LEADERSHIP: SANJAY KHOSLA
19 Mar, 2014 16:00 IST
"Growth Comes From Consistency"
Khosla believes that profit isn’t necessarily a function of innovation. Being boringly consistent in your core offering can help you carve a niche in new markets just the same
Q : How did you apply your 7-step framework at Kraft?
A: In 2007, when I joined, Kraft had not been meeting its targets in developing markets. No one had got even close. So, the first step was discovery. It is a formal process of workshops, where you get different people coming up to discover the goal. It is led by diversity — not just of age and gender — but diversity in thoughts, too.
One of the biggest learnings I have had in my career is to get the correct definition of the market. This is very important in the first phase of discovery where you decide what and where you want your product to be.
That leads us to the second step of the framework, which is strategy. How do you make your choices? Where do you want to focus on? At Kraft, we had 150-odd brands, and the idea was to focus on a few. It is a 3M model — you make choices based on momentum, margins and materials. So, if you take the case of India, Kraft had tried for years and years, but had completely failed. While it had potential momentum, it had no margins at that stage, and it was certainly not material.
Q : What do you mean by material?
A: When you say material, there is a time element — whether it can make a material impact within 12 months or three years or five years. In India, I could see that it would not be material even in five years. But, more importantly, India did not have a sustainable business model. Momentum, you could argue that with a billion people and a growing per capita you should have been able to get it.
So, during step two — strategy — India was actually de-prioritised from the top ten markets of focus for Kraft. This, you can imagine, was controversial. When I went to the Kraft board and said India was not priority, everybody was like ‘what are you talking about’, ‘look at the population’, ‘everyone is going there’, etc. But that does not mean you give up on India. Then you have to take specific action. In Kraft’s case, it was to close India operations and set up a separate team to examine how do you get into India — organically or inorganically.
I will give you another example of this. One of Kraft’s biggest as well as powerful and iconic brands is Macaroni & Cheese. When we applied 3M, we got: momentum — there was a question mark; margin — question mark; material — 1, 3 or 5 years. So, we de-prioritised it. The important part is that you do a few things but you do them bigger and bolder. What is the implication of this? It is massive resource allocation — not minor stuff.
This leads us to step three — vision or a rallying cry. Interestingly, from discovery to strategy to rallying cry, you go through the steps very quickly, and then spend most of your time in execution. It is 10 per cent strategy and 90 per cent execution. Basically, I call it KKH (Karna Kya Hai), which is often asked when you do paralysis of analysis.
Coming to the fourth step — people. When we bought Cadbury in February 2010, we made a statement, which a lot of people thought was foolish. I was looking at 165 countries, and we said we will make one leadership team in 100 days. And the reason we did that was because we wanted to get rid of uncertainties and get on to synergies because I had a huge target. The Kraft people who bought Cadbury assumed that they would get all the jobs, but we said it was going to be best of the lot. It was not going to be one way or the other. And, therefore, the people together brought a lot of change — though it was traumatic all over the world.
The model was really quite simple — command and control. Everyone was basically empowered. It was the simple business of getting the people and unleashing their potential — all focused on KKH.
Q : What was that about blank cheques you gave to people?
A: The idea was you give people you trust a target, and then, you give them a blank cheque. Tell them they can put whatever amount they think they will want to achieve the target and then give them the liberty to do what they feel is right. It works as a charm as you become accountable and then you tend to focus. And that’s exactly what happened with Cadbury India. Later, we applied the same concept to other developing markets. The annual target for Cadbury in 2010 was quite ambitious. It was to take the business from $400 million to $460 million — 15 per cent is good.
Q : So, what are the reactions to blank cheques at first? Do they believe you or they think it is just a feel-good thing?
A: Yes, they completely think that it is a feel-good thing. Or worse, they think the person giving the blank cheque lives in Holland and must be smoking something. But the interesting part is that they return some of the money saying that they did not spend it. You know why? Because they get more accountable, they become more responsible. By the way, many of my blank cheques have failed miserably. But blank cheque is not money.
If the business model is suspicious, then it is not approved. So, people try and avoid that. And that curtails mindless expansion.
The sixth step— organisation — is about building collaborative networks. It is about looking outward and inward. And finally, in metrics, keep things simple, so, people can understand. I learnt that lesson very early in HUL, when one of my general managers tore down my presentation and said what matters is sales, profits and cash. Keep it simple and to just five points or under.
Q : How did the 7-step model lead to Oreo?
A: Oreo is 100 years old. It is the number one biscuit in the world. But for 95 years, it was tremendously unsuccessful outside the US…and yet, Oreo came up as a very big deal in the discovery workshops. Most people said, ‘even though it has failed, we think this has ‘dum’. In terms of momentum potentially, maybe not today, but someday. Margin yes. Material yes. Essentially what was done was a series of experiments that started with a simple strategy on Oreo — penning down on one piece of paper what is the essence of Oreo, and where you want to do what, what will be done globally and what will be done locally. A team of 5-6 people around the world were working on it and the myth that the corporate headquarter has to be the centre of power was destroyed. Then, they got into a series of execution, and frankly, it was all that was done. I took Oreo all over the world. It went to China, Australia and France.
The pace of execution was so fast that sometimes we had to go slow to go fast.
Q : While going local in a country, how do you decide that a brand is not going against the grain of the brand in doing things?
A: In France, when we were about to launch Oreo, the French argued that positioning of Oreo will be different because the French are different. The French were told not to do it because we were determined to either launch it the way it is or with the focus of glocal.
The thing that was done globally was procurement, targeting and technology. Local was in term of flavours. What we also realised was that in building a lot of flavours, a lot of new managers were spending most of their time doing that. So, we had to put a stop and focus more on building the core. A lot of growth and profitability comes from being boringly consistent. We kept learning.
There is a series of rules you put to use while building a brand with a soul. When you introduce something new, you must add something to the mother, otherwise, you will put your name in all kinds of things that do not make sense.
(This story was published in BW | Businessworld Issue Dated 07-04-2014)