Well, that or an incredibly stupid mismanagement of a major promotion. I am writing about the GM-like imbecility of KFC’s now-infamous “Oprah Coupon” promotion, begun less than a week ago yet destined to make a laughing stock of the one-proud chain of chicken restaurants.
KFC is a division of Yum! Brands, a corporation of restaurants and fast-food purveyors, and one of the weaker lines in recent years. To counter its lagging position, the guys at KFC came up with two ideas to revive KFC’s fortunes. First, the company decided to introduce non-fried entrees to the menu, calling them Kentucky Grilled Chicken. This was actually a pretty good idea, a way to attract health-conscious customers and expand the menu.
The second idea was born during the Super Bowl. Another restaurant chain, Denny’s, got folks to give them another try with a time-tested promotion – a free breakfast to anyone who wanted one. Denny’s promotion had significant risk and cost, but it paid off big-time, and the company’s sales have been much improved since the promotion.
The guys at KFC saw the success at Denny’s. and decided the best way for them to get the same results was to run a similar promotion. But rather than wait until the next Superbowl, KFC worked out a venture with the reigning Queen of daytime television, Oprah Winfrey. Winfrey talked up the chain on her show and announced the promotion; a coupon for a free two-piece chicken dinner. Oprah also posted a link on her website to the coupon printout. The coupons could be printed May 5 and 6, and could be redeemed anytime at any KFC through May 19, excepting Mother’s Day.
Up to that point, this sounds like a great plan. A new product, announced on national television by a popular icon, with coupons to boot. What could go wrong?
From that point on, actually, almost everything.
In the first place, people began complaining from the start that they could not get the coupons to print. It should be noted that KFC neither acknowledged this problem, nor made any effort to address it. Of course, that’s probably because they had much bigger problems staring them in the face.
The geniuses at KFC decided to run this promotion, but without any coordination with the local restaurants and franchises. What’s worse, no one considered the likely response to the promotion, and the restaurants quickly ran out of the grilled chicken.
As a result, instead of a wildly successful promotion that could have raised KFC’s stature and impressed new customers, KFC’s promotion resulted in millions of people standing in line only to find their coupons were denied, no explanations were available, and the overworked staff was hostile and rude.
This being America, denial of the previously unknown right to free chicken led to reports of violence. KFC denied these reports of course, but right about now their credibility is such that anything they say is likely to work against them. In the same statement denying violence or angry protests, a company spokeswoman for KFC still tried to claim the company was prepared for the promotion.
The head office for KFC shut down its customer service lines and instead issued a press release promising that rainchecks would be sent to those unable to redeem their coupons. There’s a few problems with that claim, though. In the first place, customers already angry about having stood in line to be denied are now being told to go back to the restaurants, not for the promised food but to fill out forms to receive another coupon that may or may not arrive in a couple months, which may or may not be accepted at the restaurants, which in any case is less than what was promised on the Oprah show, and by the way the restaurant people I talked to today, say they have no heard anything about rain checks and there are no forms to fill out, meaning that if a customer believes KFC this time and tries to get a form to send off for the raincheck, they are likely to get the same rude reception they got the first time they came in on the matter. In other words, KFC is doing the things that guarantee maximum brand damage to themselves.
The very idea that KFC would plan, execute, and respond so badly to this situation is corporate suicide, an action that only makes sense if the marketing department and upper management at KFC were quickly and quietly replaced by operatives from Popeye’s chicken. Because the two things I can confidently claim after speaking to customers who tried to participate in the promotion, is that KFC has driven away a lot of customers, current and potential, and these folks will still go out and get chicken, which benefits Popeye’s more than anyone else. El Pollo Loco has played on the hype, promising to honor the KFC coupons on Mother’s Day, but the chain is too small to have planned and carried out a plan on this scale. As for Church’s chicken, if you have tried any of their “specials” or watched any of their ads (I know what ‘boring‘ is), you would recognize that subverting the Colonel to advance their own market share is well beyond their capabilities.
Whatever it is, this whole campaign and collapse is just one more example of how poor planning and dependence on spin is eventually just self-destructive and futile.
