Business

The Gut Squeeze Strategy Fails

The Gut Squeeze Strategy Fails

By on Feb 26, 2019 in Business | 0 comments

By David Aaker Published on February 25, 2019 On Friday, February 22, 2019 the stock of Kraft Heinz, the firm put together in mid-2015 by 3G, a Brazilian private equity group, fell over 25% in a single day to around $35 which was 44% of its initial price and 36% of its highest price in late 2017. The business plan of 3G Capital to “Buy Squeeze Repeat,” as Fortune once described it, dramatically and visibly failed. By ruthlessly reducing headcount and operational expenses to improve operating margins, profits and, most important, per-share earnings, 3G guts brand-building assets and budgets, and squeezes growth initiatives and investments. The predictable results at Kraft Heinz were short-term financial gains at the expense of long-term health and performance. It was always surprising that Warren Buffet, the very symbol of long-term investing would be involved in this 3G venture. The 3G methods are extreme. During the first 15 months after buying Kraft, for example, the employee count went from 46,600 to 41,000 and overhead went from 18.1% to 11.1%. Just days after the purchase, ten top executives were fired (presumably replaced with 3G cost cutters), company planes were gone, everyone flew coach–all in the name of creating a cost-reduction-first culture. All programs and people were placed on zero-based budgeting systems with a “justify what you are worth” ongoing evaluation. It is hard for brand-building efforts to sustain programs that yield long-term benefits to withstand this myopic focus on cost. The sharp stock decline was caused in part by a $16 billion brand evaluation write-off that undoubtedly, when it was created, did not take into account the fact that a cost-first strategy eventually runs out of costs to cut and, in the meantime, damages brands instead of keeping them energized and relevant.  Of course, Kraft Heinz is living in a world where people are turning away from packaged goods to eat “fresh.” However, the other large packaged food firms are not suffering like Kraft Heinz. General Mills during that same period saw its stock fall from 56 to 47 and Mondelez actually had a stock increase from 35 to 48. The good news is that other firms with strong brands are a bit less threatened by...

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Director of Getting S@#t Done

Director of Getting S@#t Done

By on Jul 25, 2018 in Business | 0 comments

Published on March 27, 2017 Featured in: Leadership & Management, Operations, Productivity  By Ryan Holmes FollowRyan Holmes CEO at Hootsuite This is the story of a $200 t-shirt … and company systems gone terribly wrong. Earlier this year, an employee wanted to send a shirt with our logo to a customer as a gift. There was nothing special about this particular shirt. It was an ordinary, 100%-cotton crew neck. But by the time this employee got approval — factoring in his own time and everyone else’s up the org chart who had to weigh in to validate the request — the cost of this t-shirt had ballooned to $200 … if not more. Systems and processes serve an important role in any organization. This is something I’ve realized as my company, a social media management platform, has scaled from a few dozen to nearly 1,000 employees. With that many moving parts, you can’t operate efficiently without a playbook. Systems ensure that projects get done, quality is maintained and there are no surprises. But it’s important to distinguish between good systems and bad systems. Good systems make things easier. Bad systems do exactly the opposite. They make everyone’s lives harder. The problem is that bad systems often end up in a kind of corporate Bermuda Triangle — no one really monitors them; worse, one is empowered to change them when the need arises. That’s how we ended up with our t-shirt snafu earlier this year. In our early days, we decided managers needed to approve requests for company swag: the cost of all those t-shirts and plush toys adds up, after all. But as we grew, this blanket policy became more cumbersome. In the case of the $200 t-shirt, our senior director of technology, Noel, had to spend several days chasing down his manager — our CTO — to get a rubber stamp on a request for a $15 gift. Finding our Czar of Bad Systems Fortunately, Noel wouldn’t let the issue die. He spent a day or two chasing down the right people in finance and marketing. In the end, he persuaded them to ditch formal approvals in favor of trusting that everyone would use their own discretion when...

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Thank you!

Thank you!

By on May 11, 2017 in Business | 0 comments

When someone donates to your cause or purchases from your company online, there is only one appropriate email response, Thank you! Not thank you and will you give us more, or thank you and don’t you also want this, just thank you. When you add an and, but, or won’t you, the client’s previous action is negated and they don’t feel appreciated. If you want to create a regular customer, or Patrons, follow up in a month, inquire about how they feel about their purchase or the outcome of the cause they supported. You’ll have a client...

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