Flawed Business Model Design at Nestlé

Last week I got to know Yvo Galli, a fellow business consultant who was formerly at the Swiss food industry giant Nestlé. We had a great discussion about several topics, but from a business model design perspective I found one issue that Yvo mentioned particularly interesting.

Yvo pointed out a design flaw in Nestlé Switzerland's business design. The flaw concerns the handling of the Thomy brand (mayonnaise, etc.) and the Maggi brand (bouillon cubes, seasoning, instant meals, etc.). The former is brand leader (Nr.1), while the latter is brand challenger (Nr.2). However, in Switzerland both brands are managed and marketed by the same sales force. This leads to a situation where the same vendors use contradictory arguments when they sell either Thomy or Maggi. In the case of Thomy, the brand leader, vendors will use defensive arguments (e.g. "there is no need for other brands in this domain"). In the case of Maggi, the brand challenger against Knorr of Unilever, vendors will use aggressive sales arguments (e.g. "you need a second brand to foster competition and innovation).

I tried to rapidly illustrate this business model design flaw and a possible solution in the image above. The first model describes the flawed business design. In terms of COMPETENCIES Nestlé only uses one sales & marketing department to bring both, the Thomy & Maggi brand (VALUE PROPOSITIONS) to market. This is done through the same CHANNEL of one SALES FORCE. As mentioned above, this leads to a contradictory argumentation of the vendors depending on if they are selling Thomy or Maggi.

The second model describes the "should be" business design, which could be a solution to the above flawed design. The difference lies in the fact that two different sales & marketing competencies are identified as opposed to the flawed model above. An defensive one for Thomy and a more aggressive one for Maggi. This should lead to two different sales teams that market through their own channels with their own argumentation for each individual brand. The consequence would be a more coherent approach to the market...

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