CONTRIBUTOR / Sanjay Khosla
SENIOR FELLOW, KELLOGG MARKETS AND CUSTOMERS INITIATIVE (KMCI), KELLOGG SCHOOL OF MANAGEMENT
SENIOR ADVISOR, BOSTON CONSULTING GROUP
KELLOGG SCHOOL OF MANAGEMENT / Consumer Products
Giving leaders a blank check to pursue big goals is a powerful display of trust. It shows that you believe they will do the right thing, take ownership, and be accountable for the results. Such intelligent risk taking can lead to a remarkable return on investment. For example, sales of Oreos outside the U.S. increased from $200 million to more than a billion dollars in six years as a result of a blank check. But not all experiments will succeed. In fact, failure is often part of the process that ultimately leads to success.
Blank checks is all about trust: trusting leaders to do the right thing, to take ownership, and yet be accountable for results.
How do these blank checks really work? There are three guidelines. The first is, you select the leaders whom you really trust (and the teams) and give them a really big target, let them dream big. And these targets have to be achieved in a very short period of time.
The second is, the leader and the team puts together a short business proposal, asking for the resources that would be needed along with clear deliverables and milestones.
And the third guideline is to nurture these teams, make sure that they have an environment where they can succeed, and then monitor progress against milestones.
BUMPER: Case Study: Oreo
Let’s take an example; let’s take the case of Oreo. Now, Oreo is the number one biscuit in the world by far. Oreo is over 100 years old. But for 95 years, Oreo was spectacularly unsuccessful outside the U.S. — and certainly not for a lack of trying.
So, we called the Oreo team, and we said, “We know currently it’s not doing well in countries like China and Indonesia and various other parts of the world — it’s not doing well. Just figure out what do you want to do, what resources do you want to use, take a blank check, and go.”
And then they realized, why is it that it’s not selling so well in various countries around the world, like China? And they found that, very often, the American Oreo was too sweet, too big, the price points were too different.
And they started experimenting, then, with a number of different products, like Green Tea Oreo, wafers. Half these products failed.
And that was okay. That was really okay because the whole idea here was to give them freedom within the framework of keeping the Oreo essence core around the world but then getting local products, which delight local consumers.
As a result of that blank check, Oreo went from a revenue of about 200 million dollars outside the U.S. to over a billion dollars in revenue in six years. More importantly, gross margins outside the U.S. were very healthy.
BUMPER: Three Lessons from Blank Checks
So, what are the lessons that one can learn from giving blank checks? And again, this is equally applicable to small companies and large companies.
The first is, you get people, you trust people, to do the right thing, and you make them act as owners. The second is that this signal of trust goes all over the organization, of empowerment, but yet they are accountable for results.
And the third is not all blank checks succeed; very often, they fail because if everything is going well, something’s horribly wrong. The important part there is, if a blank check experiment fails, not to penalize the leader or the teams, provided they’ve learned the lessons from the project.
That, again, is a signal of trust — trusting people always to do the right thing and making sure, then, you celebrate not only successes but also celebrate and learning from failures.
Over years of experimenting with blank checks, we found that, in companies, you have a choice: you can either be cozy, or you can trust people and get them to fly.