Marketing strategy mistakes are often irrevocable, and as we’ve witnessed over the past several years, successful marketing strategies are becoming increasingly elusive. Here’s a half baked strategy that totally flopped….
Every day, every decision made by you and your team either adds value or destroys value. For all those who think they can save their way to prosperity consider the following total destruction of value. In the five years since Brenda Barnes took over as CEO of Sara Lee she has managed to cut the stock dividend by 40%, to shrink revenue by over 50% and to destroy 67% of the stock value. How does one do all this in just five years?
When Ms. Barnes took over Sara Lee to much fanfare in 2005 she claimed that the company was a “hodgepodge of inefficient brands and businesses” and she had just the recipe to get it right! Unfortunately, she may have gotten into the wrong batch of brownies! Claiming to want to regenerate the core business she first cut R&D followed by a cut in marketing funding and the creation of a centralized purchasing system. The strategic “piece de resistance” is a little hard to swallow if not totally unbelievable. In an ill conceived attempt to further reduce costs she set a goal to launch fewer products! As if this wasn’t enough, she took out her knife and sliced off huge pieces of the Sara Lee pie. Holding what can only be described as a corporate bake sale she spun off the European meats division, the Apparel division, Tupperware and their Body Care business.
As Sara Lee’s Bakery had less and less to offer and no new enticements in the window her customers walked away in droves. Barnes managed to reduce revenues from $19 billion in 2005 to $ 8.7 billion in 2010. For shareholders, the Sara Lee dividend tumbled from almost 20 cents per share to just under 12 cents a share and the stock price fell like a bad SoufflÃ©, down by 67%.
Wanting to focus on the core business is rarely a bad thing but that means “focusing” on the core business. Usually that means increasing R&D and accelerating product launches, not the opposite. The goal of any strategy is to grow value! That is most often done by applying resources in markets where they can most effectively increase the corporate value. Cutting the fat is one thing but cutting lean operating company value is another. Here is what Ms Barnes teaches us:
- Focusing on core the business means investing in the core business.
- Launching fewer products in your core business is rarely a good strategy
- Meaningful growth that increases corporate value is the mandate of every manager.
Ms Barnes stepped down from Sara Lee in August and what’s left of the company will likely go on the chopping block in the next few months. Hopefully the new CEO is better at cooking up value rather than holding bake sales. You can’t save your way to prosperity!
For more on Sara Lee see” Killing Me Softly”- Leadership Failure at Sara Lee – Adam Hartung