Maggi in India : a fiasco by non-market strategies and short-term incentives

What can I say? The more I read about Maggi in newspaper, on WhatsApp, Facebook and Twitter and more I hear about it in news media, I can't help think of this one guy Jeff Timmons and the class of 'Business Government and Society' that we took with him at IE Business School.
This is a classic failure of a huge corporate like Nestle to recognize the importance of Business Government Society paradigm and hence also a classic case of its non-market strategy failure.

Before we go into that, let me put things in perspective for my layman readers. These days Business is not just a barter or a trade. It means more, it involves more. The first part - which almost every company works with, the market in which this business operates. And then, from the Porter's five forces to the modern day tools of big 4 consulting firms, there is so much thinking that goes into becoming successful into this market.

But this is not where it all ends these days. Thanks to the improved regulations, increased public awareness, easy access to the internet, rise of social media and continuous availability of news media - there is also a non-market environment that each business needs to operate within these days. This environment consists of dealing with the governments, its regulations, the society and its elements like activists, social media, etc. And hence, any business needs to now have not only a market strategy, but an integrated strategy encompassing both the market and the non-market challenges.

So, what happened with Maggi in India?

Lets start with its Market environment. Found this link on Quartz India with decent amount of details about Maggi's market share, etc and the relevant references.
http://qz.com/420932/charted-how-maggi-rules-indias-noodle-market/
I am just going to build on all this information.
Total market share in noodles market: 63%
Contribution towards Nestle India's revenues:  nearly 30%
Size of Market: India is the second largest market for Nestle's Maggi brand
Retail Sales: $623 million in 2014

So, what do we have? A market leader, with a great brand name, and a well-known campaign, "Mummy bhuuk lagi - Maggi chahiye mujhe abhi. Bas do minute aur Maggi tayaar'. which appeals to all those kids and also busy moms, across the country and makes them want Maggi more and more. In fact, even when we make noodles of other brands, we refer to them as 'Today we made, say 'Top Ramen' Maggi or we made Maggi from home made noodles'. Get the vibe?

This huge market size and the brand popularity means a huge barrier to entry for everyone else. And so, Ching's tried 'Hunger ki Bajao' to compete with Maggi and finally settled with creating a niche for themselves in the Chinese Noodles and Soups space, Saffola is happy finding itself in the healthy Oats and Oat products space, and so on.

So, the question for any strategist would be - how to break or overcome this barrier to entry, created by Maggi?

Well, how about we try playing around this giant in the non-market environment?
I haven't done enough research to claim on who would have inspired these tests by the Government regulators, for Maggi noodles, so lets just not build a conspiracy theory blaming any competitors just yet :-)

But the fact is, when Maggi had become invincible in the Market environment, the other actors involved in the game, decided it's about time to change the arena. So, Maggi noodles were tested by one of the state authorities, and were found to have excessive MSG and lead content than the required configuration suggests, and that brought out the needed shift in arena.

And who was truly responsible for this shift? firstly and fore-mostly the Maggi management. I mean firstly they didn't see it coming thanks to excessive focus on short-term incentives. yes, I am directly trying to place a blame of short-term vision here. For a company who is continuously a market leader, it is so easy for its leaders to want only to stay the leader, only to maintain the market share numbers, despite new competitions. And when the brand is already popular and the product is already a house-hold name, what more can be done? How about making the product more want-able?

MSG [also called Ajinomoto in many places] as most of us would know makes us salivate more, giving a feeling of increased tastiness. It is the same Chinese salt as people refer to it in India, and is the secret behind your corner Indo-Chinese stall's recent success and also your Daalcha-Rice chef's secret recipe. So, why not make people like Maggi more by increasing the percentage of MSG a little more? And hence ensure that the market share is maintained and numbers look great and bonuses this year are unharmed? Plus, this is cheaper than launching a whole range of new products in response to growing popularity of Ching's or Saffola Oats.

And THIS is the short term vision, for short term incentives and gains, that I claimed about earlier.

Well, what was done was done. Now, there was one state that imposed a temporary ban on Maggi and announced that it has excessive MSG and lead. The very public nature of this announcement should have been a trigger to generate a non-market strategy response from Nestle India. It was a clear signal to them, that now, their product is facing non-market elements and response should have been appropriate. Instead, as the news media in India is already calling it, the response was at the most 'delayed'.
Instead of taking control of the social media disturbances and forwards, and instead of mitigating the reputation risk, Maggi decided to wait till the other states started declaring their temporary bans and their similar findings. Only after almost 6 Indian states decided to ban Maggi until further notice, Maggi spoke something on lines of, 'We are taking our products off the shelves to avoid scare. And, Our products are safe to consume'.
This response was needed almost 2 weeks back right after the first ban. Then, it would have shown Leadership, it would have shown Social Responsibility, it would have contained the damage to Reputation. Then, it would have probably avoided those notices to celebrities endorsing Maggi in TV and media.

Now, everyone knows its banned at so many places already, so what difference does recalling the product makes anyways? Now, its just a company doing what it has to do anyways. Now, the parents are already worried, packets of Maggi are already burnt on streets, social media is already buzzing with jokes about what was the most favorite snack of so many Indians until recently.

A classic failure to recognize, limit and respond to a non-market threat. A classic failure due to short-term incentives alignment.

What this failure will lead to is even more dangerous. Read a small news today about people questioning, why Nestle India charges so much for its Cerelac and other Baby Food Products, or Why it is only made available in medical stores and specialty stores? In other words, this non-market failure is now slowly creeping into the Market environment for various other Nestle brands.

