What being customer-led looks like
If you’re not trying to make things better, why are you here?
Walkers: The characteristics of a customer-led organisation
Walkers is a business worth studying. Between 1992 and 2004, its customer- led approach to growth catapulted the crisps business from revenues of £280 million to over £600 million. Not only that - in a grocery market known for the relentless rise in the share of retailers’ own labels, Walkers grew in share terms, reducing supermarkets’ own brands to a minority position.
The story starts in the early ‘90s when PepsiCo was well on its way to establishing Walkers as a megabrand. A packet of Walkers crisps was a staple in 69% of British lunchboxes,1 and the future looked bright. Some companies might have rested on their laurels at this point, but Walkers’ leadership team wanted to explore new avenues of value creation, outside the confines of the existing business.
There were clues to new and better ways of creating customer value emerging beyond the world of salt and vinegar crisps in a packed lunch.
Walkers noticed that in America, corn tortilla chips were booming; Frito-Lay, also owned by PepsiCo, had launched Doritos in 1964 as a pioneering brand and had seen it become a billion-dollar sales market leader.2 Then, prompted and encouraged by Phileas Fogg, an aspiring UK niche player that was gaining traction with its upmarket tortilla chips, Walkers challenged itself to replicate the US success of Doritos in its home market.
In the UK, research showed that evenings represented the single biggest snacking occasion, accounting for 24% of consumption compared to 16% at lunch.3 Traditionally, the crisp brand was not associated with being eaten in the evening, but rather than assuming this was impossible to change, Walkers looked to move into the lucrative evening snacking market, so far dominated by sweet, indulgent treats.
Here was an organisation that was not prepared to be complacent about its current success. As Walkers’ boss at the time, Martin Glenn, said:
Always look for new benchmarks. Find out where you under-perform and define your market differently. If you’ve made it to the top of the tree, it’s time to start on the forest.4
As a result of this mentality, Walkers created two successful customer-led brand extensions - Doritos, corn tortilla chips, and Sensations, premium crisps for adults. They were both hard-won - ideas that initially looked impossible, asking difficult questions that took determination to answer, and then requiring courage to invest when returns were not guaranteed.
Indeed, in the case of the Doritos’ launch in 1994, Walkers’ owner, PepsiCo, had to rally even more confidence because an earlier attempt to launch corn tortilla chips in the UK failed. It had also experienced a tough time with two previous UK launches of US successes - a corn curl called Cheetos and a ridged crisp called Ruffles. The work on the Doritos’ launch that followed was about learning and adjusting until everything clicked into place. As Glenn recalled:
It was a big call ... Yes, it was well thought through and there was a good consumer case. But you never quite know when you're investing /15-/20 million based on a lot of people changing regular buying habits ...5
Meanwhile, Walkers’ foray into premium big bags of crisps through Sensations came from the insight that although adults were starting to enjoy savoury snacks in the evening, this was a very different proposition from lunchtime, where Walkers’ products dominated. By launching ‘Posh crisps from Walkers’ with grown-up flavours like Thai Sweet Chilli, premium packaging with food values, and large sizes suitable for sharing and distribution in alcohol outlets, Sensations extended the business’s footprint beyond the packed lunch into evening snacking, opening up a new customer-led opportunity. Instead of being preoccupied with battling over market share against own-label competitors, Walkers led the establishment of a whole new category in the UK. After only 12 weeks, Walkers Sensations had established itself as the third biggest brand in what was defined, inside-out, as the crisp market, behind Walkers’ standard crisps and Pringles, with a share of nearly 4%.6
Both brand extensions reflect an outside-in leadership mentality - a desire to build long-term customer value rather than competing within an established market, something that will inevitably, eventually lead to commoditisation. And it is this assertiveness, commitment and ability to look outside the confines of the organisation that defines Walkers’ customer-led leadership, which we’ll be exploring in this chapter.
As we noted, Walkers’ customer-led moves created an extraordinary growth trajectory. Even more remarkably, and contrary to the relentless trend, Walkers had consolidated its hold on the category so much that by 2004, it was taking a whopping 70% of the crisp market by volume against private label’s 18%, compared to 46% and 35% respectively in 1995, according to IRI.7 This shows the value being added by Walkers in the eyes of customers as it fought back against ‘the same for less’ own- label proposition.
The Walkers’ story, as with the Tesco story in the previous chapter, is about a leadership team having the ability to stand in customers’ shoes and finding the confidence to follow through on insights and innovation leading to commercial breakthroughs. We’re especially interested here in identifying the characteristics that define a customer-led organisation like Walkers.
What does being customer-led look like? What leadership style encourages a common thread of actions among companies that reflect an out- side-in mentality? What actions did Walkers’ leadership take to propel growth during this period? And how did these actions reflect an outside- in mentality? What is it in the activities and the visible leadership style of a customer-led business that seems to mark it out as special? This is about describing the systematic, repeatable and scalable aspects of a customer- led organisation.