Friday, May 08, 2009
Thursday, May 07, 2009
Case Competition 2 – Business Intel
This Saturday, my team will be competing in the UH-Victoria MBA Case Competition. It’s the culmination of the Strategic Management course, which is itself the capstone course of the program. Fourteen teams will be competing, presenting the results of fifteen weeks of research, analysis, and developed recommendations for company strategy. Along the way, our team has learned and reinforced some interesting lessons about the business world and people in general.
This semester’s target company is PetSmart, Inc., the leader for the pet product and services industry in the United States. I will be posting the results of the competition, and details of our analysis and recommendations on Stolen Thunder after the competition is over, but for now I want to note that the company was remarkable for its combination of smart moves and missed opportunities, of keen insights and odd missteps. This is generally because like all companies, PetSmart is made up of its people and is the combination of their talents, efforts, and inspiration. In their specific case, most of PetSmart’s strategic decisions reflect the fact that all of the senior management were hand-picked by CEO Philip Francis. When you do that, you get a group which is loyal, almost always in agreement, and committed to the CEO’s strategy, but you also lose the perspective of differing opinions and the chance to test assumptions, or in PetSmart’s case especially, the follow-through to make sure your strategy is fully effective. PetSmart is generally in good shape and is being run pretty well, but even so my team found several areas where the company could maximize its advantage or avoid potentially critical problems – and in most cases these opportunities seemed obvious to us from the company and industry environment and resources available.
Sometimes it comes from a proprietary way of thinking, a desire to make sure that a company keeps control of its plans and operations, so that open discussion is lost in the interest of protecting company strategy. Other times, though, it’s an unfortunate exercise of human pique, of refusing to consider alternatives or suggestions in the misguided belief that no additional perspective is needed or useful. And that attitude is mighty common. What amazes me after studying business at the macro level for a couple years, is not that some businesses get into trouble, but that every business will sooner or later face a crisis that was largely avoidable, or miss an opportunity that could have significantly improved its financial health. This does not happen through lack of ability, but is the result of strategic choices made but not revisited.
People outside business often imagine that they understand the theory and practice of high-level corporate strategy, or at least they believe the talking heads in government and the media who tell them that they understand business better than people with decades of industry experience and top-level education in the field. This is just one reason why Op-Eds and government plans are generally not able to effectively resolve business strategy problems; they are making assumptions and jumping to conclusions. This of course would give the reader pause when considering my own column, as this would reasonably challenge my own statements and judgments, which brings me to my general recommendation for businessmen and anyone interested in financial health, whether for an individual, a company, or for the nation. Use your own mind and experience in making decisions, but it’s generally important to consider as many relevant contributions as you can find. The common factor in the situations at GM, Chrysler, AIG, Merrill Lynch, and so many other companies which have run into serious trouble of late, is an insular culture that self-promotes, increasing confidence in its own strategies but ignoring potentially vital warning signs and alternatives that a simple Deming loop process could have provided. Come to that, such behavior is all too common, and the results from such assumptions all but unavoidable.
This semester’s target company is PetSmart, Inc., the leader for the pet product and services industry in the United States. I will be posting the results of the competition, and details of our analysis and recommendations on Stolen Thunder after the competition is over, but for now I want to note that the company was remarkable for its combination of smart moves and missed opportunities, of keen insights and odd missteps. This is generally because like all companies, PetSmart is made up of its people and is the combination of their talents, efforts, and inspiration. In their specific case, most of PetSmart’s strategic decisions reflect the fact that all of the senior management were hand-picked by CEO Philip Francis. When you do that, you get a group which is loyal, almost always in agreement, and committed to the CEO’s strategy, but you also lose the perspective of differing opinions and the chance to test assumptions, or in PetSmart’s case especially, the follow-through to make sure your strategy is fully effective. PetSmart is generally in good shape and is being run pretty well, but even so my team found several areas where the company could maximize its advantage or avoid potentially critical problems – and in most cases these opportunities seemed obvious to us from the company and industry environment and resources available.
