Kellogg’s: Institutionalize Change or Change Will Interfere With Success
Change happens all the time. Today, it is almost impossible to keep aware of everything that changes around your brand. Customer behaviors change. Attitudes change. Competition changes. Competitive strategies change. Technology changes. Devices change. Distribution channels change.
To deal with change, some organizations implement change initiatives. A change initiative has a program, an HR course, a set of slides, a video, a script, an app, a dictionary, a metric (or series of metrics), and, in many cases, a slew of young, junior consultants who take up a lot of office space.
Sometimes, when there is new leadership, there is a change initiative: new person, new ideas. If you happen to work in a place where the president or the functional chief changes at a rate of every two years, you can expect to have frequent change initiatives.
This is not the meaning of institutionalizing change.
Can you make your brand-business accepting of change? Ca you lead the organization into corporate flexibility with discipline? At the same time, can you put a stop to change-for-the-sake-of-change?
In a rapidly, uncertain, changing world, brand teams need to be flexible. Brand teams need to be able to make changes when necessary. The biggest challenge for a brand-business is ensuring that brand teams – and the brand-business – are open to change and that the organizational environment is conducive to change.
In order for change to be genuine and not superficial, cultural change initiatives must be consistently reinforced, widely communicated, supported from the top of the organization and realistic for the organization’s circumstances at that time. Change must be rooted in reality and not due to the whims of a new executive or eager HR department. Brand-businesses must create an organizational atmosphere that is conducive to change.
For example, a manufacturing company decided that everyone in the organization should be creative. A change initiative required every individual to participate. Asking people to be creative is a fruitless task: some people have this characteristic, others do not. It is unrealistic to expect everyone to be a Steve Jobs. The project was a failure. Everyone returned to business as usual.
Brands are dynamic. Brands are active promises about what they will do for the customer. Brands do not do well in closed, apathetic and lethargic organizations. Brands need continuous renewal. Brands must live in environments which are conducive to change and creativity. This does not mean everyone is a capable of change or creativity. It does means that the atmosphere is accepting of change and the creativity to deal with change
Brands do not naturally live and die by some brand life cycle. A brand can live forever, but only if it’s properly managed. This means the teams must be aware and alert to marketplace changes and anticipatory ideas for satisfying customer needs. Without the continuous renewal of innovation or renovation, the brand will stagnate. The business will stagnate. Sustainable growth requires building a continuous renewal cycle.
This brings us to Kellogg’s – pre-W.K. Kellogg spin-off.
In case you missed the news, on October 2, 2023, Kellogg’s broke away from its historical, authentic, provenance spinning off cereals as a standalone (shall we say stand away from me) company. Kellanova is the new home of Pop-Tarts, Pringle’s, Rice Krispy Treats and Cheez-its: the snack brand enterprise. Legacy cereal brands – now a new company, W. K. Kellogg – are, as The Wall Street Journal said, “somebody else’s problem.”
Did this rejection of cereals have to occur? Instead of revitalizing its cereal brands, Kellogg’s gave in to declining cereal-eating behaviors, sales and profits. Kellogg’s pushed those cereal brands away from the more desirable and more profitable snack food brands. Much of the negative performance of the cereal brands was due to self-inflicted wounds.
Rather than blame themselves, reporting indicates that executives believed the major problems in cereal were a factory fire and a worker strike. However, there are data, trends and balance sheets that show how cereal was on a decline for some time. Kellogg’s was aware of the problems in the late 1990s. Breakfast habits changed. Concerns about too much sugar increased. Today, price points are at extraordinary heights – such as $8 a box offerings. Once again, store-brands have stepped up to the proverbial breakfast bowl with high quality products that taste the same or better than past brand name generics.
There was some inherent arrogance at Kellogg’s fueling the belief that consumers would continue to eat sugared cereals for the rest of time. There was also the belief that allowed Kellogg’s to keep on keeping on with the same ideas that were successful in the past. Doing what worked in the past when the world around you has changed is massive brand mismanagement supported by hubris.
The Wall Street Journal indicates that, for example, Kellogg’s did not take the time or spend the money keeping Special K and Kashi, its two “good-for-you” brands up-to-date relative to what defines healthy. Customer perceptions about what exactly defines good-for-you change frequently. Unfortunately, this avoidance of updating a brand while staying true to its brand essence was on ongoing behavior with Kellogg’s. In 2016, reports indicated the same depressing decline in Kellogg’s cereal brands.
