Quaker Oats: Morrison Reviving Quaker

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Quaker Oats Morrison reviving Quaker after the Snapple debacle– cost $1. 4 B write-off ? Focus on Gatorade. Gatorade -cash cow – potentially could dry up ? Pre-Morrison, Quaker mainly riding Gatorade under-investing in food brands ? Morrison comes in and changes PA: Younger manager presidents – oversee individual product lines such as hot cereal, cold cereal, snacks, and domestically sold Gatorade-cost-cutting – reinvested right into their own brands ? SK ? Same representative-move multiple brands of the company ?

Relationship with distributions = oats sales rep stock the shelves = specific knowledge. Incentives are tied to reviving the snacks division = PA ? Came up with new products in older food lines ? Redefining the market-he did not see the 80% market share as the problem – used as an opportunity (redefine the market) ? “Active thirst”-Gatorade has only 7% of that market and it’s up against soft drinks, juice and bottled water ? Strategy to make Gatorade as available as water ? “Fitness water”- aimed at women who shun Gatorade ?

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Why Quaker failed with Snapple- 1) it is good in making small innovations, distributions, 2) not so sufficient in making changes in every 6 months, required for Snapple (fashion beverage). Butter Fliers-Don’t Laugh Economist Companies are obsessed with obtaining a blockbuster innovation but new products are harder and harder to come by. (Slywotzky) Innovation – making changes to something established Invention – the act of coming upon or finding: essentially discovery. Innovators try to change the status quo. Chakravorty says that is exact reason why markets resist innovations, since they disrupt the way companies do things.

Christensen – disruptive innovation – simpler, cheaper and more convenient products that seriously upset the status quo – can herald the rapid downfall of well – established and successful businesses. Brynjolfsson says that there are other areas in which innovation can take place. Executives need to rethink the way they bring innovations to market. Reinventing or simply trying to improve, business processes can offer surprising benefits to firms that do it well 3 types: 1) Operational innovation – creative in business processes e. g. Dell, Toyota and Wal-Mart, 2) Strategic innovation – e. . Tetra Pak-moving from the production of packages to the design of packaging solutions, Southwest Airlines-increasing capacity and cheap, 3) Demand innovation – e. g. Air Liquide and Johnson Controls-earned profits not by meeting demand in a new way but by discovering new forms of demand and adopting to meet them. Establishes companies should try to become disruptive innovator themselves. Hive off potential projects into independent units away from the influence of the status quo. It is sensible for larger firms to acquire smaller ones to meet their innovative needs.

Also, process innovation is as important as product innovation. Michel, Stefan, David Bowen and Robert Johnson, “Making the Most of Customer Complaints,” Wall Street Journal, September 22, 2008 Handling complaints important as good service. Companies limit service to staff who deal with customers. Do not find the problem. Look at 3 ppl – customers, managers, emps. Tension exists. Customers: fairness biggest concern. Want to know problem is resolved, how failure occurred, what you doing so it don’t happen again. Can be more happy w/skillful service than no problems, have more tolerance for bad service than poor service recovery. nd identical failure impossible to come back from. Manager: Help company learn from failures so don’t happen again, orgs don’t get all the info they can from customers. More negative feedback a service dept gets, more isolated it is, don’t want to be seen as source as friction. Emps: Have greatest job satisfaction when they think they can get customers what they want. Have difficult job companies don’t support enough. Need to feel they given means to do well, alienation when mgmt doesn’t do enough to improve service delivery.

Resolving tensions: closer integration among three stakeholders, create service logic explaining how shit fits together, draw attention to service successes, give customer service staff freedom as you can, collect as much data as you can, share it, and use meaningful measures of employee performance. TNT NV “Snapple (Triarc/Quaker)”:Deogun Nikhil Illustrates that the mgmt skills that enable a firm to squeeze pennies out of processes (quaker oats for Gatorade) are not helpful in managing a product that changes regularly. Quaker oats didn’t understand the market for Snapple (didn’t push new products).

Weinstein (at Triarc) puts compares it to fashion business; announce that Snapple is back and still hip; need to constantly reinvent. Triarc is good with new products, not squeezing efficiency. It is a constant whirl of new products (like Whipper Snapple (smoothie), flavors and packaging, pitched to consumers who want the latest thing. Require continuous product innovation. Snapple as fashion require continuous change. Quaker Oats good at process, not good at keeping Snapple trendy. Triarc good at keeping Snapple trendy, not good at distribution factors.

Triarc smaller firm – enables continuous product changes. In fashion demand is difficult to predict-Constant contact with market. Oats tried to rationalize- distribution channel – expand Snapple into the mainstream-introduced more profitable size, the public didn’t want and changed the brands image with their advertising. Triarcs used distributors as their research arm. This permitted them to make quick decisions and react to the marketplace. Quaker oats didn’t understand the market; oats alienated Snapple’s network of independent distributors and used ads – not in keeping with the brands image.

Triarc restored relationship with suppliers. Oats did not adapt Snapple to changing customer preferences = NO CHANGE = DEATH. After taking a 1. 4B write-off, Oats focuses on Gatorade – Realized that Gatorade was a cash cow – potentially could dry up. At Triarc: Gatorade success does not increase stock price. Mr Peltz and Mr. May take the company private for $418 million in cash and assumes about $425 million in debt. Rhoads, Chris, “The Twilight Years of Cap’n Crunch,” WSJ Legend John Draper created one of the first word processers.

EASY writer Word No people skills, mental problems. Innovation is not and never will be a company’s primary activity. Innovation is more likely if those individuals are encouraged to argue and question. Hire people who learn slow, don’t fit in well. You have to learn how to reward failure in a creative company which is not compatible with big companies that want smooth efficient processes. “Know thyself,” Economist Know what you are good at, know what to delegate. Jim Clark understands his strengths and weaknesses and has become a billionaire sticking to what he is good at.

Second, about a man who is willing to back ideas with his own money. Clark is not good at running a company. He is a technically sharp visionary who is able to attract dollars to build on an idea. The article calls him a cross between an entrepreneur and a venture capitalist. Clark encourages risk taking by venture capitalists by his willingness to support his ideas with his own money particularly when the times are tough. (Silicongraphics/netscape/myCFO/healtheon). A good manager should know what he is good at ? starting a company or running a company.

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