Hello everybody, Tom Ellsworth, and we're here on case studies.
This is where you can learn things that happened to other companies and apply those things
to you and your company today.
The company we're going to look at, Dreyer's ice cream.
And there's two takeaways today.
The first is, you can make a plan and do everything that you said you were going to do, or that
you wanted to do, but the outcome can be different.
And it's how to react to that.
And the second thing is, it's kind of along the same lines, setting yourself a charter
or a set of foundational principles for your company, whether it's two people, or 200 people,
is the thing that will get you through the tough times of life.
Those two points may not feel like they're related, but I'm going to show you how they
are, as we look at Dreyer's ice cream.
First, Dreyer's.
Who doesn't like ice cream?
I love ice cream.
What you may not know is Dreyer's was founded clear back in 1906.
William Dreyer was a galley boy on a ship, which is kind of a cook's helper.
And he basically invented ice cream on a cruise ship.
And he served the dessert to the captain and people that were there, and they said, "This
is really good.
You should do more with this."
And he basically decided, you know, I'm going to do it.
He decided that he was going to make that is American dream.
So he founded a company in Oakland, California.
It took him about 15 years between that experience on the ship to opening up in Oakland, California,
but he did it.
And he called it Dreyer's Grand Ice Cream, because he called it a grand dessert and it
also happened to be he was on Grand Avenue in Oakland.
So as unimaginative as that may seem, that is the origination of Dreyer's Grand Ice Cream.
So here he is, 15 years later, making ice cream.
He was kind of a, you might call it a hobby business, but he took it seriously.
But it didn't take off, it didn't go necessarily nationwide.
He ultimately turned it over to his son and some other key people at the company and they
did that in 1963 as William retired.
The next step was they just kind of kept the company going, rolling along until 1977.
So it was about 14 years.
And then in 1977, they sold it to two guys.
Gary Rogers and William Cronk.
They paid $1 million for that $6 million business that had been around forever.
But they saw something about it.
The said, "Look, this is really good ice cream.
This is premium stuff.
We could go big with this."
So it was Gary Rogers and William Cronk that said, "We're going to go big."
Over the course of the next few years, they thought it was really important to establish
a charter of principles and culture for the company.
So one of the first things that they did between 1977 and 1981, when they were establishing
and getting it off to a good start, they built this thing called Grooves.
And they called it that because it's kind of a nickname for staying in the groove.
And it was a set of principles that would guide the company and guide the employees,
because they wanted every employee to know, hey, this is our charter, this is how we'll
treat you, this is what we want to be, this is the atmosphere we want to have, and this
is what we expect from you.
And it was kind of like a 10-commandments of how the company would operate.
But it wasn't just a bunch of how to's, do this, be on time . . . It was actually more
fun because they truly wanted to get a culture out of it.
This would turn out to be a good start that was critically important to them.
So check some of these things out.
I wish I was part of companies early, early in my career for maybe the founders would
have done these things for me.
#1: Management is people, so inspire and coach people, don't just command them.
Wow, that's really sharp.
I like that.
Hire smart.
No mediocrity allowed.
We can't allow mediocre people to come in and influence our current people and our current
people need to know we'll only hire good people to work with them.
That's a great philosophy.
I appreciate that.
We will have respect for the individual.
#3: We will liberate you from oversight and micromanaging and we will motivate you to
be trusted to get your job done.
#4: People involvement.
It's all about people.
It's not about numbers.
Numbers will take care of themselves if we involve our people and they truly understand
the job they're doing and how it impacts the rest of the company.
Ownership.
Own your own job, own your own function.
Here's my favorite, #6.
Hoopla!
Let's celebrate a little bit, when we get something done and introduce a new flavor
or we just meet our monthly goals.
Let's make sure that we take time to celebrate.
#7: Train, train, train.
Equip people when we hire them, equip people when we promote them, equip people when we
get them to the next level.
#8: This would prove to be key later for the company.
Important communication should be face-to-face communication, whether you're giving feedback
or telling them about important messages of the company, do it face-to-face so they can
see you.
