Tuesday, April 25, 2017

Ben and Jerry's luck running out

The Ben and Jerry case study is truly a unique one in terms of strategic analysis. The company started by two friends in 1977 has grown from working in an old gas station to a globally recognized ice cream brand. In 1995, the company faced its first quarterly sales loss. Declining sales growth is going to be the biggest issue faced by newly appointed CEO Bob Holland.

If we look at the history of Ben and Jerry, throughout the description of the case study, the author does not once mention the strategy that was identified and stuck to from day one. This is in contrast to what we have read in the article “Can you say what your strategy is?” by David Collis and Michael Rukstad which emphasizes the importance of having a company strategy that all the employees of the company adhere to. They reiterate the significance of not just having a strategy but one that is unique and differentiated from the rest of the companies in the same business.

At the time of the article, Ben and Jerry does not seem to have a concrete strategy. Decisions in the company have been made purely on the judgement of the founders. A number of instances are proof to this. For example, the company never conducted a formal market study or test market procedures for the introduction of new flavors. Instead the relied entirely on the judgement and choice of the founders. Taste being such a subjective aspect, this was a rather risky step to take. Another example is the official reason for developing the Smooth, No Chunks line which was stated to be that the founder Ben Cohen was tired of chewing the big chunks in their mix-in ice cream. Such decisions which were paramount to the company’s success seem to have been made on the basis of whim.

The article “Bringing science to the art of strategy” by Roger Martin and Nicolaj Siggelkow brings to light the logical and scientific method that should be applied when making choices in a company. This process involves identifying all possible choices, generating strategic possibilities and then selecting the best choice by specifying the conditions to success through a series of questions, thus eliminating choices that are questionable. Had this process been followed by Ben and Jerry from day one, the company would probably not have faced a loss. Bob Holland is now faced with the biggest challenge of defining Ben and Jerry’s core strategy keeping in mind its history. Without this, company decisions cannot be made in a coherent manner and it could incur further losses. The first step towards doing this would be to alter the statement from the 1989 annual report into something more quantifiable and deterministic.

The case however also poses the question, can a company survive without a strategy? To a certain extent, the answer would be yes. Ben and Jerry did manage to establish itself as the second largest maker of super-premium ice cream in the United States. However, without a coherent strategy, success cannot be guaranteed. Clearly, Ben and Jerry was an exception to the rule. 

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