How to Achieve Focused Growth
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Marketing Strategy Jul 7, 2014

How to Achieve Focused Growth

An inter­view with San­jay Khosla and Mohan Sawh­ney about their new book, Few­er, Big­ger, Bolder.

Based on insights from

Sanjay Khosla

Mohanbir S. Sawhney

Listening: An Interview with Sanjay Khosla and Mohan Sawhney

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A grow­ing com­pa­ny is a healthy com­pa­ny. New prod­ucts, new mar­kets, new cus­tomers, new acqui­si­tions: These are good things, right? In their new book, Few­er, Big­ger, Bold­er, San­jay Khosla, a senior fel­low with the Kel­logg Mar­kets and Cus­tomers Ini­tia­tive, and Mohan Sawh­ney, a clin­i­cal pro­fes­sor of mar­ket­ing at the Kel­logg School, argue that it’s not just growth but qual­i­ty growth that mat­ters to a company’s health. Qual­i­ty growth is sus­tain­able and focused — and requires mak­ing painful cuts to some teams while hand­ing blank checks to others.

How can your busi­ness achieve focused growth? San­jay and Mohan sat down with Kel­logg Insight to dis­cuss the sev­en-part process Focus Sev­en” that they devel­op in their book. (This inter­view has been edit­ed for length and clar­i­ty. For a longer ver­sion of our con­ver­sa­tion, check out the accom­pa­ny­ing pod­cast.) Kel­logg Insight: San­jay, you spent years in charge of devel­op­ing mar­kets for Kraft Foods. Can you explain some of the dif­fi­cul­ties Kraft was expe­ri­enc­ing when you joined in 2007?

San­jay Khosla: Kraft has always had some phe­nom­e­nal brands built over gen­er­a­tions and some phe­nom­e­nal tal­ent and peo­ple. One of the rea­sons it was under­per­form­ing at that stage was it was plant­i­ng too many flags all over the world — prob­a­bly doing too much and spread­ing itself too thin.

KI: Mohan, your expe­ri­ence as a con­sul­tant to both estab­lished firms and start-ups led you to a sim­i­lar con­clu­sion about the impor­tance of focus­ing growth efforts.

Mohan Sawh­ney: I saw a very sim­i­lar man­i­fes­ta­tion of that prob­lem with tech­nol­o­gy com­pa­nies, and that is what we call SKU pro­lif­er­a­tion, or prod­uct pro­lif­er­a­tion. A small com­pa­ny like Skull­can­dy that makes head­phones has 1,100 mod­els. A com­pa­ny like Microsoft cre­ates lit­er­al­ly tens of thou­sands of units of prod­ucts and ser­vices. A com­pa­ny like Cis­co goes into 40-plus adja­cent mar­kets all at once — and then they start to stumble.

So the prob­lem is of com­plex­i­ty and lack of focus. I found that a start-up com­pa­ny can get unfo­cused before it has even a sin­gle prod­uct because there are so many oppor­tu­ni­ties before it.

KI: You advise com­pa­nies: Put your efforts where you have the best chance of win­ning big.” How does this work? Upper man­age­ment is being asked to pre­dict the future. That can’t be easy.

Khosla: The impor­tant part is to take a few bets. One exam­ple is Oreo, the num­ber-one bis­cuit in the world. It’s 100 years old, but for 95 years, it was spec­tac­u­lar­ly unsuc­cess­ful out­side the US. We decid­ed to take a bet on it. We got a few peo­ple around the world work­ing as a col­lab­o­ra­tive net­work and took a $200 mil­lion busi­ness and made it a bil­lion dol­lar busi­ness in five years.

Sawh­ney: It isn’t just pre­dic­tion that man­age­ment needs to do. There are some score­cards. We point out in our book what we call the three M’s that can help to pri­or­i­tize where you’re going to place your bets. Those three M’s are:

1) Momen­tum. That’s where you’re get­ting trac­tion in the mar­ket­place, where you’re get­ting mar­ket accep­tance. You’re find­ing that cus­tomers are respond­ing to your val­ue proposition.

2) Mar­gin. Can we make mon­ey? How prof­itable is this oppor­tu­ni­ty? Is it above margins?

3) Mate­ri­al­i­ty. How big can this be for the com­pa­ny? If it’s a very inter­est­ing and high­ly prof­itable busi­ness, but it’s real­ly small, it can only be two per­cent of your over­all rev­enues — that’s not very material.

