CHAPTER 4

Key To Winning

 

When Vice Chairman Ed Shirley took over Procter & Gamble’s (P&G) vast global grooming and beauty group, the umbrella statement he agreed on with his senior managers was very straightforward: Jumpstart the group’s stagnant performance by identifying ways to accelerate growth in rapidly expanding developing markets where results had been very inconsistent.

Even a quick look at the group’s sales showed a patchwork quilt of penetration: very little in Latin America and Central and Eastern Europe; very strong in China, but almost none in India and Southeast Asia. Ed could see that P&G was overlooking great opportunities in some of the fastest growing regions of the world. But Ed also learned that several past initiatives to pick up the pace in developing countries had resulted in costly failures—several P&G brands just couldn’t gain traction and make money in what had appeared to be fertile markets for growth. So what were the key issues? What was standing in P&G’s way, and what could Ed and his team do differently? Ed was hoping that a TTW-like process would point the way.

Keeping the Blenders Whirring

When James D. White arrived as the new CEO of Jamba Juice in December 2008, the iconic smoothies and juice company had racked up losses for the year of $149 million. To James, the first day on the job felt like he’d been strapped into an amusement park ride, the Tower of Terror, where “the bottom disappears beneath you and you drop into freefall.” He knew there were a lot of data and facts to sort through. And he also knew strong emotions and beliefs had to be heard but filtered. And he and his team had very little time to identify key issues, assess the implications, and develop an action plan to present to a very edgy and apprehensive board of directors. If the TTW process didn’t deliver, Jamba’s famed in-store blenders wouldn’t be whirring much longer.

As we saw in Chapter 3, the initial steps in TTW start with a large amount of facts and data that define what we know—what’s our situation? Then by using our umbrella statement to help determine what’s important, we start our convergent thinking process that filters out peripheral or irrelevant data. If we are working on an issue with a group or team, this will be a very iterative process—lots of discussion and dialogue. (How important is competitor Smoothie King’s growth rate? Or the number of Jamba smoothie flavors that failed? Or how many P&G deodorant brands are available in global markets?) All this discussion gives us great alignment.

With the right umbrella statement—one that’s clear, concise, and focused and that captures the urgency of the issue—and with our five principles for guidance—the identification of what’s important points us toward fact-based findings. These are some nonjudgmental observations that are supported by the important data. (Jamba stores in strip malls do better than stand-alone units. Franchised Jamba stores have higher profits than company-owned stores. P&G shampoos succeed more often in Southeast Asia than in Latin America.)

These findings represent chunks of data that can help frame the next phase of TTW—seeking insights and then conclusions, or a statement of key issues.

As Figure 4.1 illustrates, finding insights and conclusions is the final phase of thinking and focusing in the TTW process.

FIGURE 4.1.   SEEKING INSIGHTS.

Here’s the way Ed Shirley describes it. As he looked at the findings from the situation assessment for the grooming and beauty group, he noticed that all of P&G’s developing country initiatives were taken by individual brands and product categories—shampoo went to India; deodorant went to Mexico; cosmetics to the Philippines; body wash to Argentina. None of the efforts was coordinated either by P&G at the country level or by brands across product categories.

“Brazil is one of the largest deodorant markets in the world,” Ed says. “When our deodorant team went in there alone and built a plan to grow our market share, our big well-established competitor there, Unilever, shifted money from one of their other categories and squashed our deodorant team like a bug. And 12 to 18 months later, they came home with their tails between their legs.”

The findings showed Ed and his team that this uncoordinated approach was often repeated, always with the same result. As they puzzled over these outcomes, the insight came: P&G wasn’t leveraging a key competitive strength and advantage—the company’s considerable scale.

“One of my fundamental principles is that the whole should always be greater than the sum of its parts. And we were acting as a sum of the parts company,” says Ed.

And with this insight, one of Ed’s key issues emerged: In what countries and with what brands could P&G bring its scale to bear to bolster its odds for success. As we’ll see in Chapter 5, moving from key issues to governing statements, strategies, and action plans also takes a very disciplined approach.

