Fewer, Bigger, Bolder
By Sanjay Khosla and Mohanbir Sawhney
(Portfolio, 260 pages, $32.95)
One of the prime operating philosophies for major companies these days is to expand and do more. But when Sanjay Khosla became president of Kraft Developing Markets, he set out with the opposite in mind: To do less. By focusing on fewer products, he was betting he could build the company's revenue and profit more effectively than through the mindless expansion he finds common to most corporations.
His strategy was called 5-10-10. The company had dozens of product categories and more than 150 brands in over 60 countries. He mobilized efforts around five strong categories, 10 power brands, and 10 key markets. The other areas weren't shut down, but money and other resources were to be focused on 5-10-10.
It worked. After six years, developing markets revenue more than tripled, to $16-billion from $5-billion, with double-digit organic growth (from within existing operations, rather than through mergers or acquisitions). Profitability increased by 50 per cent. And cash flow improved.
China, a long-time money pit, completely turned around, with revenue climbing to over $1-billion from $150-million, and healthy margins installed. Oreo cookies, which were struggling outside North America, were picked as a power brand and revenue climbed to more than $1-billion from $200-million, also with healthy margins. It became the No. 1 cookie in China where it had been previously ignored. Tang, another highlighted brand, which had taken almost 50 years to climb to $500-million in revenue in developing markets, doubled to more than $1-billion.
The lesson, he argues in a book co-written with Mohanbir Sawhney, a professor at Northwestern University's Kellogg School of Management, is that companies need to resist the seduction of more and opt for the wisdom of less. Instinctively seeking more tends to strangle companies in complexity – more systems, more reports, more rules, more people, and less focus. As companies expand, each move seems logical, but if there is insufficient focus, the results are often disappointing. "Capabilities get stretched beyond the comfort zone. Complexity increases faster than revenues," they write in Fewer, Bigger, Bolder.
They argue instead:
Do less. Make fewer bets but make them bigger, focusing on where you can win.
Be bold. Distort your current operating procedures to focus resources on the highest-potential initiatives – your equivalent of Kraft's 5-10-10.
Simplify. Keep costs low. Cut complexity from your plans, organization, and processes.
Execute. Keep testing, learning, and adjusting.
Unleash people. Give staff the resources and authority to make your focus work.
It's not easy. It's hard to divert resources from areas where some or even many corporate executives have a strong stake to bet on just a few areas for expansion. Mr. Khosla didn't issue an edict to get his program in motion, but held workshops with the company's regional leaders at six locations around the world, adding in vendors, consultants, investment bankers and consumers. The workshops allowed participants to discuss the undiscussables and move toward a framework for focus.
This is not just a Kraft story, by the way. The authors – Mr. Khosla is now a consultant and corporate director – have seen similar approaches work effectively in other companies (and watched untrammelled growth cause problems for many organizations). A key moment for Apple was when Steve Jobs returned to the company as leader and flamboyantly swept off the table many of the products then being marketed, insisting on just a few high-tech goodies. Cisco went through a period of breathtaking expansion – adding 400 new products in 2009 – but results were sour and CEO John Chambers had to retreat, simplifying the bloated company.
Of course, doing less also means doing more in some areas. Resources can be diverted to the better options for growth. Money and talent are finite, so the company must allocate wisely. After Kraft launched 5-10-10, Mr. Khosla visited only the top 10 markets and spent virtually all his energy on the top 10 brands. Of course, even then he had to pick and choose, but he didn't waste time on areas that may have pulled in significant revenue but weren't seen as key generators of future growth.
The authors stress the importance of unleashing creativity within the areas of focus. Mr. Khosla liked to give out blank cheques to help free teams from resource anxiety, dream big – shoot for the moon – and break free of the gravitational pull of business as usual. The regional leaders for Tang were told they had a blank cheque to double the business in five years. "But blank cheques 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 cheque," the authors write.
This is a fascinating book, with many real-life stories from the authors' experience, a sensible approach to growth, and details on how to make the idea of fewer, bigger, bolder come alive in your company.
POSTSCRIPT
Get your sales advice from some Canadians. UnSelling (John Wiley, 234 pages, $30) by Scott Stratten and Alison Kramer, the Oakville, Ont.-based duo who produce The UnPodcast and claim they were put on the Earth to remind the world that not all Canadians are polite, shows how to develop loyal clients, not just one-time buyers. Patrick Tinney, a veteran sales and marketing executive now living in Peterborough, Ont., explains how to improve your sales negotiation strategy in Unlocking Yes (Centroidmarketing.com, 202 pages, $24.99).
Lawrence Cunningham, a professor at George Washington University and long-time chronicler of the investment philosophy of billionaire Warren Buffett, looks at the empire he created and its future in Berkshire Beyond Buffett (Columbia Business School, 307 pages, $29.95).
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column, Balance. E-mail Harvey Schachter
Harvey Schachter