How a great leader can transform an entire market by one strategic decision

I would like to go back to December 13^th 2008, when I had the opportunity to meet up with Jimmy Wales, the creator and founder of Wikipedia. Wikipedia Academy was being started in Chennai, India, to encourage people to contribute back to Wikipedia and Jimmy Wales and Sue Gardner had flown down to Chennai for the event. The talk that I had with Jimmy gave me an insight of how he has become the leader of this massive “movement” Wikipedia. I was questioning him about the success of Wikipedia and he had this to say, “Wikipedia grew a lot just before the dot com burst and then the dot com burst happened. We were losing money during the time and we couldn’t pay our own employees, and there was a decision that I needed to make. I either had to close Wikipedia, save the remaining dollars and send my employees home, or think of something to save the company.” What he came up with was a really unique concept the world wasn't used to at all. He decided to stop moderating the articles submitted to Wikipedia and instead allowed open editing by public, placing trust in the power of people. The rest as they say is history. Jimmy also told that if the dot com burst didn’t actually happen, Wikipedia would have still been a moderated encyclopedia and it might not be as famous and as open as it is now. He was certain that the so called dark times in every industry and recessions are the times when the confident and brightest entrepreneurs actually take a brilliant step and become a market leader or create a market that is non-existent as of now. He also told that presently all countries are in recession and this could be the time for young entrepreneurs to step in and grab their opportunities. (This was back in 2008)

Just to add authenticity to my claims ;) During the Wikipedia Academy meet up

Wikipedia has grown leaps and bounds but Jimmy is still sticking to his two ideals, “Trust in people” and “No Ads”. There are statistics which show that only 0.1% of the viewership of Wikipedia actually contribute back in making articles and this 0.1% is making such a huge impact themselves in having this much of information with regular updates and amazing accuracy. The latest strategic decisions in Wikipedia is to get people to contribute in English as well as in the regional languages and maximize the impact of people by setting up Wikipedia academies around the world. So how does Jimmy manage Wikipedia without ads? Who pays for their operating expenses? It’s again the people. Every year wiki goes down on its feet and asks for donations to cover the estimated cost it would require over the year.

So why do you think this post would make it's way to a strategy blog? The first one is when I was reading through “Do you have the right leaders for your growth strategy”, I was reminded of the leader that Jimmy has been and his influence in the growth of Wikipedia (the performance evaluation criteria for Wikipedia was growth of viewership back then and their biggest goal was to make the costly encyclopedias’ obsolete). On a personal note, I feel that Jimmy was a brilliant leader who was completely tuned to the market even during really hard times like the dot com burst. One more thing that caught my eye was that he was an optimist. It does work wonders when you have leader who is an optimist. Was this a blind decision by Jimmy Wales to make the company open to public editing without moderation (or did he just turn lucky)? I believe not, the conviction with he did it showed that he had a structure of something like Wikipedia (at its majestic present state) in mind. Was the risk worth it, is something that is open to speculation. If he had not taken the risk back then, there would be no Wikipedia now and the advent of open source would have been further delayed. Risk taking might be considered reckless but Jimmy was confident in his idea and I believe that this one strategic decision by a great leader has transformed the entire market and has shown the world that there is still "hope" in the power of people.

References:

Do you have the right leaders for your growth strategy? - Katharina Herrmann, Asmus Komm, and Sven Smit

 

Why does an American old grandpa run so fast in China?

---Brief discussion on strategies of KFC in China

American fast food has been prevailing in China nowadays, especially in big cities like Beijing, Shanghai, Hong Kong and Guangzhou. KFC was very successful in China, which was expected to make 36% of an estimated $2 billion operating profit from 3700 restaurants and had a 40% market share among fast-food chains compared with 16% for McDonald's until 2010, according to Euro monitor International, a London-based market research firm.

Why this American old grandpa runs so fast in China?

I think its success in China is closely associated with its analysis on environment, industry and company, which is the important step in the framework to conduct a strategic planning process.

