done something quite similar this year, as demand has dropped for tickets at Fenway.  Rather than simply slash prices, they have added breaks on concessions to some tickets.  The concept applies to products as well.  You could add a small complementary product as a free gift to entice people to buy a particular good (think accessories along with an electronics item or a piece of apparel). 

Tuesday, May 14, 2013

Classic Mistake at a Job Interview

The Wall Street Journal recently interviewed Jennifer Boden, a human resources executive at Amazon.  They asked Boden a series of questions regarding Amazon's recruiting efforts.   Boden offered some keen insights.  I found this particular exchange with the interviewer worth stressing here:

WSJ: What tends to trip candidates up in interviews?

Ms. Boden: Most people will trip up when they focus on where they've been, the name, and they don't focus on what they've done. Or if they can't explain to us the process of how they delivered results.

Boden's observation confirms what I have seen many times over the years.  I often tell students to NOT make the interview a recitation of their resume.  The interviewer has read the resume!  He or she knows where you went to school, what your GPA is, where you interned in prior years, and what awards you have won.  What does the interviewer not know from looking at your resume?  That's the key question.  You have to talk about the major project you accomplished at your internship or the consulting report you put together for a client company as part of a business school course.  You should describe the major community service initiative you led at your university or the honors thesis research project that you completedAn interview should be focused on telling several stories of hard work, organization, leadership, and achievement.  Be prepared to talk about what you did, what you learned, and how you can apply those lessons to this organization.    

Friday, May 10, 2013

Feedback, Critique, and the Challenge vs. Failure Mindset

Stanford Professor Baba Shiv has done some fascinating research on the role of neurostructures related to motivation, emotion, and decision making.   Shiv argues that it's important to take the stress out of a situation if we want people to think creatively, engage in constructive dialogue and debate, and avoid becoming defensive.   By taking the stress out of a situation, we can help others move into a "challenge" mindset rather than a "failure" mindset. In other words, we can encourage them to view a critique as "an exciting challenge rather than a failure."  They become like the kid playing a videogame trying to conquer the next level of the game, rather than the person who recoils in the face of negative feedback. 

Shiv explains, for instance, that you should take someone on a walk, preferably in the morning, when giving them feedback.  Why?  The key is serotonin, a neurochemical that helps put us in a calm state, as opposed to a stressful state of mind.   Serotonin levels appear to be highest in the morning.  Moreover, going on a walk outdoors helps to elevate levels of serotonin.  Thus, this technique may help shift someone into a "challenge" mindset, which can make them less defensive about the feedback that you are going to provide. 

Wednesday, May 08, 2013

Amazon and Online Grocery

Forbes has an article titled, "Why Amazon is Happy Breaking Even With Online Grocery."  Author Tom Ryan argues that the firm doesn't plan to generate profit from the online grocery business, but simply to break even.  According to the article, based in party on research by RetailNet, "It’s all about helping Amazon attain the scale to support its ambition to build a national same-day delivery shipping model."   I don't quite understand this point about scale economies.  Amazon isn't going to be shipping books on the same truck as vegetables.  It is not likely to be using the same distribution center.  What is the scale advantage for other products from having an online grocery business?  

Later on, the article provides a much stronger argument for Amazon's entry into the online grocery business, a market where it has traditionally been very difficult to make money.   Quoting an analyst at RetailNet, Ryan writes, "Finally, Amazon views steady grocery delivery as a 'powerful way to drive frequent customer interaction,' and opens up avenues to entice consumers to shop for other products with each order."  Now we have the key rationale!   Consider why Target has expanded its grocery offerings.  It wants to build traffic in its stores.   Target knows that the margins are very slim on grocery items.  However, when guests come to buy groceries, they also buy apparel, home goods, and the like.  The firm can make healthy margins in those areas.   Target has learned that offering more grocery items brings people to its stores more often, and that foot traffic yields higher margin sales in other departments.  Amazon clearly believes that the same dynamic applies when people shop its website.  Engaging people to buy groceries will hopefully yield more sales of books, electronics, and other items that do produce better margins.   Moreover, Amazon may be able to use its strong predictive algorithms to help drive those kinds of profitable sales, based on a deep understanding of this online grocery customer.  

Tuesday, May 07, 2013

Bad Gatekeepers

Rob Cross, Andrew Hardagon, Salvatore Parise, and Robert Thomas have written a good column for the Wall Street Journal on the barriers to innovation at large companies.  Among other things, they argue that bad gatekeepers stifle innovation at many firms.  According to these scholars,

"A second problem arises when a handful of experts dominate a company's information and decision-making networks. Simply put, these are people to whom employees must turn to find the information they need to do their job properly or to get approval for projects.Very often, these gatekeepers hold their esteemed position for good reason -- they have technical expertise or other skills that have served the company well. But they may not be the best judges of new ideas, and their expertise in one area may in fact blind them to innovations in other areas."

How do you avoid this problem?  In my research, I have argued that senior executives need to occasionally circumvent the gatekeepers so as to access unfiltered information about key issues, threats, and opportunities facing the company.  Gatekeepers often serve a useful purpose, but they also impede information flow.  They do not have to have bad intentions to stifle innovation.  It simply may be the case that their own biases and predispositions may cloud their view on new ideas.  Moreover, it may be that they sense a different set of priorities among senior executives, and therefore, choose not to champion particular ideas that have bubbled up from below.   How do you circumvent the gatekeepers?   I would argue that you have to be quite intentional as well as transparent.  You need to find ways to open a direct line of communication with front-line employees, customers, and suppliers... while being transparent so that middle managers do not feel that you are "cutting them out of the loop."

Friday, May 03, 2013

J.C. Penney Apologizes. Now What?

J.C. Penney has issued a new advertisement apologizing to its customers for the mistakes that the firm made during the past year or so.   I have to commend the move.  It takes guts to come out with such a commercial, acknowledging serious merchandising/pricing errors.  However, customers needed to hear this message.  Moreover, the message is strong and effective not simply because of the apology, but because it includes an explicit invitation for customers to return.  What else is needed?  J.C. Penney needs to follow up this ad by explaining to customers what has changed.  What did they learn from these mistakes?  How have they rectified past errors?  What will be different when customers return?  The firm has to answer these questions to overcome the hesitation that some customers will have about returning to the stores.