New Strategy

By Anne Field  |  Posted 06-10-2002 Print Email

New Strategy

Establishing Web sites to boost brick-and-mortar traffic, learn more about individual customers and help them to comparison shop is hardly a new concept. But when Kriete and Schwinn arrived at Hasbro— Kriete from The Readers Digest Association, and Schwinn from OfficeMax—e-commerce was something relatively new for the toy industry. In a business where some 80 percent of products are turned over every year, the focus of toy marketing executives traditionally had been on product development, solidifying relationships with retailer-distributors and backing them up with mass-market television advertising. Recalls Schwinn: "We knew there had to be a better way to build this mousetrap."

There was. Today, three years later, the Kriete-Schwinn partnership has evolved into one of the industry's most successful examples of IT-marketing teamwork. Since the start of their collaboration, the company's Web design and technology costs have declined by more than 50 percent, net-driven sales are up in stores, and customer service costs have dropped 20 percent. Instead of calling Hasbro's toll-free number, customers now go to a new Hasbro super-site to find where to go to replace a lost piece to Clue, or buy the latest G.I. Joe doll.

Better still, the Kriete-Schwinn collaboration has been institutionalized at Hasbro, in the form of an IT-business steering committee composed of top business and IT managers, which meet frequently to discuss strategy and make sure everyone's on the same page when it comes to new projects. "There's a gravitational pull that occurs when you have a strong CIO and a strong business executive who, for some reason—usually something like financial crisis or another type of clearly-shared goal—decide to work closely together," says Ranjay Gulati, professor of management and organizations at Northwestern University's Kellogg School of Management. That force, he says, by its nature, pulls together CIOs, marketing chiefs and inevitably, their teams, into "alliances of necessity."

At first, Kriete and Schwinn kept their new strategic alliance under wraps from Hasbro colleagues. In late 1999, the Web boom was still in full flower, and, "Nobody was exactly in the mood to start shutting down Web sites," Kriete explains. For that reason, they knew they'd need hard numbers on Web site traffic and online revenues, if any, in order to make a solid case for waste-cutting and change. And that wouldn't be easy either. "This information was being hoarded, or spread out across the divisions, or being held close by brand managers throughout the company," says Schwinn.

But fate came to the rescue. In 2000, amid a downturn in toy sales, CEO Hassenfeld, the grandson of Hasbro's cofounder, held a corporate retreat at which he announced that 2000 revenues would be off by $144 million. He ordered, on the spot, between $50 million and $70 million in the first of what would be two rounds of cost-cutting.

It was the green light Kriete and Schwinn needed to press forward. Kriete recalls: "I immediately turned to Doug and told him that the marketing department could bring in all the [Web] design work from the agencies and save money. Doug said, 'Yeah, well, I can bring in all of the hosting that is done at external services, and I can save another wad of money.' So all of a sudden, we just thought, 'Wow.'"

Success, though, would also require a detailed management strategy—to prove to top execs and middle managers that the new Web project would be in everybody's best interest. They decided early on that input would be solicited from everyone. Says Kriete: "We wanted it clear that this wasn't just a corporate mandate, strictly orders from the top. We wanted both IT and business people, top people and middle managers, to be an integral component of the overall strategy so that they would own it and we wouldn't have to execute it by ourselves."

Toy Soldiers

As with everything else, Kriete and Schwinn divided to conquer. Schwinn met with top management to lay out the full financial and operational scope of the plan. Kriete, meanwhile, sought to win the buy-in of brand managers—a far stickier proposition. "Many of these guys' egos were wrapped up in some of these individual brand sites," Kriete recalls. Trust was at stake. "You could have all the mandates in the world from senior management, but if you didn't have the trust of the brand managers to ensure their brand was portrayed effectively, it wasn't going to work," he says.

At first, says Kriete, some brand managers were openly reluctant, telling Kriete they thought the Web was overhyped. In some cases, managers of some of Hasbro's nearly 100 brands hadn't developed Web sites at all, preferring to spend their money for marketing solely on TV ads. In still other cases, brand integrity was the biggest worry on brand managers' minds. In each case, Kriete met with each manager individually, first talking about their individual business objectives, then showing them how the project would—by tying all the company's brands together—generate more interest per brand, and help consumers to migrate from one featured product to another. "The G.I. Joe crowd probably wouldn't have even looked at a Tonka toy product before," he says. "With the new Web strategy, it would all be there with the click of a button."


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