Sometimes it comes from a proprietary way of thinking, a desire to make sure that a company keeps control of its plans and operations, so that open discussion is lost in the interest of protecting company strategy. Other times, though, it’s an unfortunate exercise of human pique, of refusing to consider alternatives or suggestions in the misguided belief that no additional perspective is needed or useful. And that attitude is mighty common. What amazes me after studying business at the macro level for a couple years, is not that some businesses get into trouble, but that every business will sooner or later face a crisis that was largely avoidable, or miss an opportunity that could have significantly improved its financial health. This does not happen through lack of ability, but is the result of strategic choices made but not revisited.
People outside business often imagine that they understand the theory and practice of high-level corporate strategy, or at least they believe the talking heads in government and the media who tell them that they understand business better than people with decades of industry experience and top-level education in the field. This is just one reason why Op-Eds and government plans are generally not able to effectively resolve business strategy problems; they are making assumptions and jumping to conclusions. This of course would give the reader pause when considering my own column, as this would reasonably challenge my own statements and judgments, which brings me to my general recommendation for businessmen and anyone interested in financial health, whether for an individual, a company, or for the nation. Use your own mind and experience in making decisions, but it’s generally important to consider as many relevant contributions as you can find. The common factor in the situations at GM, Chrysler, AIG, Merrill Lynch, and so many other companies which have run into serious trouble of late, is an insular culture that self-promotes, increasing confidence in its own strategies but ignoring potentially vital warning signs and alternatives that a simple Deming loop process could have provided. Come to that, such behavior is all too common, and the results from such assumptions all but unavoidable.
Wednesday, May 06, 2009
Case Competition
If you read my blog regularly, you know that lately I have been posting IR-regularly. That’s largely due to a few things at work, and the case competition at UHV. That competition concludes this Saturday, just three days from today. I will be writing about that competition and its results, so I may be even less relevant than usual for some people. If you are interested in the MBA process, however, or have an interest in the case competition process, this might be worth a read.
The Masters of Business Administration (MBA) is different from most Masters degree programs, in that the MBA is intended to be a functional, real-world degree. So, rather than write up and defend a treatise in front of an academic panel, many business schools demand that MBA candidates demonstrate their knowledge and accumulated resources in a practical application of their combined skills. The case competition is an ideal way for this exhibition to be performed. At UHV, the capstone course for the “Strategic MBA” is called “Strategic Management”, and that course culminates in the case competition. The competition is open only to MBA students who have completed all or almost all of the other courses necessary for graduation, and is judged by a panel of professors from the business school, and senior officers from businesses interested in participating. The specific business officers who take part as judges is a carefully guarded secret, but it offers an additional appeal to the competing teams – performing well in the competition could not only produce a good grade in the final course, but also possibly lead to interest from a major company. Hey, the plaque is nice but who doesn’t like to improve their career profile?
The course itself is a bit sneaky, if you are not careful to pay attention. For instance, the capstone course eats up a lot of time and resources, so it’s not advisable to take the course at the same time as more than one other course. I noticed that about 15 students have dropped the course this semester, from the original group of 70. Also, the course at UHV is offered in three sections, and you choose your team from students in your own section, forming a team during the first days of the class. Careless or slow selection can be a critical mistake!
The course this semester covered 104 days, or just short of 15 weeks. Of that time, the first individual report was not due until February 21, almost a month into the semester. The second individual report was not due until March 14, and the third individual report was due March 24, representing a gradual increase in pace. The group’s first report was due April 4, the second April 18, the group’s final presentation was due May 2 and the group final paper was due May 3. The competition itself, of course, is May 9. So, the first paper was due on day 27, the second on day 48, the third on day 58, the fourth on day 69, the fifth on day 83, the sixth on day 97, the seventh on day 98, and the case competition takes place on day 105. When added to the regular course requirements of assignments and quizzes, this means that the pace increases as you approach the deadline, which is similar to real-world conditions for many companies.