Please understand that decision to whether make a product available for masses in volume everywhere at a lower price, or whether to make it available in specialty stores as a premium product, is a strategic decision, is a market decision; It affects the bottom-line of the company, and now a threat of non-market environment looms over Nestle India, questioning these various strategic decisions for its other brands as well.

Anyways, what should be interesting in coming days is to see how the competitors use this window of opportunity and of course, how quickly Maggi can bring this whole fiasco to a closure. And, this won't be achieved by just making the global leaders come down to India.

The new integrated [market and non-market] strategy needs to make sure that the 7 year-old kid who used to finish her lunch box only if mummy gives Maggi in it, trusts the brand all over again.

Five MBA things that #gobeyond in Lagaan

 

When the famous Indian movie Lagaan was released, people were busy praising it for so many different reasons and one of them was that this movie is also being used for training MBA candidates. Well, I was not an MBA then, and hence didn't bother much about this, but I am an MBA now, and so when this movie was telecast on the TV a few days back, I decided to watch it for the MBA concepts this time. And yes, I did browse the web for different lessons that various MBAs have already derived from the movie in all these past years.
Well, I did find a lot of those Lagaan slideshows and lessons-learnt submissions - but, almost all of them were in the areas of People Management, Leadership, Leaders vs Managers, Team Management, and then the rest few were in the areas of Opportunity, Entrepreneurship and Passion.

Personally, my MBA lessons helped me to #gobeyond these concepts of people and talent management, and I found a scope for bringing forth some more MBA concepts that the movie highlights. Hence this post: Five MBA things that #gobeyond in Lagaan

1) Negotiation Skills: The scene where the British officer ends up offering Cricket match as a way to discount additional taxes levied on farmers is an excellent example of how the negotiations should not be done. This officer had an advantage of a favorable B.A.T.N.A. [Best alternative to negotiated agreement], had the required authority to anchor the entire discussion near or beyond the reservation price [beyond which negotiation is not affordable] of the farmers, yet, when he did the actual negotiations, with each round, he kept changing his anchor, in fact he didn't really anchor to any point, and while he kept pushing beyond the reservation price of farmers making them uncomfortable, he also kept pushing his own limits beyond his own reservation price, making offers that expanded the Z.O.P.A. [Zone of Possible agreement] so much that both reservation prices were mandated to become three times of what they originally were. As I mentioned earlier, a classic case of how negotiations should not be done.

2) Principle-Agent Problem: An officer in-charge of a certain region, comparable to regional manager of some multinational firm invests the firm's three year revenue from the region in to a gamble, through a completely personal decision, drenched in risk of losing it all, thanks to his pride and ego. A classic case of an agent forgetting interests of principle, a perfect situation to imbibe some corporate governance, a tale where the very definition of stakeholders and concept of stakeholder's interest goes for a toss. And then, if we wait till the very end of this movie, we see that this officer is in fact penalized, sent to a remote location on transfer and all the taxes missed are recovered from his personal wealth and salary. So, if and when the board decides to take action, our agent manager does see his own earnings tied to the firm's income, and his decisions made accountable for firm's losses - a glimpse of corporate governance to mitigate the principle-agent problem.

3) Change Management: I am not sure if the script writer's of the movie actually read about Kotter's  model for Change Management before making this movie, yet everything that our protagonist Bhuvan does in the movie to create his match-winning cricket team from a bunch of regular village folk conforms so much to the Kotter's model.
a) Create Urgency: Establishing a gamble, a bet, around the cricket match - winning involves opportunity to extreme prosperity, losing involves risk of losing everything that every person of the province possesses, just to be able to pay the three-fold taxes, does create a sense of urgency, ain't it?
b) Form a Powerful Coalition: Bringing on-board a British Lady who knows the ins-and-outs of the game, early on - Can there be a more powerful coalition that Bhuvan could have formed.
c) Create and communicate a vision for change: 'Three years without any taxes. Everyone can keep everything that he earns, Everyone can prosper.' A vision, a common goal that Bhuvan keeps preaching to bring more and more players on-board, to gain support of villagers, to inspire and motivate one-and-all.
d) Remove Obstacles: When you start something with nothing in hand, there will be obstacles. Not having equipment of the game, to finding a suitable ground to play, to keeping an eye of a bunch of hens as they provide livelihood to one of the players, to injuries of players. Our protagonist takes care of them all in one way or another.
e) Create Short-term wins: Whether it is appreciating Tipu before all villagers for his first balling and catching efforts, or whether it is celebrating village festival with a bang, involving the British Lady as well in the celebration, Our protagonist does know how to create short-term wins and also announce them to the world.
f) Build on the change: Well, every little progress that the team makes in the movie is an excellent example of building on the change.
g) Anchor the changes in corporate culture: By the time, the team becomes complete and is ready to play, there is already a crowd of entire village cheering those who are playing. Cricket which was a completely alien game for these villagers has now become an everyday routine.
Interesting, ain't it?

4) Incumbent vs New Entrant Strategy: Well, when you are a new entrant, and you know that you have no choice to give up the game, the best strategy is to burn the ships - Cut off all the ways that can lead you to step back. Invest so much that "not producing" doesn't remain an option anymore. By accepting a gamble, where loss or withdrawal meant paying up triple taxes, which in turn meant ruining the lives of everyone, Bhuvan had burnt the ships as soon as he had landed in the game.

5) Trust: Well, some may call it people management, some may tag it as excellent leadership skills, some may use it to distinguish managers from leaders, and may call it team management, some may describe it as the magic that makes start-ups successful and some others may talk of emotional quotients and stuff. But the bottom-line of it all remains 'Trust'. It is the trust created by our protagonist Bhuvan through his constant endeavor to help others, through his narrative of a better future for every living being of the province, through his actions and through his vision, that makes him successful in the end. Things do work out really well when "trust" is established.