Kraft Foods’ 7 step model for focus and winning in emerging markets

Kraft

A few weeks ago, HSM, the company behind the upcoming 2011 World Innovation Forum in New York City hosted a conversation with Sanjay Khosla, President of Kraft Foods’ Developing Markets division. Mr. Khosla leads Kraft’s $13.6 billion businesses in developing markets, specifically the Asia Pacific; Central and Eastern Europe, Middle East and Africa; and Latin America regions. In the last three years, the size of Kraft Foods’ developing markets business has more than doubled with $13.6 billion in annual revenues. If Kraft Foods’ developing markets business was a standalone company, it would be one of the top 10 food companies on the planet. The company’s developing markets business realized nearly 13% revenue growth on average annually and reported operating income growth of more than 34% on average annually (2006 – 2010). During the hou long conversation, Mr. Khosla gave the attendees a rare look inside the company’s strategies in evaluating, and developing new and old products to suit emerging markets. 

He also shared how he put his obsession of “Winning through Focus” into practice to turn Kraft Foods’ underperforming developing markets business into a top tier performer. Mr. Khosla’s “Seven step model to drive growth and win through focus in emerging markets” are:

  1. Discovery: Find out what works
  2. Strategy: Focus through lenses
  3. Vision: Find a simple hook
  4. People: Unleash the Potential
  5. Execution: Clarify and delegate
  6. Organization: Build collaborative networks
  7. Metrics: Manage numbers and tell stories

Here are my notes from the conversation with Kraft Food’s Sanjay Khosla:

  • choose what NOT to do
  • focus on few and do well
  • choose space where company has competitive market
  • choose lenses
  • Kraft chose to focus on 5 categories, 10 brands, and 10 markets in emerging economies
  • 4 yrs ago they looked at acquiring Cadbury and Danone biscuits
  • both brands were doing well in emerging markets
  • Focus to unleash the potential of peop
  • Match company people with priorities
  • 2/3 of leaders in Kraft emerging markets businesses are new in roles
  • create talent & skills aligned with priorities
  • encourage risk-taking
  • Oreo tagline, ‘Twist, link, dunk’, resonates in America but not emerging markets
  • Oreo was flat in emerging markets in early 2000′s
  • Chinese consumers thought Oreo was too big and sweet
  • Kraft stuck with tagline, but made product less sweet, and smaller
  • developed more compact Oreo wafers to meet size demands in China
  • be clear on who is doing what
  • use past lessons and be future focused
  • look externally instead of internally for solutions
  • When Khosla joined Kraft 4 years back most decisions were still made in Chicago HQ
  • Now he focuses on finding leaders locally
  • make sure people can work virtually
  • Tang was American icon but not in emerging markets
  • Khosla set up global virtual small team to solve Tang low sales
  • Team came up with concept of “Tang makes water exciting”
  • Don’t become an innovation junkie
  • Focus on few important areas
  • Measure how business is doing
  • Focus on P&L, see how story is being told, celebrate local successes
  • Brazilian manager was awarded for new Tang packaging
  • Make sure you are steady before you push growth
  • Stay positive and learn from mistakes
  • Kraft initially wanted to have a billion dollar business in China because there were that many people in the country
  • don’t have growth for growth sake
  • Kraft scaled back and got business right before re-scaling up
  • focus model worked
  • create a buzz w/in business that ppl have freedom to dream and act
  • Oreo is #1 biscuit in China
  • Discovery stage is important to communicate goals to key stakeholders
  • You can’t sit in office somewhere and determine strategy
  • In discovery meetings sometimes senior managers encourage dissent
  • Co-development of strategy between senior and other managers is important
  • Oreo team started in social media a few years ago
  • Peer pressure of getting the whole company involved in social media is strong
  • Focus is to uniformly roll out social media efforts
  • In China, Kraft was spreading too thin and expanding too fast
  • Acquiring Danone helped move re-structuring up faster 6-12 months instead of longer
  • Dannone had a better foothold in China
  • To avoid resistance everyone has to own the solution to counter resistance
  • Keep metrics simple so it’s understandable
  • Allow people autonomy
  • In India Kraft wanted Cadbury team to focus on where they can win
  • Khosla gave Indian managers “blank chack” autonomy to make decisions provided they didn’t dilute brand
  • Brand grew 27% in 1 year for Cadbury Dairy Milk
  • “Blank check” method makes managers more commercially responsible
  • Kraft will invest $200m in Brazil
  • too many participants in a discovery phase is not good
  • get an external moderator for discovery phase
  • a little bit of tension and irreverence is good for phase
  • try not to have too many senior managers
  • in discovery phase, if anyone thinks things are fine, there’s a problem
  • In connected world, employees share sentiment easily
  • Focus on the few things you can win at and do them well
  • Unleash your people