At the heart of the problem is the fact that most corporate cultures demand a focus on cost cutting, outsourcing, and process. While certainly not bad on their own, when metrics based on financial performance rule, the creative thinking and risk taking needed for innovation goes out the window. No one wants to be on the wrong end of the spreadsheet—especially not alone and especially not today.
For innovation to work, you need a culture where everyone from the top down feels like they have skin in the game—in other words, innovation is a team sport and the stakes are nothing less than survival of the fittest. Bilal learned this first hand at Kraft where he saw the company evolve from an internally focused silo-driven environment to one where people pooled their collective energy to achieve a common goal.
Together We Can Do Anything
The early nineties were remarkably like the business climate of today. Recession, rising costs, and an increasingly vocal consumer forced many companies, including Kraft, to take a hard look at how they operated. The company's cheese division in particular was having trouble getting out new products that could produce market share and revenue growth. To make matters worse, even when they had the right products, their launches were often so disjointed that they couldn't get traction in the marketplace. When the business won on volume, share and profit lost out, and when it won on profit, volume and share didn't line up. What we needed was a "trifecta" or superior outcomes on all three measures.
Success came when leadership recognized that if they wanted to change the results, they needed to change the culture. For us, that meant a complete structural change. While cheese was a core product for the company, not all the categories were performing equally. Processed and cream cheese was profitable, but natural cheese, the largest segment, was not. What's more, natural cheese was absorbing most of the overhead. In a complete departure from traditional organization, the CEO envisioned separate categories based on consumers, size, and importance to the business. The result was three fully integrated category businesses: Natural Cheese, Philadelphia Cream Cheese, and Processed Cheese. For the first time, each team had P&L responsibility and a sense of ownership in aggressively driving their business. This new team culture wasn't just a new structure for Kraft; it was a new way of thinking for all of us.
Building the Team
Initially it was a challenge to adjust to this holistic approach. The category leader in essence became the CEO for that business, supported by leaders of R&D, Marketing, Finance, Consumer Insight, Sales, and Brand management. We had to learn each other's language, whether it was scientific, marketing, or finance. We also had to broaden our view of what we were doing inside our own departments. R&D wasn't just developing a new natural cheese product. We were developing something that supported finance and was valuable enough for marketing and sales to capture profit and market share. Finance understood that if a project took three years to develop, but served the ultimate goal, it deserved protection in the budget. Customer Insight kept us on track so we weren't innovating what could be done—we were creating something that should be done because the customers wanted it. Working together in this way we brought three critical pieces of innovation into alignment: Who (the customer), What (the innovation) and Why (the business case). Ultimately it's this alignment—or what we call the sweet spot—that ensures success.
Working in Concert
Once the team was in place, our first task was to develop a strategic plan that identified a short list of challenges and objectives that best served the company. We had a three-year responsibility for growth and clear metrics on what success looked like. We were aiming for the trifecta—increased volume, profit, and market share. To get there, we had weekly meetings with a facilitator who gave us honest feedback on our progress and interaction. As a result we identified three objectives: reduce the cost of manufacturing, find new opportunities for product use, and innovate packaging to differentiate us from the competition and add value to the customer.
The cost of manufacturing was the biggest challenge. The overhead was killing us, siphoning off funds needed to create future growth. It made sense to consolidate and close plants and contract out manufacturing, but this was an emotionally charged topic. Working together however enabled us to develop innovative solutions that in many cases allowed employees to buy the plants and contract back to us.
The next challenge was finding new uses for natural cheese. Often it's not a new product that's needed but a new form that opens up opportunities for marketplace innovation. The answer was shredding. Most natural cheese came in block form, making it necessary to hand shred it. By pre-shredding the cheese we opened up a new world of convenience. Marketing had a field day. Pre-shredded cheese started showing up in salads, soups, casseroles, and pizzas, in home and commercial markets. Along with the new form came packaging innovations that included resealable pouches and a hanging display feature that made more efficient use of shelf space and increased product visibility.
The result of the team effort was the trifecta—volume, profits, and market share significantly increased. In 1995 Kraft owned 26.8 percent of the $1.6 billion natural cheese market. By the late 90s shredded cheese alone brought in over $2 billion for the company. Innovations are still being made in the shredded cheese category today, maximizing the investments made more than a decade ago. It happened because a team, working from a common goal, shared the risks, and the rewards. By making sure the category did well, everyone did well. As a team the group won the Chairman's Award which brought with it both recognition and monetary rewards. As individuals, each leader developed cross-functional skills that made him or her more effective and marketable as careers progressed.
Being Team Healthy
Kraft built a successful team culture by changing their structure, but, as Jane points out, sometimes all it takes is making sure you have the right people in the right positions who are willing and able to function together. "Whether you're changing structure, changing people, or both, people have to set aside politics, self-interest, and a silo mentality to focus on the real goal—success for everyone. When people are empowered, nurtured, and rewarded for working towards a common goal, individuals flourish. When people know their best chance of winning is to use everyone's strengths, innovation flourishes."
To have a healthy team culture, make sure:
• The CEO's vision is clear and that everyone personally understands the strategy needed to drive it
• Everyone knows what winning looks like: set goals people understand and can achieve. Small successes lead to big successes
• People can directly connect their contribution to the company's top-line growth
• All levels reward success and celebrate failures that lead to learning
• People are empowered to discuss and debate issues openly; feedback is used to advance performance, never to punish
• Team members support each other's initiatives
• Top management walks the talk; without support even the best teams falter
When your company is team healthy you've taken the first step in building a vibrant innovation culture. Innovation can't happen in a vacuum. Like raising a child it takes a village of dedicated, talented, empowered individuals working as one. As you implement an innovation team strategy in your company, remember that victories inspire and build buy-in. With each success more people will want to join the team and that's when innovation can take hold and lead to something we all want—sustainable growth.