Change Is Sweet

Nick Riso pulls a chair up to his PC and clicks on VeryBestBaking.com. Right away, you can see what he and his colleagues have done: They've shrunk the brand. The Nestlé logo appears just once, in ant-sized type, on the site's home page. Replacing the focus on the Nestlé brand is a user's guide to cooking. Riso's cursor glides first over "Recipes" ("Hundreds of choices") and then over "Kitchen Helpers" ("fun stuff for moms & kids"). He clicks on "Sign-Up," where people can subscribe to an e-newsletter on baking. As a link pops up, he delivers a chalk talk on what this interactive approach could mean for building market share.

"Take any consumer product," he says. "On average, about 8% to 10% of the people who buy it have a bonded relationship with that brand: They don't even think about any other brand. Well, in the case of our products, that 8% to 10% typically buy 50% of what we sell. If we can use the Internet to increase the percentage of consumers who are bonded to our products by even a few points . . ." Here, the possibilities leave Riso almost speechless. "Well, that's just a huge growth opportunity for us."

The opportunity might be there, but when will Nestlé see a payoff? While the company reports that traffic on its "VeryBest" sites has steadily increased, the new strategy has yet to yield bottom-line results. That's because Nestlé is shifting its orientation from return on investment to what might be called "return on trust." Nestlé hopes that positive attitudes toward its informational sites will rub off on its brands -- and eventually translate into an inclination to buy those brands. If, however, consumers decide that Nestlé's sites are little more than elaborate infomercials, this strategy might last about as long as it takes to eat a Nestlé Crunch bar.

But Becky Chao has a ready comeback. "There is no strict ROI here," she says. "It's not about whether hits translate into sales. This investment is all about developing credibility and building a relationship with consumers. You can't build credibility if your site looks like advertising. The relationship is the gold standard, the ideal."

While Nestlé waits to see if its Internet soft sell will work, the company is putting its muscle into nonconsumer sites, where new efficiencies can result in real returns. Last year, it launched NestléEZOrder, the first direct-to-retailer e-commerce site to be implemented by a major food company. Nestlé hopes that the site will eliminate most of the 100,000 phone and fax orders that it gets annually from mom-and-pop shops, along with the high transaction costs that come with those orders.

Nestlé is also investing heavily in intranet technology. Its HR department, for example, has created a series of two-hour, online training modules that people can complete whenever and wherever they want. Previously, far-flung employees had to fly to southern California to attend training sessions. The company hopes eventually to convert 10% of all meetings into Web-based affairs, thereby saving millions of dollars in travel expenses.

The next challenge for Nestlé: getting buy-in for all of this change from its own employees. "Putting these technologies into place is the easy part," says Riso. "It's much, much harder to get 17,000 people to change their behavior and really incorporate this stuff into their thinking."

Roll Up the Rugs

"The biggest impediment to change is our own history," says Rich Vincent, 39, who directs executive development for Nestlé USA. "I hear it all the time: 'We've got 130 years of success. We're beating the competition. We've got great, powerful brands. Why do we have to relearn our whole way of doing business?' It's very easy for people to slip back into the old way of doing things. They use the new jargon, but they really don't adopt the new risk-taking behavior."

For Weller, the urge to shake things up goes back to 1994, when he became CEO. One of his first initiatives was to create a document that would lay out a common set of objectives for his highly fragmented company. The result was a two-sided sheet of paper titled "Blueprint for Success." It's one of those hokey mission statements that most people in most companies ignore. Just consider: The Nestlé USA "vision," according to the blueprint, is to be "the very best food company in the United States." But Weller believed that the document could be a blueprint for real change -- that it could help unify Nestlé and turn it into a fast-moving, entrepreneurial company.

Still, change was slow in coming. Three years ago, Harvard Business School professor John Cotter met with Nestlé's leadership team. He asked the 19 executives in attendance to close their eyes and cast a blind vote: Is this team dynamic enough to remake Nestlé into a fast, performance-driven organization? Only a few people raised their hands. "I was a little surprised by that vote," says Weller. "It showed that we had to learn how to be leaders and not just managers."