Facing a Critical Juncture

At Jamba, soon after James White arrived, he scheduled an off-site retreat with his top dozen executives to introduce them to the TTW process and come up with a rescue plan for the company. This would be an action learning event—the Jamba management team would learn TTW by applying it real time to Jamba’s very pressing problems.

As the starting point for answering the What do we know? question at the top of the hourglass, the team was given “prework” to complete before the retreat began. In addition to gathering facts and data about their functions and areas of responsibility, they were asked to identify recent changes they had observed, both inside and outside the company, additional changes they anticipated in the near future, and the challenges or opportunities those changes represented.

At the retreat, agreeing and aligning on their umbrella statement turned out to be quick: We are at a critical juncture in the life of this company. If we do not stabilize our financial condition and enhance our revenue, the business will fail.

Team members discussed and evaluated the facts, data, and prework, making their way through the second question, What is most important? Surprisingly, especially to James, this analysis was something that had not been done previously. “I don’t think the prior management had a real understanding of Jamba’s strengths and weaknesses, our marketplace opportunities and threats,” says James. After the SWOT assessment was completed, the team focused on key issues and agreed on five:

1. Business model: company-owned versus franchise. Jamba’s focus on company-owned stores was adversely impacting its balance sheet. Many company-owned stores were underperforming, raising several subissues: Should Jamba close them, even if they were new? Did Jamba need a new business model that focused on franchised rather than company-owned stores? If so, how would Jamba ensure the quality of the Jamba brand?

2. Cash/liquidity. Jamba had negative cash flow. Costs were already cut by 15 percent, but it wasn’t enough. Jamba needed to find additional savings in stores without compromising quality or the customer experience. Jamba also needed to find cost-cutting opportunities at headquarters without jeopardizing its ability to function or damaging employee morale.

3. Right-sizing. Prior management had an oversized vision of Jamba as the “Starbucks of smoothies.” It foresaw a potential for 10,000 stores nationwide. But with the Great Recession in full swing, a more realistic, fact-based assessment suggested just over a quarter of that number—somewhere around 2,500. Could Jamba thrive with a smaller footprint? Were there other formats that would expand growth prospects?

4. Smoothies or smoothies plus? Should Jamba focus on smoothies, its core business, or should it offer a wider menu—breakfast, lunch, and dinner options, and warm beverages, especially in winter months?

5. Licensing. With the strong Jamba brand, the company had an opportunity to establish licensing agreements that would place Jamba products in grocery and convenience stores across the country. Could Jamba do this while maintaining high standards and without adversely affecting franchisees?

It was a very productive retreat for James and the Jamba team. As we’ll see in Chapter 5, it set the stage for a multiyear turnaround action plan.

Insights from Careful Analysis—Not Always A Falling Apple

It’s worth looking at the role of insights in formulating key issues and in helping to set a direction for the rest of the TTW process. Often when we think of insights, we imagine an Isaac Newton type of event. From a falling apple hitting someone on the head comes the discovery of gravity. While insights can strike suddenly, usually they come from careful analysis of data and understanding of the dynamics that frame a specific issue.

In marketing, for instance, insights shed light on why people behave the way they do and what choices they make. They tap into an underlying need, or desire, or belief, or value system. They usually are simple, but nonetheless, profound.

Professor Theodore Levitt, the Harvard Business School guru, gives a great example: People don’t want quarter-inch drills. They want quarter-inch holes.

An insight is that Aha! moment, the revelation of an undiscovered truth that often was “hiding in plain sight.” Once you see it, you can’t “unsee” it, nor can you imagine why it hadn’t occurred to you before. Insights lead us to discover new ways to think about our issues and businesses.

For example, it was a simple but profound insight that enabled Oscar Mayer, the hot dog and cold cuts giant, to tap into a fast growing area of the otherwise stagnant processed meat market.

