A “Radical” Strategy Story for Nestlé
Solving for Strategic Atrophy
Takeaway: “The key issue is not that competitiveness is a flawed concept. It is that [the nature of it] has had the wrong focus.”
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How do you "radically change your pitch behavior"?
While asked of WPP leadership on a recent earnings call -- WPP has once again cut its growth outlook for the year, citing a "tough economic environment" -- the question has become the head-scratcher of the day for strategic management across brands, markets, industries and governments worldwide.
Walgreens (stock at a 27-year low, under new leadership), Teladoc Health (its stock once traded at $308/share and now hover around $7; under new leadership), Starbucks (facing a class-action lawsuit for misleading investors; under new leadership), Wipro (missed estimates; under new leadership), Nestlé (share price floating around levels last seen in 2017; under new leadership) and even Europe (the European Commission today releasing a report on “competitiveness”) are all trying to deal with the same Big Problem, which boils down to this:
Leadership search for balance in a wobbly world.
The only surprise is that everyone seems surprised, taken aback by accelerating, amplifying and disorienting change. So the new cliché on earnings calls is finding “strategic fit” to the mess, but the implied message on top of deteriorating EBITDA data and collapsing shareholder value is the big idea machine is broken, at least the commercialization part of it is, the top-line innovation part, which is the part that earns revenue and shifts the balance of power. Which is the part that really matters. Our solutions are not mind-stretching enough.
In the absence of original vision, novel action and courageous leadership, we study the study. We get lost trying to decide how to decide.
Dr. Seuss would explain it this way The Board: “You can get so confused that you'll start in to race down long wiggled roads at a break-necking pace and grind on for miles across weirdish wild space headed, I fear, toward a most useless place. The Waiting Place….”
Saabira Chaudhuri covered Nestle's move to "jettison its chief executive officer" for the Wall Street Journal. Her story two weeks ago (Nestlé CEO Abruptly Ousted as Board Seeks Better Cultural Fit) is a good read on understanding the personal professional risk in confusing operations from strategy, and the unmet market demand for original narratives from executive management, in business as well as government. She writes:
"On an investor call, the incoming CEO talked about how he wanted to improve market share and productivity, raising eyebrows among some analysts who said the ideas, while sound, weren’t in any way new. “While we absolutely understand that he will not have had much time to gather his thoughts, his priorities around market share and sales growth, investment in the business and productivity savings do not sound radical,” said RBC analyst James Edwardes Jones, after the call.
For the most part, we are either asking the wrong questions, or our questions are based on the wrong framework. Navigating the 'transition space' to compete differently takes creative, courageous leadership. That process starts by sweeping the old concepts out of the saddle. That comfortable mental furniture used as the centerpiece of product management — principles of branding, positioning, message and even “strategy” itself — are coming apart at the seams, unable to accommodate the seismic instability happening the world over. Existential crises abound and confound.
Says Mario Draghi, the former Italian prime minister and president of the European Central Bank, on the philosophy behind his roadmap to make Europe more competitive:
“For a long time, competitiveness has been a contentious issue for Europe. In 1994, the nobel-prize-to-be economist Paul Krugman called focusing on competitiveness a “dangerous obsession”. His argument was that long-term growth comes from raising productivity, which benefits everyone, rather than through trying to improve your relative position against others and capture their share of growth.
The approach we took to competitiveness in Europe seemed to prove his point. We pursued a deliberate strategy of trying to lower wage costs relative to each other – but the net effect was only to weaken our own domestic demand and undermine our model. But the key issue is not that competitiveness is a flawed concept. It is that Europe has had the wrong focus.
We are lacking a strategy for how to keep pace in an increasing cutthroat race for leadership in new technologies. We are lacking a strategy for how to shield our traditional industries from an un-level global playing field caused by asymmetries in regulations, subsidies and policies. We are lacking a strategy to ensure that we have the resources and inputs we need to fulfil our ambitions without increasing our dependencies.
“We need an EU that is fit for today’s and tomorrow’s world. And so what I am proposing in the report that the President of the Commission asked me to prepare is radical change, because that is what is needed to achieve transformation across an economy.”
More simply, an entire continent needs bigger, better and a strategically different kind of market integration.
Broad-Framing is Technique
The central insight behind broad-framing as a strategy-making technique is this: You never solve complexity. You bound it.
Roadmaps to the ‘next hundred billion in growth’ begin and end with better system vision. The process starts by understanding the advantage of becoming the keystone to lead an intentional reorganization of markets into unique economic systems (“ecosystems”), which are then managed as a single organism.
Superwinners aggregate.
For Nestlé, that broad-framing of a “radical” strategy story to increase shareholder value looks, roughly, like this::
