• Turnarounds and the Big Play

    by  • December 11, 2011 • Branding, Leadership, Marketing, Strategy

    chartbusterI’ve been in business a long time. If you don’t believe me, just look at my profile picture – that was taken a couple of years ago, (okay, maybe I’m being a bit generous on that timeline). My point is this: I’ve had my share of corporate turnarounds. Believe me, there’s nothing that can match the turnaround experience in teaching or seasoning a young manager. My most daunting resurrection was my first one – that of the Canadian unit of Jacobs Suchard, at the time called Nabob Foods. I was Nabob’s VP of Marketing, a 32 year-old disciple of an excellent turnaround CEO – a fellow by the name of Hugo Powell who eventually moved on to Interbrew (now Anheuser-Busch InBev) as CEO.

    Reversing a business in red ink toughens you. The principles of success become ingrained in your business DNA. Rule 1 of the turnaround is Grab the cash. The means to that end is quickly slashing sku’s and product lines to reduce inventories. Make your first cut your biggest cut is Rule 2 – that goes for business consolidation as well as headcount reduction. So now you’ve cut costs and freed up some cash. That’s far from the end of it. You have yet to strengthen the strategic health of the enterprise. Pull that off and you have fulfilled the Golden Rule of the turnaround.

    Sadly, most plans to improve sales and market share are based on doing a little more of the same and trying to do it better. Familiar examples are spending more on advertising, introducing new products or line extensions, expanding distribution. These risk-averse measures seldom work in turnaround situations. In fact, these moves often increase the bleeding because they are not transformational, not strategic, and not game-changing. Usually, one or two “big” plays make the difference. In the case of struggling Nabob Foods, two significant innovations facilitated the turnaround. New vacuum-packing technology drove sales and coffee-roasting advancements cut costs by 15%. Half of that cost savings went to the consumer – the other half went to our bottom line. Nabob Coffee’s market share accelerated to 25% and national leadership as arch rival Maxwell House worked to catch up. And guess what? While they played catch-up, we were already working on the next innovation. That strategy continued for years.

    A better-known and much larger example is the Apple turnaround. Steve Jobs snatched Apple from a funeral pyre with two big plays. Firstly, by facilitating all aspects of Apple’s hardware and pre-installing its own operating system, he secured sustainable competitive insularity. Secondly, he innovated with blockbuster products iMac and iPod.

    Opposite of the Apple way is an “old economy” player, the Campbell Soup Company. Campbell’s happens to be profitable but they’ve been trying to fix their weakening soup franchise for the past 15 years. Tell me, does the Wall Street Journal’s blurb on their latest foray into renewal sound conventional or transformational to you? “Campbell’s,” say WSJ, “is implementing more-efficient advertising and introducing tastier, more relevant products for today’s consumer, like a new line of Slow Kettle soups with more-sophisticated flavors. The turnaround will take time.” Damn right it will.

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    Formerlife: Jacobs Suchard CEO (Kraft, Nabob), Strategy Consultant. Afterlife: Palgrave Macmillan Author, Historical Novelist, Business Journalist

    2 Responses to Turnarounds and the Big Play

    1. December 13, 2011 at 3:50 am

      Thanks John, I have a client who are not exactly in a turn-around situation – at least they don’t think so – but they do need make a load of substantive changes. While they have NFP status, they are a large organization so the finance picture is significant. Your points make great sense.

      • John
        December 18, 2011 at 10:11 am

        There’s a lot to be said for the leadership ethic of “make change before you have to”. That’s what happens to those of us who suffered through the pain of red ink and the stress associated with survival. Best wishes for the holiday season, Alan.