Blank cheques: Driving innovation and breakthrough results

by | Sep 2, 2012

In the ‘60s, NASA declared Tang, a powdered breakfast drink, good enough to include in the rations of its astronauts. One would imagine such an endorsement would send sales volumes to stratospheric levels (no pun intended).

This isn’t quite what took place. In 2007, Kraft Foods decided it was time for a plan of action to give Tang a boost. The beverage was trapped in a cycle of underperformance.

Tang teams in key markets, such as Brazil, were approached by the parent company and asked for a plan of action, without worrying about resources or money. This was a blank cheque: the recipient given authority to dream big without worrying about cost.

The results speak for themselves. In the past five years, Tang doubled its sales outside the US and became a profitable, $1 billion name there. Kraft’s developing markets transformed from $6 billion worth to more than $15 billion in 2011.

How blank cheques work

Blank cheques are not permission to spend without limits or consequences. They need to be planned and considered, and teams need to define the resources they require and be in sync with the company’s overall strategy. They need to produce long-term, profitable growth and not just a short-term spike in sales.

Kraft’s developing markets strategy involves the big 5-10-10: five key categories (biscuits, chocolate), 10 power brands (Tang, Cadbury), and 10 priority markets (Brazil, India, China). Blank cheques must fit in with this strategy.

Let’s take a look at the five main steps in how blank cheques work.

1. Pick the best bets

Blank cheques are designed to fund big projects, so it is important these are chosen carefully. Kraft’s blank cheques have the following three Ms in mind: Momentum, where it is easier to build on a working business domain than fixing something that is wrong; Mine for gold, identify what is working and then scale up quickly when the reasons for the success become evident and Material – something that produces high impact with the least possible effort.

2. Pick the right team

The top levels of management should work closely with unit leaders to determine who would make the best recipient of a blank cheque. Team members selected do not have to be the most senior or experienced, it is most important for them to have the most potential.

3. Define goals and plans

Targets need to be established that are quantifiable, ambitious, with a deadline. At this stage, the team selected for the blank cheque are given a short time before the project commences, to make sure they do not become paralysed with fear and they need to submit a short proposal indicating where the resources will be allocated.

4. Kick off

The first reaction to a blank cheque is scepticism. People are used to fighting for every resource they need in corporate environments. This may then lead to fear: fear of failure and fear of the spotlight. These thoughts normally make way for empowered, enthusiastic reasoning as those selected realise they have results to deliver and time is of the essence.

5. Monitor results

Set milestones for the smaller victories expected and monitor them closely and regularly. Failing is part of the process. However, it is important to fail early, fail cheaply and learn fast.

Case study: Cadbury India

Kraft Foods acquired Cadbury in February 2010 and India quickly became one of the company’s prioritised markets. It had taken 40 years for Cadbury to be worth $400 million. Kraft offered Cadbury representatives in India a blank cheque to make Cadbury a half-billion dollar business by the end of the year.

The Indian team’s proposal called for expanding distribution, investing in sales and a greater marketing push behind Cadbury Dairy Milk. Dairy Milk had momentum, offered attractive margins and it was material because it was Cadbury’s biggest brand in the nation.

It took a few short days for the proposal to be drafted, and the team was granted $500 million.

The challenge saw the team innovate in several ways. When they evaluated distribution channels, they noticed some retailers kept Dairy Milk in ‘visicoolers’ – special display cases that kept the chocolate from melting in the Indian heat. Outlets with visicoolers had sales of more than 15 per cent than outlets that did not. The team doubled the number of visicooler outlets, from 20,000 to 40,000. They also doubled the number of permanent in-store displays, from 5,000 to 10,000. More than 2,000 towns were added to distribution, which saw the total number of outlets in India rise to 550,000.

The team also introduced a campaign called ‘Let’s have something sweet!’ This tapped into the Indian tradition of having something sweet before life’s important moments.

In 2010, Cadbury India had its best year to date, with 28 per cent revenue growth. This doubled the original sales targets and exceeded the $500 million blank cheque target. The team even had some change left over from the $500 million budget.

If you would like to find out more, we have uploaded a PDF detailing Kraft’s blank cheque strategy here.

Jeffrey Tobias

About Jeffrey Tobias

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well-known startups.

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Managing Director, The Strategy Group

Dr Tobias is an accomplished innovation consultant and entrepreneurship strategist, drawing expertise from the academic, entrepreneurial and corporate worlds. Jeffrey’s commercial and business experience is particularly focussed on lean startup, design thinking and leadership. Prior to The Strategy Group, Jeffrey was Cisco’s Global Lead for Innovation in the Internet Business Solutions Group helping Fortune Global 500 companies improve customer experience and grow revenue by transforming how they do business.
Jeffrey is a professor of innovation and entrepreneurship teaching MBA students at the Australian Graduate School of Business at the University of New South Wales. An active angel investor, Jeffrey is on the board of various well known startups. Jeffrey’s corporate background includes leading global innovation strategy at Cisco, working with large corporates such as Adobe, Westpac, Telstra, Woolworths, and Perpetual.

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