Grandpa: I knew myself and where I am going.
Grandpa: I knew how to love and win the Chinese young” kids” hearts.

KFC knew clearly its strengths, weaknesses, opportunities and threats of the potential market in China, which laid a solid foundation for its market positioning.

KFC’s first strength should be the strong brand in the fast food industry. It has been more widely accepted and recognized in China than any other fast food brand like McDonald, Burger King, and Pizza Hut and so on. High quality of food should be his second advantage. KFC announced that their food quality was controlled by the local franchise. Their third strength should be their fast speed service and short processing time, which helped distinguish them from traditional Chinese food when they first entered China market. However, these operational advantages cannot guarantee whether the fried chicken could be successfully accepted by Chinese people and how to compete with local restaurants remained KFC’s two weaknesses.

Grandpa knows his strengths and weaknesses, and he knew which potential market he would target. Here come the opportunities and treats.

Without a large number of fast food restaurants at that time, KFC seized the opportunities to grow and expand. Until recent years, the number of KFC’s stores has been 2-3 times that of McDonald. The basic thing is to cover more customers and show its advantages of high quality, convenience and strong brand.

However, with people paying more attention to health trends, KFC has to face new challenges to develop their market and maintain the current market share when the friend chicken and potato chips were regarded as junk food. Besides, how an American company can survive under the legislative and policy of a foreign country remained a big problem.

Based on the analysis above, I really appreciated three strategies that KFC adopted under such circumstances. The strategies fully reflected that KFC knew how to love and win the Chinese young “kids” hearts.

-Localization

In order to compete with local companies that possessed the local resources and understood the local markets, KFC chose the right joint-venture partners and employed local management team and gave them decision making power. The local employees helped open up supply line and tap the local market potential.

What impressed people the most was its strategy of localizing its menu. KFC customers can purchase a bowl of congee, a rice porridge that can feature pork, pickles, mushrooms and preserved egg, which is traditional Chinese food. Besides hamburger, sandwiches, milk and hot chocolate, KFC promoted its new nutritious breakfast deep-fried dough sticks, porridge, and soy-bean milk. Afterwards, KFC also provided a chicken, bacon and mushroom rice dish. It was very unique to Chinese customers that you can find traditional Chinese food in an American fast food chain. KFC cared more about what the real customers’ need was and how to integrate their strengths into the needs. Localization without losing its uniqueness in friend chicken and other fast food was an outstanding feature of
KFC in China.

-Innovation

I also was impressed by KFC’s innovation and the speed of creating new trends. Not only did KFC focus on new types of services but also it developed new food types. KFC had diverse types of set meals for individuals, couples, families with children and also a group of friends with reasonable prices, which provided a different convenience from the short processing time.

Also, KFC offered new dishes with fish, shrimp, and other seafood that you would not combine with friend chicken. Combined with local features, KFC had specialized menu terms like a Sichuan cuisine influenced wrap. These new items together with special gifts and meanings mentioned in the attractive advertising and promotion always caused a series of consumption trends.Grandpa really knew what the young customers need and like.

-CSR

Another thing I want to mention is its Corporate Social Responsibility strategy. Its attention on charity such as Red Ribbon activity gradually got the government's recognition and improved its public relationship. Also customers would like to buy more when they knew 1% of their money spent in KFC would be contributed to charity issues.

After knowing the KFC's case, I better understand how a good strategic planning process could help a company develop faster and more successful.

However, with more and more entrants and new substitutions, KFC needs to develop more strategies to maintain its dominant position in the market.

Also, as Liu mentioned, who was the author of KFC in China: Secret Recipe for Success, how much reliance on a single market should a company have no matter how financially attractive that market is?

-Xin Wan

March 28, 2012

References:

http://www.bloomberg.com/news/2011-01-26/mcdonald-s-no-match-for-kfc-in-china-where-colonel-sanders-rules-fast-food.html

http://www.thechinaexpat.com/kfc-in-china-4-reasons-why-kfc-kills-mcdonalds/

http://www.slideshare.net/blakefelson/kfc-in-china