The company was trying to figure out how to make bologna more appealing to mothers so they would pack more bologna sandwiches into their children’s lunchboxes, when they realized it wasn’t that mothers didn’t like bologna. These time-challenged mothers of children in elementary schools really disliked fixing lunches. It was one more thing they had to do in the morning when they were already too busy. And their kids weren’t too thrilled with what they prepared, which was another disincentive. Kids found mom’s lunches boringly repetitive and short on creativity.

And it was from that insight that the convenient, appealing time-saving Lunchables brand was born. With literally hundreds of varieties and permutations, the brand has grown into a very profitable billion-dollar bonanza for Oscar Mayer, now going on more than 20 years.

For Keurig, the insight was understanding how many people wanted to make a single cup of good coffee, conveniently and quickly. These habitual coffee drinkers were generally dissatisfied with other alternatives. They considered granulated instant coffee, or coffee purchased from vending machines, to be of inferior quality. Other good coffee options such as going out to a specialty shop like Starbucks, were too expensive and often inaccessible during the workday or late at night. By offering consumers a wide range of high-quality coffees and other hot and cold drinks, ready in less than a minute, with no prep or clean up, at prices averaging about 50 cents per cup, Keurig has become the global leader in single-cup brewed beverages.

Daryl Brewster, CEO of CECP (formerly the Committee Encouraging Corporate Philanthropy), describes an insight at a critical moment for Kraft’s food business in Mexico that not only prevented a sales loss of $70 million in that country, but also resulted in the creation of what is now more than a half-billion dollar business in the United States.

At the time, Daryl was head in the United States and Canada of Kraft’s $6 billion snack, confection, cereal, beverage, and pet food portfolio, which included such power brands as Oreo and Chips Ahoy! cookies; LifeSavers candy; Post cereals; and Tang and Crystal Light beverages. Just two weeks after Daryl assumed added responsibility for Kraft’s Mexican business, the government imposed a tax that more than doubled the cost of fructose—the key ingredient in their most profitable products—Tang, Kool-Aid, and Crystal Light. A quick estimate put the likely hit at $100 million.

As a long-time believer in TTW, Daryl knew the importance of putting together a solid situation assessment that would inform their strategies and actions. Absent the assessment, the leadership team assumed that price increases, lobbying the government for a change, and asking for budget relief from Kraft headquarters were the only real options.

The situation assessment and findings wound up showing otherwise. Due to their popularity with less affluent Mexican consumers, the beverage impact would be significant, but likely closer to about $70 million as repriced products became less affordable.

And as Daryl and the team looked at the situation assessment, affordability was glaringly critical. The team immediately decided on strategies to lower costs across the board with a focus on reducing cost of goods by reformulating from fructose to sugar and on initiating lobbying activities with the government.

But more was needed, which is when the insight hit. In addition to making the beverages available in their normal pack sizes in jars and pouches, they would pack them in single-serve sachets, something not tried in Mexico or in any other market in Kraft’s global operations. The insight was masterful on many levels. The lower price of single-serves would make them affordable to almost all consumers except the very lowest economic group. Its format would make single-serves convenient to use with bottled water that’s popular in Mexico due to tainted water issues. The sachets small size (12 flavors of single-serves could be racked on an 8-by-12-inch rack) meant they would gain increased acceptance in the cramped food stalls (tiendas) so popular in Mexico. And even powerful competitors like Coke and Pepsi would view single-serves as complementary to their bottled water businesses.

The product was a great hit in Mexico and within a year, Crystal Light single-serves were introduced in the United States where within three years it was a $300 million business. Daryl went on to use TTW throughout his entire portfolio and led his business to record top and bottom line growth. He followed his success at Kraft by taking over the troubled Krispy Kreme Doughnuts company where he reversed financial declines, reduced debt, and expanded operations globally.

Actionable Insights Lead to Key Issues

Of course, all insights must be actionable for them to be worthwhile. They must assist us in forming our key issues, or conclusions, that address our umbrella statements. It’s coming up with solid key issues that enable us to move forward with the TTW process.

And we know our key issues are solid if they tie together the most important findings and persuasively define a major problem or diagnose a significant issue. They also should point to a course of action that addresses threats and weaknesses as well as opportunities and strengths.