#9: Let's remember it's an upside down organization.
We're not a triangle going to the top, where we celebrate our leadership.
Everybody at the bottom of the triangle, selling the ice-cream, delivering the trucks, they're
out there on the front lines, face-to-face with customers, face-to-face with the stores,
and they know better than we do at the top what's happening.
We're a upside down company, and we want that feedback to come in, good news and bad, very
quickly so that we know what's going on.
And we will value all those people.
And then #10.
Ready, fire, aim.
It's not to be negligent or to be a little crazy, but it really was to be spontaneous
and say, we expect you to make a decision and not just sit around aiming, aiming, aiming,
aiming.
You're expected to do something.
Be careful, use your training, get permission, but sitting around aiming forever and never
firing at something or never executing, that doesn't get the company anywhere.
So over the next 17 years, there's a 17-year gap here, not really a gap, or a continuum,
where they grew the company for 17 years.
And then in 1998, they were in the middle of a four-year plan to go big.
And they called this, "The grand expansion."
And what this grand expansion plan was all about is they said, it's time to really go
big.
And they had grown themselves up to about $600 million in sales by this time.
And they said, "We need to do more consumer marketing.
Let's expand our distribution."
Some little interesting super premium delicacy ice cream had been popping up like Ben and
Jerry's and Haagen Dazs.
And they said, "We've got all these refrigerated trucks.
We've got space on them.
Why don't we charge these super elegant ice-cream people, the super premium people, why don't
we charge them to use our trucks so we can deliver for them.
We've got space on the truck and we're going to the store.
And that super deluxe ice cream in the high category doesn't compete with our great Dreyer's
ice cream here.
So we're not really competing with each other; they're two different types of ice cream.
So let's make some money on them.
Smart.
Also, they ultimately signed Ben and Jerry's for a broad nation-wide agreement to do that.
And then they said, Let's also accelerate some new products.
We can see some things like sorbet and ice-cream bars that are more and more coming to the
forefront.
So let's make sure that we follow the market with some great new stuff.
They also found a little coffee company named Starbucks, and they started introducing some
Starbucks flavored ice cream.
The last thing they did is, you take a look at this [1998], this is the dawn of the Internet.
And it's the dawn of information systems and they said, we really need to invest in information
systems so that we know our sales every day, every place.
So they put all this into place, and they were executing and doing really well with
their execution when, guess what?
A perfect storm happened in the market.
So they had made this grand four-year plan, from '94 - '98, and then in 1998, a ton of
things happened to them that they didn't cause, but they had to react to.
First, dairy products and butter fat, which is the core ingredient of ice cream, the prices
shot way up.
So they were having to pay these higher prices from the farms for the butter fat.
Also, a competitor Breyer's, which was owned by a giant conglomerate started aggressive
price promotions and coupons and fighting for the grocery store space.
They had never seen that kind of fight before.
So Breyer's fighting with Dreyer's.
Then, they started some years before with some low-fat products and some sherbet products
that had less sugar in them.
And for some reason in 1998, the American consumer lost interest in healthy ice cream.
Now as we look some 20 years, 30 years later, it is kind of shocking, I think.
You know, to think that at one point in time you have the healthy ice creams that people
were passing on because they wanted the real good stuff.
Well, nonetheless, that's what was happening then.
And so that also hurt what they had done, perfect launches of some new products.
And then a big hit.
Ben and Jerry's called them and said, "You know what?
We don't need you distributing us anymore.
We're going to figure some things out for ourselves, and we don't need you."
Now that was huge, because that was a big, important partnership and it came out of the
blue.
They were delivering on time, they were doing everything right.
But Ben and Jerry's just said, "You know what?
We're going to do some other things, we'll do it ourselves."
And lastly, one of the founders came down with a brain tumor.
He would survive, but he was out of action for months as he got treatment, and was in
the hospital and then recovering from home.
None of these had anything to do with the plan that they had put together and done so
well.
So the moral of the story there is you can execute a plan perfectly and there can be
a perfect storm that follows you or unintended consequences and you need to be ready for
it.
