The Nestle Noodle Example

At Corporate Bravery we highlight examples of bravery but we also highlight epic examples of fear-based failures. Lost in the details of major corporate blunders is the role that fear played in management decisions and how the culture of fear or elements of a fear-based culture contribute to major losses.

Fortune magazine's May 2016 provides one such example. While we don't typically think noodles when we think Nestle, the international conglomerate is in a lot of food lines beyond chocolate and sweet confections.

The Fortune article dives into the problems surrounding their Maggi line of Ramen Noodles sold in India and issues it had with the Indian version of the FDA. If I could sum the problems up in a few words I say that pride, dismissiveness and fear created a host of problems.

In the words of the Fortune author, "a violation punishable with a fine of up to $4,500 - had Nestle paid it, the story might have ended there." But they didn't and after a series of blunders ended up costing the company 1/2 billion dollars.

Nestle's culture was to avoid using the press because of fear resulting from a past experience. As the story states, "Chalk it up to a natural Swiss reserve, but Nestle's aloofness also has to do with the long shadow cast by the company's notorious baby formula scandal." A scandal from 1974 had informed the company approach some 40+ years later. The author continues by saying "Nestle executives lost their appetite for broad public engagement. It has taken a generation to overcome this feeling."

This aversion to engaging the press caused many problems with public perception.

"Why wasn't Nestle more proactive? Partly because , as a general rule, the Nestle way is to deal with authorities directly rather than through the press. To outsiders, Nestle appeared paralyzed - or worse, guilty. Rumors spread in the hinterlands that Maggi contained glass particles - a mix-up due to the linguistic similarity of the words "lead" and "glass" in Hindi."

What followed was a succession of fear-based decisions that led them to fighting regulators in the legal system. This was based on words used in a statement by regulators that the product was "unsafe & hazardous for human consumption."

"They felt the phrase exposed them to legal action. Millions of people in India ate Maggi. What was to stop anyone who had health problems from blaming Nestle's noodles?"

To recap, at this point Nestle has violated several key tenants of a brave organization. This includes aversion to media engagement, use of the legal system as a weapon, uncooperative approach to regulators. That is 3 of the 8 fear factors we outline in the book Corporate Bravery.

Ultimately the issue would get swept up into a larger national debate in India about multinationals. The case went all the way to the nation's high court where they would side with Nestle but not before fear-based decision making led to the loss of hundreds of millions of dollars in shareholder value, new competitors and a tarnished reputation among consumers.

What Morgan Spurlock Can Teach Us About Brave Business

I recently watched this Ted Talk by Morgan Spurlock that is an oldie but a goodie (released in 2013). For those of you that may not be familiar with Morgan he came to fame with his documentaries the most famous of which is Super Size Me. He parlayed that success into a series on A&E entitled 30 Days in which he walked in other people's shoes to provide a perspective on issues that were controversial at the moment.

What I like so much about his Ted Talk is how he exposed the fearful decision making in the Advertising industry. But this isn't a hit piece on that industry and the same decision making processes and cultures exist in any industry and in most organizations.

One of my favorite moments in the talk involves a clip at the 10 minute mark where he is meeting with the Ban deodorant marketing execs and asks them what the one word they would use to describe Ban and there is silence. Then the first answer is superior technology... for deodorant!

Some of the takeaways from the talk include:
1. The brands that were obviously brave and took a risk with Spurlock's movie were ones that cut out the middle man (advertising agency) because they understood that they may not have the brand's best interests at mind. This is a theme covered in my book Corporate Bravery.
2. Spurlock's summation of what he experienced with trying to make the movie was, "When you train your employees to be risk averse, then you train your whole company to be reward challenged."
3. It is remarkable that EMC won the rights for his Ted Talk with just over $7K. A small sum for the millions of views that this clip has experienced.

Weekly Brave Update - Chip Kelly, Campbell's Soup Edition

This week I am focused on examples of brave leadership in two industries that nearly all of us have experiences with - food and football.