It’s also important that we stay focused on the vital few—seven to ten key issues may make us feel like we’re covering all contingencies. But research and experience show that seven to ten are far too many. Here is where we employ the 90-10 rule to pare down our key issues to a more effective maximum of four to six.

So What? Implications: What to Do and Why

Armed with key issues and conclusions, the next step is to drive for implications. Our implications move us toward the action phase of TTW. They explain what we should do and why in a way that’s clear and actionable. Plus they are memorable and motivating, capturing insights that will significantly affect our issues. Let’s look at just a couple of examples:

Key issue. Our largest competitor has purchased low-cost production capability and is driving down prices in the category.

Implication. A timely upgrade of our production capability isn’t possible, so we have to cut our input and labor costs in order to remain competitive.

Key issue. Farmers’ markets are the most rapidly growing sector in food retailing.

Implication. Unless we build a distribution infrastructure, we can’t serve farmers’ markets and we miss out on great sales growth.

Implications are the bridge to the start of the action phase—the forming of visions, governing statements, and goals that we take up in Chapter 5.

The step-by-step approach for moving from umbrella statements to key issues and conclusions and implications is detailed in the Key Issues exercises at the end of this chapter.

Chapter Summary

  Looking at the top half of the hourglass, there is a clear line of connection from the initial What Do We Know step to the transition point of So What, the implications for action. The line links data and facts to our findings, which in turn lead to key issues and ultimately to our implications.

  Insights are important for revealing undiscovered truths that often are hiding in plain sight. Once we see the truth, we can’t “unsee” it. With insights, we discover new ways to think about our issues.

  Key issues, or conclusions, tie related findings together, establishing those that are most important and pointing to a course of action.

  Implications flow directly from key issues. They explain what to do and why. They are clear and actionable and also must be memorable and motivating.

Chapter 4 Exercises

Insights and Implications

What insights have we gained and what are their implications?

Mastering Key Issues

Begin by asking:

  What did I learn from my analysis?

  Can I clearly communicate the information in a way that others will understand? How should I best articulate this?

  Am I missing anything? People? The organization? The marketplace? The community?

  Which are most important? Rank the top five in order of importance based on relevance, ability to act on, criticality, and urgency.

Exercise: Key Issues

This exercise can be done at the individual or group level.

1. Review the information collected in the situation assessment (seven Cs framework, SWOT, and SCA) and identify the key issues.

2. Think about the following:

  What conclusions can I draw?

  What high-level actions do I need to consider?

3. For each key issue, create a corresponding implication statement.

4. Combine risk and action in your statement.

5. Review your statement to assure clarity and achieve alignment.

The deliverable is a draft of key issues and implications.

Exercise: Key Issues
(Recommended for larger group or team)

Create a wall of issues by asking everyone to individually reflect on the situation assessment, up to and including the SWOT/SCA. Ask each participant to consider what he or she has learned from the situation assessment. Ask all participants to identify what they believe the key issues to be and write them all down on sticky notes, one issue per note.

After the participants are finished, ask them to bring their collection of notes to the front of the room and place them on flip chart paper (see Figure 4.2). You will have a lot of sticky notes. Ask the group to read through all identified issues for clarification and then remove duplicates.

FIGURE 4.2.   WALL OF ISSUES.

Sort issues into categories by working with the group to identify common themes among those that remain. At the end of the process, you will probably have about five to seven categories that when labeled and summarized will be used to draft key issue statements (see Figure 4.3).

FIGURE 4.3.   SORTED WALL OF KEY ISSUES.

Organizational Assessment

Use the following table as a checklist for identifying TTW principles and practices. This will help you to better understand where you and your team need to focus your energies. To get an idea where you believe your organization stands, read through each statement and jot down a rating:

When you have completed the checklist and scoring, review the individual items. Look for those items on which you have scored 3 and below, and think about the following:

  What do I believe is driving the score?

  What do I need to stop, start, or continue doing?

  What do I hope the result will be?