Case Study Pages:
Strategy, leadership and company culture
In the fast paced world of household, consumer health and personal care products, innovation is the key to success. To keep ahead of their competitors, Reckitt Benckiser (RB) needed to create a company culture that allowed new ideas to thrive. This case study focuses on the strategies that RB uses to achieve above average growth within the industry and the importance of innovation and marketing to this global organisation.
As a result of reading this case study, students should be able to:
- Explain how employing the right people with the right attitude can influence the success of an organisation
- Discuss the importance for a global business to develop a marketing strategy including branding and advertising
- Evaluate the use of constructive conflict and employee diversity within RB to gain a competitive advantage in terms of innovation and speed-to-market
- Outline different leadership styles and determine where the management team at RB would fit.
To be successful in the fast-paced world of household, health and personal care products, you have to think big.
RB’s strategy has always been clear: employ the right people to drive above industry-average growth and turn it into profit and cash.
The concept of the Powerbrand was introduced in 2002 and consists of RB’s leading global brands that compete in markets with significant potential for high growth.
A strong corporate culture is an important part of any good business and attracting and retaining the right people has been a key part of RB’s success.
A good leader may be described as one who influences, motivates and enables their employees to do their job well and contribute to the success of the organisation.
Since the merger in 1999, RB has seen phenomenal success.
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The two businesses were a good match, with a combined history of innovation spanning over 150 years. Complimenting each other geographically, they now covered extensive markets across Europe, the UK, Australia, the United States and many smaller markets worldwide.
Similarly, their product portfolios worked well together, with Benckiser a market leader in automatic dishwashing and fabric care products, while
Reckitt & Colman had achieved success in disinfectants, home care, pest control and health and personal care.
The merger was a successful one, with RB the fastest growing business in its sector. The above industry-average growth since the merger can be linked directly to the company’s strategy, company culture and leadership model. Having the right people helps create the right culture, one RB describes as strong, fast-acting and highly effective.
The company embraces diversity and encourages constructive conflict to achieve the best ideas and innovations. The leadership team expects their employees to use initiative, take ownership of their ideas and to take risks, with the aim of outperforming the market.
central message is clearly communicated to all stakeholders makes good business sense. By focussing on the common goal, both shareholders and employees can be confident they understand the company’s vision and the strategy to achieve their objectives.
Employing and retaining people with the right principles and attitudes helps to create the culture and approach to business that makes RB unique.
To stay ahead of the market, RB needs creative thinking and employees who are willing to take a risk on new ideas, as well as a leadership team
prepared to support them. The range of products RB manufacture and sell is extensive. Household names such as Aerogard, Clearasil, Dettol, Mortein, Pine O Cleen and Strepsils are but a few of the easily recognisable products in Australia.
However, RB has identified 19 of their best selling products that, in their category, are globally number one or two on the market. They call these
their Powerbrands – global leaders in high growth categories. Focussing on their Powerbrands makes sense, as the profits from these 19 brands alone make up more than two-thirds of the company’s total revenue. RB invests heavily in these brands through advertising and marketing to maximise the returns and grow their market share. They also concentrate on continual innovation, listening to the needs of their customers and looking for ways to make their products better.
Another key strategy is to focus on organic growth. This refers to the development and growth of their existing Powerbrands; they only look to acquire new brands if they add significant financial or market value to the company.
Like all good businesses, RB is continually looking for ways to reduce costs. Managing costs by eliminating waste and improving efficiency contributes to their aim of turning growth into profit. Squeezing costs at every opportunity is an important aspect of cash management and is reflected in their above industry-average profits and returns for shareholders.
3. The Global Powerbrands
Brands like Finish, Vanish, Clearasil, Mortein, Dettol, Scholl, Harpic and Airwick are worldwide household names as a result of RB concentrating the majority of their innovation, marketing and media investments around them. In 2010, 69 percent of RB’s revenue and 85 percent of their growth came from these 19 Powerbrands. Product brand recognition is one of the company’s great strengths and is a result of RB’s products maintaining a consistent overall image around the world. Their plan is to create brands that are truly global. Local leaders can express the product differently, taking into account local market conditions, if it means gaining market share or improving growth – however, this does not allow them to change the way a brand is headed. To keep the consistency in their brands, RB has a global category team for each category, which works with the markets to define and ensure consistency of the brand’s purpose and positioning everywhere in the world.
In a market where there are many competitors all selling very similar products, differentiation is a key tactic in setting your product apart from the rest. In the markets that RB competes in, innovation is essential. Instead of spending large amounts of money researching and developing new products, they use extensive market research to determine what the consumer wants and needs, in order to make their use of the product ever more easy and convenient, and the results from the product ever better.
These are sometimes big innovations but often many smaller ones, where they can incrementally improve a product, implementing a few changes that may save the consumer time or make the product more convenient to use, and that they are prepared to pay more money for.