First lets start with Chip Kelly & the Philadelphia Eagles. There was a great story this past week in Sports Illustrated about Chip's overhaul of the Eagles. While the jury is still out on the effectiveness of his complete overhaul of the team - one thing that is confirmed is Chip's bravery. In fact the title of the article is "Chip Kelly's fearless coaching mind."

Despite presiding over arguably two successful seasons that culminated in 10-6 records, he went 'all in' on his vision for success this past offseason. He let walk or traded his top 3 offensive weapons, including his starting quarterback, and made some big name free agent signings. Listening to sports talk radio during the free agency period you would think that everyone was bi-polar based on the daily reactions to Chip's moves.

You might be thinking 'why are we talking about sports on a business blog?' but coaching an organization like the Eagles is as complicated as being the CEO of any Fortune 500 company and we can find some strong lessons in Chip's mindset toward fearless management.

"Either Kelly is a forward-thinking genius, in the mold of Bill Walsh, Jimmy Johnson and Bill Belichick—or he’s just another coach who never should have left the college ranks. Whichever it is, the word bold doesn’t begin to define the transformation that Kelly has put his team through this off-season, his second since jumping from Oregon to the NFL."

Part of what makes his moves so bold is the fact that he has a very clear vision for his team and is confident in knowing the types of personnel he needs in that system to be successful.

“Certainly he has his strategy and the way he wants to build his team,” says Stephen Jones, executive vice president of the Cowboys. “You’ve got to respect him for that. He seems very convicted in how he wants to do his roster.” At every position he knows exactly what type of player he wants, from physical description to mental makeup."

This vision and understanding of who the organization is and complementing that with the right personnel is the hallmark of a truly brave organization. Another key aspect of corporate cultures that operate in a brave way instead of out of fear is that they are not easily influenced by the media. Despite a preponderance of critics of these moves Chip has been undaunted. Not in a way that is stubborn but in a way the conveys confidence in his strategy and what he wants to accomplish. According to the article,

"It’s impossible to say whether Kelly’s method will thrive long-term in the NFL, but he’s made all the right moves at every level of his career while naysayers shook their heads and said, That’s not the way things are done. He sets his own course and, so far, it’s been one that everyone else ends up following."

Secondly, there was a great in-depth look at the rapidly evolving US food industry in Fortune Magazine. The article provides a great summary of the wrenching changes that are accelerating in the way Americans buy food that is having massive implications on how food is grown, processed, marketed and sold.

Jeter's Example

Picture from the Derek Jeter Facebook page

On February 12, 2014 Derek Jeter announced his retirement after the coming season via a Facebook message that read almost as a love story between a great baseball player and the team, city and sport that gave him so much.  The well written announcement received accolades across the media landscape for its truly representative expression of who Derek Jeter is - its true authentic voice.  It was a rare gem in a world that has carefully crafted PR spun messages that have been written by PR firms and reviewed by 13 attorneys prior to submitting to the world.  It was a real breath of fresh air.  There was no fear behind the message.  No concerns about legacy and trying to shape, with a final message, about how history should view Derek Jeter.  Just a heartfelt expression of a full career and a desire to grow in different ways as a person.

Read the full statement here:

 

A Fearless Cinnamon Roll?

 If you are like me you probably thought Cinnabon was sleepy little chain of mall stores that was tethered to the retailing past but recent articles I read have completely changed my impression of Cinnabon.  It doesn't hurt that its CEO is a great story and a good example of corporate bravery.

Part of this change of mind is because of Cinnabon's Kat Cole.  She has a really cool history which you can read more about in this Entrepreneur article.  She has been active on Twitter and engages customers regularly and has a good grasp on who Cinnabon is and its customers and has a business plan to provide even more for its customers.

I recently read this Q and A in Restaurant News entitled "Cinnabon's President Outlines Growth Strategy" that gives a couple of great insights into how they have resisted allowing fear lead their decision making in two important areas - product innovation and media or public relations.

