Sanjay Khosla knows how to achieve massive revenue growth. And perhaps more importantly, he knows how to do so while lowering costs and raising profits.
As president of developing markets for Kraft Foods (now Mondelēz International) from 2007 to 2013, Khosla helped to increase revenue from $US5 billion to $US16 billion in five years while increasing cash flow, make Oreo and Tang billion-dollar brands in new markets, and acquire major international brands like Cadbury and Danone biscuits.
Today, in addition to sitting on the boards of Best Buy and Zoetis, he is a senior adviser with the Boston Consulting Group and a senior fellow at Northwestern University’s Kellogg School of Management. He’s consolidated his growth insights into the Focus7 model, which he explains in his new book “Fewer, Bigger, Bolder: From Mindless Expansion to Focused Growth,” cowritten with Kellogg professor Mohanbir Sawhney.
We’ve summarized the seven-step process, which Khosla tells us is meant to act as a repeating cycle.
1. Discovery: Search for growth.
Finding your opportunity to scale a company doesn’t need to be a complicated process. It’s often a simple insight that gets things rolling. Netflix was founded to address Blockbuster customers’ frustrations with late fees. Unilever’s Lipton Tea had a surge in sales when the division realised that it should compete against a wide variety of beverages and not just other tea brands.
When searching for growth opportunities, it’s important not to begin with a conclusion and search for evidence to support it. At Kraft, Khosla led a workshop initiative where he gathered the input of vendors, consultants, investment bankers, and consumers in six different markers so that they could figure out along the way what wasn’t working and where cash and resources should be flowing instead.
2. Strategy: Pick your bets.
Khosla says that you should consider your opportunities through eight lenses to determine which would be most valuable for your company, and then pick a few to focus on:
- Offerings — What products or services could you be presenting differently?
- Brands — How are you presenting these offerings? How can you extend a brand?
- Customers — What are their needs and desires?
- Partners — Should you collaborate rather than compete with a certain company’s service?
- Channels — How are your customers receiving products and interacting with your company?
- Markets — How do the cultures of your markets differ?
- Monetization — How can you make more money for employees and shareholders?
- Processes — How does your business operate? What is the resulting customer experience?
At Kraft, Khosla and his team decided to discontinue products in markets where they weren’t working and instead focus on five categories, 10 brands, and 10 markets.
3. Rallying cry: Rouse the troops.
Once you’ve determined where and how you’re going to grow, you’ll need to create a hook that will get your employees putting forth their best effort to make the vision a reality.
“The rallying cry can be a phrase, a colour, a number, an acronym, a symbol — something simple yet vivid that brings the strategy to life for everyone in the organisation,” Khosla and Sawhney write.
Ray Kroc bought McDonald’s in 1954 with the goal of turning it into a popular franchise, which of course he accomplished, and then some. To inspire his growing business, he used the acronym “QSC&V” — standing for quality, service, cleanliness, and value — and ingrained it into his employees’ memories. The acronym has never left McDonald’s official mission and values statement.
4. People: Unleash potential.
Next, you need to determine who will lead your initiative with passion and energy. If necessary, move money, people, and resources away from non-priorities to this project.
Khosla says that in “extraordinary cases” the most effective strategy you can take is giving a select team a blank check to achieve a very clearly defined goal within a specific timeframe. At Kraft, Khosla gave his Indian team the budget they asked for and set a deadline of just under 11 months to make Cadbury a half-billion-dollar business in India.
“At first, people thought we had lost our minds. But that fear turned to inspiration, once employees realised that we’d been given the freedom and resources to take our business to a new level,” Khosla writes.
By the end of the year, the team had surpassed its $US500 million goal and did so under budget.
Khosla says that it is necessary to keep a close eye on your teams and that you should be ready to end the project if checkpoint goals are missed.
5. Execution: Simplify and delegate.
To execute your plan effectively, cut bureaucracy by trimming layers in decision making.
Before Khosla joined Kraft, virtually no one in China was buying one of the company’s iconic products, the Oreo cookie. Khosla noticed that the root of this problem was management’s restrictions on R&D. The researchers quickly learned that Chinese consumers had different taste preferences from Westerners, but management prohibited product and marketing experimentation.
Instead of taking Oreos off the market in China, Khosla decided to simplify the decision-making process and gave the researchers and the rest of the China team the freedom to execute without constant executive approval. The China team developed a less-sweet cookie as well as other offerings tailored to Chinese consumers, like green tea-flavored creams.
Within six years, Oreo became the No. 1 cookie in the country, helping take Oreo revenues in developing markets from under $US200 million in 2006 to $US1 billion in 2012.
6. Organisation: Align and collaborate.
Khosla says that a common mistake he’s seen as a consultant is managers thinking that radical reorganization can be a solution to all problems, whether it’s slowed-down sales or a loss of market share. Often the solution is instead a reallocation of energy and resources, and reorganization should be undertaken with extreme caution.
He recommends opening up communication in your growing company by creating collaborative networks across teams that normally would not be in contact with each other but are working toward similar goals. For example, Microsoft has a Digital Leads community comprised of digital and social media experts representing different subsidiaries around the world who periodically discuss what has been working for them and what can benefit the company as a whole.
7. Metrics: Measure and communicate.
You need to measure what you’re trying to grow, keeping it as simple as possible. If you’re trying to grow the top line, focus on market share and revenue; if you’re trying to grow the bottom line, focus on cost reduction, productivity, and operational efficiency, Khosla writes.
And metrics shouldn’t be just a series of numbers — make them connect with your team via stories.
In October 2012, Khosla organised a conference entirely dedicated to telling stories about the year’s successes and failures. Rather than a series of PowerPoint presentations with charts and data, the gathered teams spent two and a half days finding creative ways to communicate their progress and setbacks, some even showing up on stage in costumes. Khosla writes that he was afraid the freedom he gave the teams could be taken too far, but it resulted in something far more memorable and instructive than another routine conference.
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