There are four formal phases to the competition – first each student prepares individual analyses of the target company’s industry and the company itself. This semester the target company is PetSmart, Inc. the industry leader based in Phoenix, Arizona. The first paper examines the industry, the second refines that analysis and adds the company analysis, and the third refines the industry and company analysis and produces and issue statement – that is, a point or points on which the company needs to address a critical problem or can take advantage of a unique opportunity. The second phase comes up at that point, where the teams each meet and discuss their individual results, and reach consensus on a group opinion of these analyses and issues. The team’s first paper then presents analysis of the industry and company, in much greater depth than the individual reports, and also includes the first exhibition of the group’s recommendations. For comparison, my third individual paper was 67 pages while my group’s first paper was over a hundred pages, with ten pages of single-spaced source citations. The group’s second and third paper refine and defend the paper and recommendations; our final work was 131 pages long. We worked hard not only to cover all the bases, but also to cut out extraneous material, which is to say 131 pages was the lean version of our work. The third phase is development of the PowerPoint presentation. Since we would be presenting that work in the span of 25 minutes allotted to us, it became important to have enough slides to present the full picture of the industry, company, and recommendations, but also avoid to many words and clutter, and to be sure we finished on time but without rushing. The key there is to present relevant charts and figures, but stay away from text except where absolutely necessary. It also means a lot of discussion and rehearsal.
The fourth phase is the question and answer session, which immediately follows the presentation. This is what trips up a lot of teams, who work hard on their paper and delivery, but who do not prepare for likely questions. These questions cannot all be predicted ahead of time, but generally they are based on justifying the recommendations, explaining their selection and implementation and defending their cost and payoff.
There is, I think, a fifth and sixth phase that most students do not notice. The fifth phase is that you should communicate with your team early on – the professor mentioned from the start that you could work cooperatively with your team while producing your individual analyses, as long as your work was your own. That is, it’s OK to discuss your opinions from your analysis with your team, and develop an early consensus on some points (although with my team, it led us to examine assumptions and reconsider initial analyses), but you have to do your work and defend your conclusions with hard numbers and support. My group had several phone conferences and meetings, and well over five hundred postings on a private discussion board set up by the professor for the teams. And of course there is also the sixth phase, where you find a thread running through the industry, company, issues, and your recommendations tying everything together. Your recommendations will be strong if they make sense on every level, including alignment with the company’s leadership and direction. If you find yourself selling recommendations which are in conflict with industry conditions or the company’s present business strategy, you will have to explain to the judges why it is necessary for the company to abandon its present course.
At this time, all of the participating groups have submitted their final presentations and papers, and so all that is left is the actual competition, which means giving our presentations before the judges and answering questions. Of the initial 18 teams, 4 dropped out from students quitting the class, and it looks like three teams took in an additional member from one of the teams which dissolved, which is what our team did, so that we now have five members rather than the standard four. This has problems and advantages. Problems, because a late addition to your team can be disruptive and make roles unclear, but also advantages, because if you add a strong individual you can end up with a stronger team. We were fortunate in that respect, because the student who joined our team has strong marketing skills and is better than the rest of us at graphics. So, we are breaking up our presentation five ways rather than four, and we have all been working on our parts to be clear and confident.
More after the competition.
The Masters of Business Administration (MBA) is different from most Masters degree programs, in that the MBA is intended to be a functional, real-world degree. So, rather than write up and defend a treatise in front of an academic panel, many business schools demand that MBA candidates demonstrate their knowledge and accumulated resources in a practical application of their combined skills. The case competition is an ideal way for this exhibition to be performed. At UHV, the capstone course for the “Strategic MBA” is called “Strategic Management”, and that course culminates in the case competition. The competition is open only to MBA students who have completed all or almost all of the other courses necessary for graduation, and is judged by a panel of professors from the business school, and senior officers from businesses interested in participating. The specific business officers who take part as judges is a carefully guarded secret, but it offers an additional appeal to the competing teams – performing well in the competition could not only produce a good grade in the final course, but also possibly lead to interest from a major company. Hey, the plaque is nice but who doesn’t like to improve their career profile?
The course itself is a bit sneaky, if you are not careful to pay attention. For instance, the capstone course eats up a lot of time and resources, so it’s not advisable to take the course at the same time as more than one other course. I noticed that about 15 students have dropped the course this semester, from the original group of 70. Also, the course at UHV is offered in three sections, and you choose your team from students in your own section, forming a team during the first days of the class. Careless or slow selection can be a critical mistake!