A good example is the Finish dishwasher detergent. They noticed that consumers usually use three different products in their dishwashers: a powder, a rinse and salt. In 2000 RB came up with the Finish PowerBall 2-in-1 that combined the powder and rinse aid. They then improved it in 2001 by adding salt, and again in 2005 by adding a glass protector. They support their new and improved products with heavy marketing and
their strategy has paid off, with over a third of their revenue coming from products that have been developed in the last three years.
4. Culture and People
A strong corporate culture is an important part of any good business and attracting and retaining the right people has been a key part of RB’s
success. At the time of the merger, about 80 percent of senior employees were let go as they did not fit the new culture. It was easier to hire new
staff or leave a position vacant, rather than wasting time trying to change people or put the wrong person in the job. During recruitment, there are
four core values that RB is looking for:
- Achievement – we don’t just aim high, we always aim to outperform
- Entrepreneurship – we allow daring ideas to thrive
- Team Spirit – we work as one united by common principles and attitudes
- Ownership – we take initiative to do what’s needed.
RB has a unique culture of ‘constructive conflict’ and values this as a positive problem solving tool. Rigorous discussion and debate is encouraged at their meetings and participants are expected to come well prepared to fight for their ideas and to have thought it through very carefully. At the end of the meeting a decision is made – often whoever has the strongest argument wins! All then agree to get behind and support the decision and move on.
Debate often stems from the significant international diversity that exists within the organisation, with employees bringing different ideas and perspectives to the table. For example, among the top 400 executive employees globally, 49 different nationalities are represented. The global
nature of their Powerbrands means diversity within their management team is crucial to understanding and developing the markets in which they operate.
A global company needs employees with different national perspectives as it encourages ‘risk’ taking. It increases its ability to challenge any “it
won’t work in this market” parochial thinking. Diversity improves creative thinking, challenges existing consumer behaviour models and brings a wealth of ideas to the organisation.
Speed and action
Generating the ideas and making quick decisions is only one aspect however. Getting those ideas to the market fast is imperative. The first to market has the advantage – and the faster the innovation comes to market the longer you have to take advantage of first mover economics. The company structure at RB is flatter than most other organisations. Middle management is limited, bringing the executive team in closer contact with those on the ‘front line’. This helps generate faster response times and also reduces office politics, giving employees more control over their work.
In such a fast paced market, where consensus is not sought, there is no patience for lengthy meetings, glossy presentations or political power plays. Swift decision making is vital if RB expects to be first to market. In an industry that relies on innovation to succeed, they need strategies to get their new ideas to market before their competitors. For RB, this means not worrying if the manufacturing costs of their latest product are not as low as they could be when first launched – although cost cutting starts the very next day. A good example of this is the launch of the Dettol (Lysol) No-Touch soap. The product was first launched in the US market before any competitor products and was so different to anything else in the category
it drove significant growth for the company. At RB, decisions are made fast and innovations are driven globally. As a result, within one year of launching in the first market the No-Touch system was being sold in numerous countries around the globe and has sustained the first-to-market advantage.
RB recognises the value of their high performing employees and they are prepared to pay for it. Remuneration is
consisting of a base salary plus incentives such as bonuses and share options for those who feel confident to push their ideas to get great results.
High performance is not all that is expected of RB managers. International, speedy mobility is part of their cultural style. Given the global stature of their Powerbrands it is an advantage for the management team to move between international offices as their career progresses, gaining experience and invaluable insights into operations and product performance in different markets: taking ideas from one market and introducing them as radical in another.
Keeping production costs under control is important in any business. However, RB considers this just as vital as building sales. A conservative attitude is reflected right across the organisation.
In line with RB’s strategic aim of turning their above industry-average growth into cash, they have set up two cost-cutting teams. The ‘Squeeze’ team looks to reduce the amount of materials used in their packaging, and this can generate significant savings. For instance, in 2009, the team recommended a new, resealable pack of Vanish stain remover as an option for consumers, and saved the company millions by using 70 percent less plastic than the original.
Secondly, the ‘X-trim’ team is responsible for improving efficiency across the entire organisation. This may mean changing the layout of a manufacturing plant, or finding a cheaper way to distribute their products. For example a simple change in the production process of aerosol cans resulted in a major efficiency improvement. The decoration of aerosols cans had always been achieved by printing directly onto the body of the can at the can manufacturer’s factory, before storing the cans by their intended use (e.g. what product they would ultimately contain). These cans were then shipped to the RB factory and stored again until needed for production.
It was decided to label cans after filling in the production process. This resulted in savings through many areas. Firstly there was less inventory of cans, at both the manufacturer and RB factory, as one can could now be used for multiple variants. The printing of labels, and application, was cheaper than printing tin plate, even allowing for the cost of the new labeling equipment. This project resulted in million dollar savings, and resulted in a more flexible production process.
5. The leadership model
It is thought that all leaders fit into one of these styles or somewhere in between. The leadership style at RB would lean more towards Participative, but not Democratic, as no vote is taken and consensus is not sought. However, crucially, it follows distributed leadership principles.