Dreyer's could have done one of two things.
They could have gone, "Oh man, we did the plan.
We did it perfect.
We had everything going and here," but instead, they said, "You know, the same brains that
helped us make this plan the first time, guess what?
We're going to make a plan b, and we're going to get out of this.
So basically, they had a whole different attitude about it.
They said, "Let's go to Lake Tahoe, with our key people."
And they brought them up to the summit in Lake Tahoe and the first thing they did, they
said let's look at the facts, and let the facts talk to us, and don't deny the facts.
And don't try to explain them away.
It's not anybody's fault in the room, but let's look at all these facts and react to
them, by not trying to convince ourselves that something other than the truth is going
on.
So they didn't go into denial.
And they didn't try to convince themselves what they're seeing is not what the truth
was.
They realized they needed to do two things.
They had spent money on the healthy products and those change, so they were going to have
to reorganize that.
They had all these trucks and this distribution system and all of a sudden Ben and Jerry's
didn't need them anymore.
They were going to have to consolidate that and do a little financial reorganization of
that.
They put together a multi-point plan.
And they said, this is what we have to do.
And one of the things they said, we need to go back to grooves.
Because grooves was that charter of things that keep everyone in the groove, that this
is how we'll act.
This is how we expect people to act.
And one of them was, face-to-face communications.
And they had grown huge between the time they made that, and 17 years later, but they were
still following it.
In the week after the meeting in Lake Tahoe, they did what they needed to do with the investors
and the stock market.
They told them what happened and they gave them the details.
In the seven days from completing those meetings, forward, in those seven days, they dispatched
all the company senior executives and they spoke to every person in the company on a
face-to-face basis.
And they said, "Hey, the tenants of grooves is we communicate good news and bad news face-to-face,
because we care about you.
And we're going to tell you what the plan is."
And in those seven days, every person in the company was in a room somewhere, face-to-face
with an executive where they could ask questions and get straight answers live.
Well, one of the things they had to explain was there would be some layoffs.
There would be some changes because these were big hits we took, even though we did
everything we thought we should of the plan.
But we're going to revise the plan and we're going to come back even stronger.
So what they concluded was that they had the support of their employees.
They said, you know, everybody really trusted us.
They believe it.
Well it's because when they set that charter grooves, they stuck to it.
And 17 years later, it wasn't just some sign on the wall from the original founding of
the company; it was how they lived and operated and the employees trusted that what was on
the wall would be how they were treated, and the owners trusted that that's how the employees
would operate as well.
There is a happy ending that happens here.
Two years later they had pushed sales up to $1.1 billion, as they followed their restructuring
plan and they introduced more heavy cream, elegant, high-end ice-cream products because
that's what people wanted to eat.
They brought that out, and they drove it to here [$1.1B].
And that also got the attention of another company that sells a lot of things for us
with a sweet tooth, Nestle.
And Nestle came and paid $2.4 billion for Dreyer's in 2002.
So from a crisis in '98, they have a great finish.
And the great finish that they owed the success to, yes, we made a good plan, yes we put it
together, but the employees that were with us were needed to execute that plan and because
that charter that had set the culture, and we had been loyal to that, the culture made
sure the plan was completed.
Without the culture, they all believe they could not have had this level of success.
And, with a great plan, without the loyalty and the trust of people, they could have lost
good employees that said, "Well, if the company's in trouble, I'm just going to work somewhere
else."
And that would have been a normal reaction.
So that's the story of Dreyer's.
And the two things I gave you at the beginning are the two things that are true now.
When you start your company, whether you've got four points or ten points, establish a
culture for your company, what you're going to stand for, how you're going to treat your
employees and what you expect from them, and then live to it.
And then when you execute your plans and things don't go perfectly at the end, you did everything
you thought that you should, but you get a different result or the economy or something
gets you in a storm, that charter, if you've been loyal to it, the most valuable asset
that you have is your people and those people will trust you so you can react together and
you can build a plan b and move forward.
Well that's the Dreyer's case study.
I'm Tom Ellsworth and now I need the custom pillow.
There we go.
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