[MUSIC] Once the organization is aligned behind priorities, how do you unleash the potential of people? One of the ideas that we were experimenting with for many years is giving select leaders a blank check. Now you can say, blank checks, that's crazy. Blank checks are a metaphor for trusting people by giving them complete freedom to act as entrepreneurs while being accountable for results. Leadership is really about finding the right people, giving them the right resources, and getting out of the way. Take the case of Tang. Now Tang is a brand that took nearly 50 years to reach $500 million outside North America. Although floundering in Brazil and other countries, we decided to make Tang one of our ten focused brands. We were in Sao Paolo and gave a blank check to Alejandro, who was the head of Tang in Brazil at that time. We told Alejandro, why don't you dream big, take whatever resource you need, but be accountable for results. Now the first reaction to a blank check is skepticism. Are you crazy? You then go into complete panic, because you really don't know what to do with a blank check. You realize very quickly that working harder doesn't work. You have to work smarter. And finally, you get into an action mode, trying different things, failing often, but scaling quickly what works. So how do these bank checks really work? The first step is to select leaders whom you trust and give them really big targets to achieve in a very short period of time. The second step is for the leader to pull together a brief business proposal identifying resources required in terms of people, skills, and money, with very clear milestones and deliverables. And the third step is to carefully monitor deliverables against these milestones. So Alejandro and his team found that they were doing too many little things, too many little innovations, which was just creating a lot of activity, but not producing results. They decided to focus on the core of tang and test the number of ideas. Half the experiments failed. The key approach here is being strategically agile. One or two of the experiments started working, which were quickly scaled up. One of the areas that was working well was merchandising and investment in distribution. The Tang team decided to focus even more resources here to ensure flawless execution. Boring consistency and excellent execution often works well. As a result, in five years, Tang doubled sales and became a billion dollar brand outside of North America, after taking nearly 50 years to reach half a billion dollars. Now blank checks don't always work. Sometimes they fail because if everything is going well, something is terribly wrong. One of the biggest failures was a blank check we gave to a small team in Latin America for the brand Royal. The team came up with affordable, nutritious food products under the Royal brand. Now, what went wrong? Why did it fail? First, we started doing too many things just to fill up shelf space, too many products, unfocused. Second, we got into commodity issues, pricing pressures. And third, the cross margins were lower than expected. But the real mistake I made is kept going on and on with this project. I started pursuing this project as a personal hobby. You gotta stop beyond a point and move on. Eventually the leadership team called me and said stop, we're not meeting the milestones, let's learn the lessons. So how do you deal with a failure? We had a large conference in Latin America for about 200 dealers where I announced that I made a huge mistake with Royal. I also announced that the team would be redeployed and not penalized, since they showed imagination, energy, and learned from the experience. I then invited the Royal leader to come forward on the stage and share the lessons from the failure. Interestingly enough, many months later, no one remembered the success stories from this conference, but they all remembered the lessons from the failure. So overall, what are the lessons from blank checks? First, you get people to act as entrepreneurs and owners. Interestingly enough, the return from blank checks are much better than the average returns. Second, it sends a very strong signal of trust. And third, it's okay to fail. It's very important that you do not penalize people in gains of failure, provided they learn the lessons from the experience and move on. Over the years, we've given many blank checks. The idea applies whether you have a small company or a large one. Recently I received an email from a colleague whom we had given a blank check to. He said, you know, I wanna let you know that I'm just about to be promoted. I wanted to thank you, however, for trusting me and giving me a blank check. You really scared me and gave me sleepless nights, but you made me grow, and you helped the business grow. And that It's really what blank checks are all about, getting people to grow. You have a choice in life, you can either be cozy, or you can fly. Next we will cover execution, cuz at the end of the day success is 10% strategy and 90% execution. [MUSIC]