KI: Anoth­er phrase in your book involves tap­ping into a firm’s human resources. You write that the same ideas that apply to strat­e­gy, apply to peo­ple: Bet on few­er peo­ple, bet big­ger on them and be bold in let­ting them run with their dreams.” Whom do you bet on and how do you set these employ­ees up for success?

Khosla: One of the phras­es we use is giv­ing blank checks to peo­ple.” I’ll give you a sto­ry of a col­league of mine, George Zogh­bi, who was run­ning a glob­al food ser­vice and dairy com­pa­ny called Fonter­ra. We gave him a blank check. We gave him com­plete free­dom to do what he wanted.

The nor­mal response to a blank check ini­tial­ly is skep­ti­cism. It then goes to fear and pan­ic. You also real­ize, if you don’t focus on a few things and do them well, you’re not going to achieve any­thing in the timeframe.

George did a phe­nom­e­nal job. He met some impos­si­ble num­bers in a short peri­od of time. He fell at times, learned from it, got up and moved on. He has recent­ly been appoint­ed vice chair­man of Kraft.

Sawh­ney: One thing I would say is that these are not always the peo­ple who are in the obvi­ous places in your orga­ni­za­tion. So this is actu­al­ly a key task of lead­er­ship, to find the peo­ple who are emerg­ing as stars. There is a fair bit of human judg­ment involved in sit­ting face to face with some­body and say­ing, that’s a per­son I’m going to take a bet on. Ever since I became famil­iar with Sanjay’s use of blank checks, I’ve been using that with the com­pa­ny that I’ve been advising.

KI: As com­pa­nies focus on new mar­kets, par­tic­u­lar­ly inter­na­tion­al ones, you stress the need to go glo­cal.” What do you mean by this?

Khosla: It’s very sim­ple. It’s a ques­tion of, how do you get the bal­ance right between hope­less­ly local and mind­less­ly glob­al? Take the case of Kraft Chi­na. For years, Kraft invest­ed a lot of mon­ey and got a lot of skills and peo­ple, but it was caught in a vicious cycle of low growth, low gross mar­gins, declin­ing mar­ket shares, and mak­ing no mon­ey. More impor­tant­ly, there was no hope of mak­ing money.

So the approach that we took was, be very clear about what need­ed to be done local­ly in Chi­na — things like sales, mar­ket acti­va­tion, local prod­uct devel­op­ment — while lever­ag­ing the tremen­dous exper­tise in terms of pro­cure­ment, man­u­fac­tur­ing, and R&D of a com­pa­ny like Kraft.

Sawh­ney: What San­jay meant by mind­less­ly local” is basi­cal­ly hav­ing a bunch of sub­sidiaries that are oper­at­ing pret­ty much inde­pen­dent­ly, where you lose the ben­e­fits of scale. But on the oth­er hand, if you’re hope­less­ly glob­al” then what you have is one-size-fits-all. And that’s in fact the prob­lem that Kraft had in Chi­na and the Oreo cook­ies that San­jay was talk­ing about. They were not right for the Chi­nese mar­ket. They were too sweet, they were too big, they were too expen­sive, but you wouldn’t know that. You had to go to the vil­lages and the streets of Bei­jing and Shang­hai to fig­ure out what the Chi­nese con­sumer want­ed. It had to be the local tal­ents. So it’s real­ly a combination.

Khosla: And then in terms of exe­cu­tion, you need enough nim­ble­ness and agili­ty and flex­i­bil­i­ty to keep learn­ing as you’re doing. So in the case of Oreo, the team came up with things like green tea Oreo and wafer Oreo. Some of these new prod­ucts failed, and that’s fine, so long as you quick­ly learn and move on. But at the same time there was some great tech­nol­o­gy in terms of R&D and pro­cess­ing cocoa that was then used in all these mar­kets around the world to great advantage.

So the basic pieces of the Focus Sev­en mod­el stand: get strat­e­gy clear, cocre­ate and align peo­ple around the world behind a sim­ple idea, be very clear about what the pri­or­i­ties are, unleash the poten­tial pow­er of peo­ple to all the teams, and then mea­sure progress.

Sawh­ney: Lead­er­ship just needs to do three things: find the right peo­ple, give them the right resources, and get the hell out of the way.

Featured Faculty

Sanjay Khosla

Adjunct Professor of Executive Education

Mohanbir S. Sawhney

Robert R. McCormick Tribune Foundation Clinical Professor of Technology

About the Research

Khosla, Sanjay and Mohanbir Sawhney. Fewer, Bigger, Bolder. New York, NY: Portfolio / Penguin, 2014.

Read the original

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