In How Companies Win, Rick Kash, vice chair of Nielsen along with its chief executive officer David Calhoun, explain how successful companies have switched to a new demand driven strategy. The book highlights examples from corporations such as The Hershey Company, Best Buy, IBM, Hewlett Packard and McDonalds. Kash previously was chairman and founder of The Cambridge Group, a part of Nielsen and one of the world's most preeminent growth strategy firms. Prior to founding The Cambridge Group, Kash co-founded Nielsen's micro-marketing supermarket and mass merchandiser information system used by more than 90% of consumer packaged goods marketers.
The book highlights that today's best companies recognize that demand is the most precious commodity in the economy. Kash speaks on how to manage global expansion, demand-driven business strategies, Chinese competition and how Groupon is poised to revolutionize e-commerce as Amazon did. The Arab Spring, he adds, is part of "the demand revolution and that is about people."
An edited transcript of the conversation follows.
Are companies with an older generation of leaders struggling to embrace a consumer that is learning about and demanding products in a different form?
Kash: Nothing causes business leaders to pay attention like the change in business results. When you're not as successful as you've been in the past, you'll ask what's changed, and how can I adjust? That's precisely what is happening in large corporations today. It is the change in their results that brings home that necessity is the mother of reinvention. An example is companies who thought that the Internet was going to be an interesting way for people to get information but not necessarily a way in which to conduct business or commercial applications have now learned from companies like Amazon and the ability of companies like Groupon to influence commerce and business, they now are rapidly moving. The largest to the smallest companies in the world now recognize that the Internet is a channel of doing business and they must participate and participate well or suffer the dire consequences. I think the single event that most made this evident was [Amazon's 2010] purchase of Diapers.com. Suddenly, if you can ship diapers, you can ship laundry detergent and any number of things such as televisions. There is not a company in the world today that isn't focused on moving as rapidly as they can to participate in the emerging economy, which is the Internet.
You're based in Chicago where Groupon was founded. How do online companies deal with consumer fatigue when so many group buying sites have sprung up?
Kash: Groupon is moving very rapidly away from being just the coupon company, they are now in travel and in a period of six months they have become one of the largest travel bookers in the United States. They are also now not just doing coupons or local businesses but they recently did a program with Sam's Clubs, Sports Authority and General Mills. They are broadening quite dramatically the basis upon which their simply making offers. By virtue of what I read from Groupon, they are gathering data, and it's not simply the ability of Groupon to go and see if a person wants to take a coupon; they have 130 million names around the world and they're beginning to determine consumer patterns.
Does individualized analytics take away randomness from the online consumer experience?
Kash: It's a question of how you apply the analytics. What they are doing is satisfying your current demand: You bought this before and you may buy it again. The real message of analytics and the real opportunity is to look at the pattern and to be able to econometrically determine, based on that pattern, what else you might buy. I believe everybody on the Internet is going to get better at that and certainly retailers are getting better at that, there is a reason why a company like Macy's is thriving.
Could you describe McDonald's success after they changed its strategy?
Kash: McDonald's is a remarkable company because they have a view of their business and one of the best interviews I've ever done is with their CEO Jim Skinner which is highlighted in the book. Here's a company that does tens of billions of dollars of business all around the world, and he says, 'Rick you want to know how I really think about McDonald's,' you know their first hamburger was 15 cents, 'the way I think about McDonald's is we're a 15 cent hamburger adjusted for inflation.' McDonald's is on a path of understanding that there is latent demand that they can service within each restaurant. Think about beverages which is part of their U.S. strategy and their ability to say we can get people to come back in the beginning of the morning and to come back during the middle of the afternoon to get beverages like a cup of coffee or their new concoctions of coffee and some of their cooler drinks. Many of the McDonald's in America are open 24 hours so they are constantly thinking of a business unit called bricks and mortar and how do they attract people to come their more often. So I see zero chance that they're going revert, they are one of the best-run companies in the last half-century.
Starbucks shut down a number of stores a few years ago and have managed to regain profits. Do you see their success as similar to McDonald's in terms of their business strategy?
Kash: What's common is that they both had reduced the amount of money they had invested in training and then increased the amount they invest in training so that their customer experience was better. Howard Schultz changed the menu that they were delivering, as did McDonald's, he kept many things and changed many things. Both of them adjusted to the changing demand of the consumers who were most profitable for the company. And now as you see Howard Schultz is making a major effort to make Starbucks available in retail. If you can't get to the store, you can get the Starbucks experience at home. It's brilliant.
Is the Arab Spring an example of a demand revolution?
Kash: When I was in India and China recently I described the demand revolution. What I believe is going on in the Middle East is a manifestation of the demand revolution. Let me put it into context for you. There have been two great revolutions in the last several hundred years. The first were the industrial revolutions, and they were about the ability to use machinery. The second was the technology driven by computers and chips that was also about machines and equipment. The third revolution is the demand revolution, and that is about people.
The reason that there is a demand revolution is because there is a whole generation of people now who have grown up with the ability to step to a keyboard and get exactly what they demand because they demand it. So you can go to a keyboard and get any piece of information on the history of the world, go to your car and get to a route, you can demand to change the time and place. Time because you can record television programs with your TiVo, and change place through Skype. We are a generation of human beings who have the ability to demand things and get them. What's happened in the Arab Spring is precisely an expression of that. They were repressed for decades, and suddenly through the advent of Twitter and Facebook, many other people shared their demands, and suddenly you have a revolution. The Arab Spring, some people write about it geopolitically, that it is acting out against repressive governments. They've been there for years; the fundamental change is people's willingness to link together and share their aspirations for demand and to act as a group. That's a demand revolution.
There are major tech companies such as Google and Facebook growing in the MENA region, what opportunities do you see for them?
Kash: I think the major tech companies have enormous opportunity. First of all, I think they will help to bring stability. The opportunity for Facebook, Groupon and all the other companies is that they provide stability and inspiration for the people in the Middle East. The Middle East looks on Facebook and at the other parts of the world and says, 'That's what we hunger for -- stability, fairness and economic opportunity.' So the opportunity isn't just commercial for these enterprises, it is also sociological. I believe that as the economies grow in these countries, whether it be Africa, Asia, or Middle East, the opportunities are boundless and extraordinary.
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