It is no surprise then that Kellogg’s finds itself with brands that are failing to generate profitability. Without innovation, renovation and awareness of altered customer states, brands tend to wither.
It is not only Kellogg executives who have lost interest in Kellogg’s cereal brands. The cereal stand-alone company has been losing share ever since October 3rd, 2023. Worse yet, in order to implement changes to the W.K. Kellogg supply chain, the new cereal company will need to take on significant debt.
Turns out, Kellanova’s high snack food prices makes the newly formed company look great. But, because of the high prices, snack volumes declined 7.4% for the last quarter. High prices for boxes of cereals caused a 13.4% decline in volume at new company WK Kellogg. Using high price rather than innovation, renovation and designing actions for managing change is a formula for failure. Kellanova may soon see the same declines as cereals unless there is ongoing innovation and renovation.
What can brand-businesses do to become conducive to change? Here are three actions for institutionalizing change within the organization.
- Focus on strategic dexterity
Strategic dexterity is the ability to manage both planning and flexibility. Strategic dexterity is being able to create and activate prearranged, agreed strategies while being open to and able to evolve when disruptions happen or when business, environmental, political, geographical circumstances alter the landscape.
Critical to strategic dexterity is being strategically sensitive. Strategic sensitivity means having an informed grasp of the potential scenarios and areas for possible disruption. Strategic dexterity allows brand-businesses to be resolute and responsive, disciplined and dexterous at the same time.
Kellogg’s seemed to behave in a strategically insensitive manner. Being strategically insensitive means disregarding the changing world. This means not having the insight to understand what possible changes may occur. Not paying attention to customers, their needs, their problems or their beliefs and behaviors. Such insensitivity is equal to not being up-to-date. Strategic insensitivity insulates a brand-business from innovation and renovation. As for Kellogg’s, strategic insensitivity allowed executives to continue believing and acting as if what worked in the past will continue to work.
- Implement Internal Marketing
Organizational alignment and commitment around the possibility of change are essential. A brand-business’ people are its first priority. Employees must come first. Without internal marketing, a brand-business runs the risk of acquiescence rather than adherence. Internal marketing ensures that everyone is together in agreement and alliance.
Internal marketing 1) informs everyone and keeps them informed; 2) defines success so everyone knows what winning looks like; 3) provides educational opportunities so everyone can perform to expectations and experience attitude change; 4) recognizes and rewards genuine progress by celebrating the small successes; and 5) educates employees as to what this change means to them and their positions.
- Ensure organizational diversity in thinking
Corporations put a great deal of effort into diversity programs and education. These are designed to produce a fair, safe and representative workplace that is sensitive to different cultures, genders and ethnicities. On the other hand, not enough effort is placed behind diverse ways of thinking. Many organizational cultures tend to hire those who fit in.
A consensus-driven culture usually does not hire iconoclastic individuals. And, iconoclastic individuals may feel uncomfortable when they are forced to conform or forced to struggle daily in breaking down barriers to new ideas and change. Cultures that are analytic tend not to want lateral thinkers. Creative cultures have trouble assimilating linear thinkers. If you are a technology-dependent company, it makes sense to hire people who are comfortable and expert with technology. If you are a financial company, it makes sense to hire those who know finance, spreadsheets, accounting and so forth. In the 1990’s, enterprises that wanted innovative ideas created “skunk works” crews that had separate offices and locations with teams that were not integrated into the mainstream of the business. IBM did this with the ThinkPad group. Today, some organizations, recognizing the need for creativity, hire consultants to educate employees into creativity.
Different perspectives allow for more creative productive thoughts that lead to actions. Hiring for skills, as well as for diverse thinking, benefits brands and the businesses that own them. For example, synthesis is a skill that is essential to forming relevant, actionable information from reams of data. Synthesis creates ideas formed from reviewing different disciplines, generating something new from existing knowledge. Brand-businesses should hire brand people who may have skills outside of an MBA or a statistics background. Brands need lateral thinkers as well as linear thinkers. Institutionalizing change relies in part on having people who think differently on board.
Change happens. The only predictable characteristic of change is that it is unpredictable. Brand-businesses must be able to manage when change happens. Those brand-businesses that were flexible were able to survive the upheavals of COVID-19.
There are many brand-businesses that retreat to the comfort of what worked yesterday rather than face the facts of change.
Ensuring that a brand-business is conducive to change is a critical factor in generating high quality revenue growth leading to enduring profitable growth. These three must-do’s for creating a change-acceptable enterprise should be on every brand-business agenda.
