Guest post written by Stephen Forte
Stephen Forte is chief strategy officer at Telerik, a provider of software development tools.
The Twinkie’s unexpected curtain call is sure to land in the annals of many business case studies across the university landscape. How could an 83-year old, iconic American snack meet its ultimate fate despite the fact that consumers wolfed down more than 500 million of the cream-filled, golden spongy cakes each year? No doubt, business executives and students alike will dissect the tale of the Twinkie even more than it has already been sliced, diced and deep fried.
Over the years, Americans have been fascinated with the Twinkie, putting it through the wringer. How many other products have been deconstructed, radiated, liquefied, dropped from a high-rise, and even shot into space? Product probes and testing aside, Twinkie’s storied journey teaches several important lessons: some that helped it succeed and others that led to its demise. Regardless of business type – Fortune 500, startup, consumer products, software and more, businesses should take note of the lessons that can be learned from the successful rise and untimely demise of Hostess and its flagship, American delight, the Twinkie.
- Innovate
There are many factors that led to Twinkies’ ultimate downfall. When it came to innovation, it’s fair to say that 'Twinkie the Kid’ was slow on the draw. In the ultra-competitive market of consumer-packaged goods, few companies will let send their cash cow out to pasture to graze indefinitely. From Coca-Cola to Quaker Oats, large consumer goods companies continually cultivate their product lines, introducing new, bigger, better, healthier, lighter and different flavored twists to refine their products. Rather than innovate its products however, Hostess missed the mark and passed up the opportunity to leverage its brand recognition and customer base. Instead, Twinkies stayed on the sideline with its best days left far behind.
Hostess should have taken a page out of the Apple marketing handbook. Arguably, the most successful in the art of innovation, improving upon and expanding its entire product line from the Shuffle to the Macbook Pro, Apple is constantly introducing lighter, more powerful, feature-packed products. For more than 30 years, innovation has been Apple’s engine, driving it to become the world’s most successful company.
- Maintain Customer Focus
Hostess took its eye off of customers a long time ago. When Americans began to obsess with weight loss and healthier eating, many food manufacturers took notice and acted, introducing low-calorie and/or healthier options of their products. It was only a handful of years ago that Twinkie finally introduced a lower calorie version. Moreover, as Hostess was finally working to catch up with the market, perceptions of its snacks plummeted and often became the butt of jokes amongst an increasingly focused, health conscious society. Perhaps if the company had moved faster and committed more than a minimal effort to build demand for its lighter version, that was marketed appropriately, Twinkies may have enjoyed greater sales.
There are many well-known companies, from Polaroid to Research In Motion, that have fallen to similar situations as Twinkies for not acting in a timely manner. That said, those looking for an example of customer focus need not look too far. Even Microsoft – the market leader in the desktop – is investing millions to widen its focus and redirect its ship onto a new course, as is evident in its push for Windows 8 and Windows Phone 8, based on changing consumer preferences, cultural patterns and demand for the ever expanding mobile apps market.
Learning from Twinkie’s mistakes, when a business has a shrinking customer base coupled with large scale, ongoing shifts in customer preferences and tastes, don’t ignore the reality; act on the facts. Would a whole wheat or Gluten free Twinkie have been successful? The world will never know.
- Build A Strong Financial House
It seems so obvious but a strong financial house is fundamental to any business. Unfortunately, Hostess’ balance sheet became its Achilles heel. Its debt-to-income ratio became unsustainable. The true health of any company is only as good as its financial balance sheet. Hostess’ anemic balance sheet may have also prevented the company from investing in R&D or potentially repositioning Twinkies to appeal to increasingly health conscious consumers. There have been many high profile companies that didn’t keep their financial house in order, from Enron to Lehman Brothers, and they are now history. Keeping the company’s financial house in a healthy state must remain a priority for any business.
- Be Agile
Twinkie’s storied journey wasn’t always bumpy. It blazed its own trial and left many good lessons for companies to emulate.
Over the course of its lifecycle, the Twinkie faced great challenges. It successfully met those challenges head on, demonstrating its ability to quickly adapt to unforeseen circumstances. It survived World War II, which triggered rations for one of its key ingredients (bananas), so the company introduced its now famous vanilla cream center, which went on to replace the original filling. In 2000, a labor dispute created the “great Twinkie famine,” resulting in product shortages, which the company overcame as well.
Whether dealing with disaster recovery, an unexpected crisis or adverse business conditions, companies need to be agile in how they work around unanticipated roadblocks. This can make the difference between success or failure. The auto industry’s turnaround is great example of how businesses must overcome unprecedented challenges. It’s important for companies to rise to the occasion and do whatever is necessary to overcome adversity.
- Build Customer Loyalty
Few products or companies are successful enough to live a ripe old age of 83. In the case of Twinkie, its heritage left an indelible mark on people that spanned generations. When word came out that Twinkie’s days were numbered, nostalgia played a great role as customers hit the stores, wiping out the inventory. Today, Twinkies can mostly be found on eBay.
While many businesses might not have an 80-year track record, companies should strive to engage and connect emotionally with customers, just as Twinkies did. Businesses should strive to build a long-lasting product that becomes not only endearing but a continuous necessity to a customer’s way of life.
- Create a Mystique
Through its TV commercials featuring Twinkie the Kid to its tag lines and children’s rhymes, Hostess helped create a long-standing lore about the Twinkie, which propagated into an urban legend that Twinkies can survive not only radiation but that the product had a 1/2 shelf life longer than plutonium. Companies such as Nordstrom have also nurtured and cultivated a priceless mystique around their customer service. No doubt many of us have heard the story about a customer successfully returning a set of tires when Nordstrom doesn’t even sell automobile goods much less tires. Urban legend or truth? Either way, these efforts have kept the brand visible to the public eye.
- A Sweet Surprise
Without question, at the outset Twinkies delighted customers with the product’s cream-filled center that delivered “a sweet surprise with every bite.” Conceptually Twinkie’s original product vision was powerful, long lasting and set the product apart from the competition.
Businesses should take a page from Twinkies and strive to do the same by deliberately designing and building products that over deliver, in order to surprise and delight their customers. However, companies need not stop short of surprising and delighting customers with products alone. This can be extended to customer service or employee relations, either of which a company can instill and expand upon its own culture, helping to set it apart from competitors. Looking back at Twinkie’s ongoing labor problems, if they had taken a different route years ago in their HR and employee relations, today they might find themselves in a completing different scenario.
It’s important to remember that Twinkies aren’t fading into the sunset because the product wasn’t right or for lack of demand; recall, they sold 500 million annually. It came to the end of its trail due to a number of key factors, each of which was under management’s ultimate control.
In the words of Warren Buffett, “in the business world, the rearview mirror is always clearer than the windshield.”