What good looks like
Because being customer-led is unnatural, customer-led organisations stand out. They take action that differs from their peers and competitors, action that reflects an outside-in mentality. They understand what customers value beyond what’s being sold to them today - the problems they’re trying to solve or the outcomes they really want. They are also skilled at creating this value in new and better ways, improving on the set of solutions currently on offer.
Their performance reflects their skill as they grow new markets or gain market share. And if market share is the measure, it is crucial that the market is defined in broad outside-in ways that recognise the problem the players are solving for customers, and therefore the true competitive set. For example, there is a big difference between a supermarket ready meal (a product category) and nice food fast (an outcome achieved in many different ways from Pret A Manger, the freshly-made-sandwich chain, to Deliveroo or Uber Eats, the restaurant meal delivery services).
It is relatively easy to be customer-led as a start-up because the few people involved can all see their customers and the role they play in giving them what they want, and they can also see how successful they are immediately and in ways that have impact. If they aren’t creating value for customers in some way that is new and better than before, at least locally, then they are unlikely to last for long.
But taking the approach to a bigger, broader audience requires a different way of operating, and the first customer-led challenge is delivering your current solution while ensuring that you keep asking whether this creates value for customers in ways that stay or get further ahead of the continually evolving alternatives.
As an example, while Walkers’ customer-led growth was driven by two impressive brand extensions - Doritos and Sensations - underlying all of this was the company’s constant quest for quality. It was on a journey of continuous improvement where Walkers developed a ‘Gold Standard’ crisp created from the very best potatoes and fried in the very best conditions. This was the ideal of the perfect crisp it strived to put into every pack, every day of the year. No mean feat when you’re dealing with 350,000 tonnes of potatoes a year. During the ’90s, Walkers invested in a series of costly innovations to boost quality, including first replacing plastic bags with foil and the air in the bags with pure nitrogen to improve freshness further. As Martin Glenn said:
Most companies test quality against both their own current products and their competitors' products. This can be a useful exercise, but it can also produce an attitude in which a business is satisfied with products that are ‘good enough.’ The result of this is an inevitable downward drift in quality as products get benchmarked against a declining standard.8
This quest for the perfect crisp underpinned everything at Walkers. Glenn pays tribute to Zweifel crisps in Switzerland for fuelling his belief that quality pays in this industry. The Swiss potato chip manufacturer is obsessed with quality and has a 70% share in its home market9 where consumption per capita is high and crisps are not viewed automatically as junk food. As with many other customer-led leaders, Glenn’s outside-in beliefs are reinforced by learning from examples of other businesses succeeding in new and different ways elsewhere. Here, Zweifel’s focus on quality and its subsequent success in Switzerland supported Glenn’s confidence that a similar approach could work in the UK. We’ll see more examples of customer-led leaders looking to other markets and industries for inspiration throughout the book. They help people see, and even more importantly believe, that there are new and better ways to create customer value in their own organisations.
So, Glenn’s relentless focus on quality happened for a reason. Walkers’ leadership team believed that investing in higher quality with all of the associated costs would eventually bring a return, even though the costs were immediate and definite, and the returns not guaranteed and in the future. Glenn said, ‘If you have a high-quality product, it will sell faster, it has higher margins and you can reinvest in growing demand.’10
This is an example of an outside-in belief. Each time an investment was made in foil or nitrogen to improve the freshness of the product, Walkers was doing things that no customer would ever directly ask for. They were also activities that it would be easy for Walkers to avoid, in the process saving money and boosting short-term profits. Yet each time the investments flowed through into evidence that customers noticed the quality, valued the difference and increasingly preferred Walkers over the alternatives. As a result, the shared outside-in beliefs of the whole team involved were reinforced each time - Moments of Belief, in other words.
What happened with Walkers happens with other companies too. Over the years, we have identified six activities we believe are disproportionately important in creating customer-led success. These are: making clear customer choices; using guiding insight; developing innovative propositions; empowering people; rapidly learning; and creating a business-wide customer plan. Three aspects of a visible leadership style also play a crucial role: being assertive in the market; being committed internally; and being externally focused. We’ll be examining these later in the chapter, but before then, it’s useful to know what they are.
While some of these activities may appear familiar and reflect what matters to many organisations, the disproportionate value comes when a customer-led company with an outside-in belief system follows this approach completely. Indeed, our research suggests that this is how exceptional customer-led success is created. We’ll be highlighting the differences between more common inside-out companies and unusual outside-in companies throughout the book.
To give an example, while ‘making clear customer choices’ about which customer needs to address might suggest drawing conclusions from focus groups for many organisations, it means much more in an outside-in environment where it is akin to reframing a market. Think Henry Ford and faster horses versus new cars. Outside-in companies want to make an accepted industry work fundamentally better: while a focus group on quick and easy ready meals might suggest new recipes from another country or redesigning the packaging to better showcase the ingredients, an outside-in approach would reframe the entire market to make it better for consumers - to bring restaurant food home with Deliveroo, for example.
Before we get into more detail, let us describe more fully what customer-led success looks like through the Walkers story.