A decade ago, Kraft was facing a major challenge with Tang—the powdered breakfast drink that had long been one of its iconic brands. After rocketing to fame, literally, as a drink carried by U.S. astronauts in the 1960s, the brand had fallen into a cycle of underperformance. Around the globe, Tang’s managers launched a number of initiatives, but the innovations were either off target or amounted only to small steps. In Latin America, for example, where the volume of sales at least remained steady, Tang’s managers tried producing a bottled, ready-to-drink version, and even experimented with Tang yogurt. “We were actually losing focus on what the main attributes of the brand were delivering,” recalls Gustavo Abelenda, president of Kraft Latin America.
Yet even with its flattening performance, the business had materiality—almost $500 million in annual sales. The margins were good. And Tang had the potential to pick up momentum. The brand had recognition worldwide. Its powder technology surpassed rivals. And it was on trend—because it’s easy to transport and relies on water, Tang is one of the greenest beverages on the market. But how could Kraft re-ignite the old favorite? Kraft adopted a bold strategy for boosting sales back into the stratosphere: Tang leaders in key countries were told to dream big and not worry about resources. Mark a huge goal and go for it.
So they did—in ways we will describe below. The results were outstanding. In five years, Tang doubled sales and became a $1-billion brand—after taking nearly 50 years to reach the $500-million revenue mark.
The secret of Tang’s turnaround was what we call a Blank Check—a deal that freed the Tang team from the sorts of resource anxieties that could limit innovation. In effect, the deal said: Forget about the budget—if the Tang team comes up with a plan with a good chance to supercharge sustainable growth, Kraft will pay for it. This, of course, contradicts a line of business gospel: Live within your means. Managers have always been taught that they have to work with the limited resources available. Unfortunately, resource constraints limit more than plans. They also limit the creative potential of people.
We have found that if you take away the inhibitions imposed by budgets, people think differently—they address problems with a fresh eye, they become more entrepreneurial, their imaginations soar. Put another way, people lose their fear of failure.
Here’s what we propose: Under the right circumstances and within the strategic framework, leaders should focus on defining ambitious goals and leave it to their managers and their teams to ask for whatever resources they need to achieve these goals. When teams decide their own budgets, they act as owners—in our experience, it’s remarkable how often they are inspired to achieve outstanding results.
Kraft Developing Markets started issuing blank checks in 2007. Five years later, the company ran an assessment of how the initiatives had worked. Seventy percent had succeeded. But even taking into account the failures, the blank check initiatives far outperformed regular operations.
Blank checks are a metaphor for the freedom given a team to determine for itself the financial resources needed to meet agreed-upon goals within a defined time frame. Blank checks exhort teams to shoot for the moon, while giving them the rocket fuel they need to break free of the gravitational pull of predetermined budgets and business as usual. But blank checks are not a license to spend without limits, without guidelines, or without consequences. Teams have to define the resources they need—they must fill in the amount of the blank check. Further, teams that sign up for blank checks are held strictly accountable for quantifiable results.
Most critically, every blank check initiative needs to be consistent with the company’s overall business strategy. And it needs to have the potential to produce sustained, profitable growth.
How Blank Checks Work
To put the blank check idea to work, business leaders need to go through a systematic process that involves:
1. Picking the best bets. Blank checks are designed to fund big bets, so the bets have to be chosen carefully.
2. Selecting the team. Blank checks are ultimately big and bold bets on a few people, rooted in the faith that they have the potential, the passion, and the perseverance to transform their businesses.
3. Defining goals and plans. Once the leadership has selected a likely initiative and assembled the team that will receive the blank check, the business leaders need to define the goals they expect the team to achieve. Goals need to be quantified, aggressive, and time-bound.
In the case of Tang, for example, Kraft Developing Markets leadership issued a dramatic challenge: Double sales in five years. After Kraft bought Cadbury, the goal for India came with a harsh deadline: Make India a half-billion-dollar business by the end of the year—which meant accelerating the region’s total sales by 25 percent in ten months.
4. Kicking off the initiative. Once the business plan has been agreed upon, company leadership formally issues the check by approving the amount and transferring the first round of funding into an account that can be accessed by the team leaders.
5. Monitoring results. As the blank check initiative begins, it is important to set milestones for key deliverables and then to monitor them closely. We recommend quarterly milestones so that course corrections can be made quickly.
A blank check can be a powerful tool under the right circumstances, but it should be used selectively—it is not the operating mechanism for the company as a whole. Leaders need to keep running all other aspects of the business as the opportunities to use blank checks unfold.
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