The course this semester covered 104 days, or just short of 15 weeks. Of that time, the first individual report was not due until February 21, almost a month into the semester. The second individual report was not due until March 14, and the third individual report was due March 24, representing a gradual increase in pace. The group’s first report was due April 4, the second April 18, the group’s final presentation was due May 2 and the group final paper was due May 3. The competition itself, of course, is May 9. So, the first paper was due on day 27, the second on day 48, the third on day 58, the fourth on day 69, the fifth on day 83, the sixth on day 97, the seventh on day 98, and the case competition takes place on day 105. When added to the regular course requirements of assignments and quizzes, this means that the pace increases as you approach the deadline, which is similar to real-world conditions for many companies.
There are four formal phases to the competition – first each student prepares individual analyses of the target company’s industry and the company itself. This semester the target company is PetSmart, Inc. the industry leader based in Phoenix, Arizona. The first paper examines the industry, the second refines that analysis and adds the company analysis, and the third refines the industry and company analysis and produces and issue statement – that is, a point or points on which the company needs to address a critical problem or can take advantage of a unique opportunity. The second phase comes up at that point, where the teams each meet and discuss their individual results, and reach consensus on a group opinion of these analyses and issues. The team’s first paper then presents analysis of the industry and company, in much greater depth than the individual reports, and also includes the first exhibition of the group’s recommendations. For comparison, my third individual paper was 67 pages while my group’s first paper was over a hundred pages, with ten pages of single-spaced source citations. The group’s second and third paper refine and defend the paper and recommendations; our final work was 131 pages long. We worked hard not only to cover all the bases, but also to cut out extraneous material, which is to say 131 pages was the lean version of our work. The third phase is development of the PowerPoint presentation. Since we would be presenting that work in the span of 25 minutes allotted to us, it became important to have enough slides to present the full picture of the industry, company, and recommendations, but also avoid to many words and clutter, and to be sure we finished on time but without rushing. The key there is to present relevant charts and figures, but stay away from text except where absolutely necessary. It also means a lot of discussion and rehearsal.
The fourth phase is the question and answer session, which immediately follows the presentation. This is what trips up a lot of teams, who work hard on their paper and delivery, but who do not prepare for likely questions. These questions cannot all be predicted ahead of time, but generally they are based on justifying the recommendations, explaining their selection and implementation and defending their cost and payoff.
There is, I think, a fifth and sixth phase that most students do not notice. The fifth phase is that you should communicate with your team early on – the professor mentioned from the start that you could work cooperatively with your team while producing your individual analyses, as long as your work was your own. That is, it’s OK to discuss your opinions from your analysis with your team, and develop an early consensus on some points (although with my team, it led us to examine assumptions and reconsider initial analyses), but you have to do your work and defend your conclusions with hard numbers and support. My group had several phone conferences and meetings, and well over five hundred postings on a private discussion board set up by the professor for the teams. And of course there is also the sixth phase, where you find a thread running through the industry, company, issues, and your recommendations tying everything together. Your recommendations will be strong if they make sense on every level, including alignment with the company’s leadership and direction. If you find yourself selling recommendations which are in conflict with industry conditions or the company’s present business strategy, you will have to explain to the judges why it is necessary for the company to abandon its present course.
At this time, all of the participating groups have submitted their final presentations and papers, and so all that is left is the actual competition, which means giving our presentations before the judges and answering questions. Of the initial 18 teams, 4 dropped out from students quitting the class, and it looks like three teams took in an additional member from one of the teams which dissolved, which is what our team did, so that we now have five members rather than the standard four. This has problems and advantages. Problems, because a late addition to your team can be disruptive and make roles unclear, but also advantages, because if you add a strong individual you can end up with a stronger team. We were fortunate in that respect, because the student who joined our team has strong marketing skills and is better than the rest of us at graphics. So, we are breaking up our presentation five ways rather than four, and we have all been working on our parts to be clear and confident.
More after the competition.
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