One of the key areas for growth for Cinnabon is licensing arrangements with consumer brands.  They have 72 such arrangements including Kellogg cereals, Pillsbury, and International Delights to name a few.  Creating partnerships with that many companies for that many consumer products comes with a lot of risks and many brands would never dream of possibly diluting their brand positioning in that way but Kat has some thoughts on that indicating they are not afraid to make a few mistakes and have made smart decisions to limit the possible downsides:

Some people ask questions about all the licensing and co-branding, and certainly we’re not perfect; we’ve made our mistakes. But we’ve had more wins than we have losses, and one of the things we’ve learned is that as long as we pick a partner that is typically No. 1 or No. 2 in their space, and they have the demonstrated ability to deliver a quality that exceeds consumers’ expectations of their product and meets consumers’ expectations of our brand, then it’s a smart move.

The other big question that continues to come up with Cinnabon is the current climate around products with so many calories and the growing concerns around what are called 'indulgent brands' and their impact on waistlines in American culture.  I like how she doesn't shy away from the identity of the brand.  She knows exactly what the brand communicates and doesn't dance around the company's identity:

What’s the future of indulgent brands? How do you justify a brand that’s so indulgent? And I say, look, first of all, we have to have a few agreements. One is that people are going to want to treat themselves. I think most people would agree, whether it’s with burgers and fries or cocktails or doughnuts or whatever it is. The next is that they’re going to want to do that with sweet things. And if you can agree on that, then that says that there’s a place in the market for indulgent brands — ice cream, cookies, cinnamon rolls, whatever it is. That has not changed, actually. Despite all the health trends, we have just had three of the best comp sales years we have had in a decade. Lots of people are buying cinnamon rolls, worldwide. However, what’s changed is they demand higher quality for that indulgence. And of course they want more flexibility in portion size.

She continues on to respond to a common thought process for those critical of indulgent brands:

We have tested whole grain, and you know what? A couple of people think it’s a good idea. A couple, but not enough to make an additional whole product innovation worth it.

A Classic Media Response

One of the eight factors of a fear culture is the media.  While I provide a lot more information related to each of the eight factors in my upcoming book I couldn't let this great example pass by without highlighting it.

You may have heard about the recent fire in a Tesla Model S.  While a car fire should not be a market moving occurrence, this one had a little more meaning.


The backstory;

Tesla has been on a roll lately both in the stock market and in the court of public opinion with the very successful launch of its Model S exceeding sales expectations and the future looking bright for the company as it tries to introduce new lower priced models that can be produced on a more massive scale.  However, the lingering question about the Tesla engineering has been the battery pack and what safety issues may be caused by a battery pack exploding.

This past week we finally found out and within minutes of the story hitting the wire (the embedded video has 3 million views and there are others with a simple Youtube search with similar view numbers) the stock plummeted losing over 10% of its value within a matter of a couple days.  The cry starting to build quickly towards a media statement on the accident but nothing came from Elon swift enough for those in the market and the stock continued to sink.

Then on Friday Elon broke the silence with a master stroke of genius regarding the incident.  He released a blog post detailing the accident along with the emergency response.  You can read the full response at this link but a few key aspects of the response:

1. Elon highlighted the safety features - onboard alert system directing the driver and occupants to exit the car and the firewalls between battery packs preventing the fire from reaching the cabin of the car.
2. Quarter inch armor plating around the battery pack compared to a thin metal sheet protecting the gas tank in a conventional automobile.
3. He contrasted the stats so far with that of a typical combustion engine with a conclusion that is 5 times safer in a Tesla than a typical gasoline powered engine.
4. Provided a copy of the email exchange with the customer where they reinforced that they were very pleased with how everything performed and that they were even more sold on the product

While there was a pressure to rush out a response (even highlighted by the Forbes article linked) to attempt to stem the tide of fear that was building around the company and its engineering they were methodical in gathering all the facts even if it took extra time.  They created a clear, detailed description which added credibility to the message, and then turned a potential negative into a massive selling opportunity by contrasting it with the competition - the traditional automobile.

In full disclosure I just purchased less than 100 shares of Tesla on Monday, but this has been a perfect example of a brave and courageous media response in a situation where fear could have dictated a rushed and inadequate response that would have only created more questions.  It came at a cost as the shares (as of this writing) have not recovered their pre-accident price but they have a long-term perspective not driven by the very fickle short-term whims of the market.