Mattel: How Barbie Lost Her Groove

 
 
By Kim S. Nash  |  Posted 2005-08-04
 
 
 

Bad news came with botoxed lips and belly shirts. In the summer of 2001, toymaker MGA Entertainment introduced Yasmin, Jade, Sasha and Cloe—the Bratz. The new fashion dolls came in a rainbow of skin tones, with pouting, street-smart expressions. African-American Sasha wore a hip-hop knit cap and low-rise jeans.

No blonde hair, sugary smile or impossible figure, which for four decades had defined Mattel's iconic Barbie doll. Girls who wanted attitude and ethnicity, not pert and pale, bought $20 million worth of Bratz dolls in the first six months they were out, and the doll line went on to win the People's Choice Toy of the Year award from the Toy Industry Association.

MGA had hit a coveted demographic—girls age 6 to 12—dead-on.

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And yet, Mattel was uncharacteristically sluggish in response. It would be a full 14 months before Mattel came out with a Barbie offshoot, the My Scene dolls, that featured the right mix of vivid makeup and edgy clothes that young girls now craved.

The gap was long enough for Bratz to get a platform-booted foot in the door and stay there.

Unlike doll makers before it, MGA was able to seize, and keep, market share.

Worldwide sales of Bratz reached $700 million last year —growing more than 45% over the previous 12 months, while Barbie has stagnated at the same $1.5 billion level since MGA introduced Bratz four years ago. Barbie's share of the fashion doll market has shrunk from 75% in 2000 to roughly 60% today, says Sean McGowan, a financial analyst at Harris Nesbitt Gerard in New York.

Today, new rivals—Janay and Friends from Integrity Toys, Girls on the Go from Tolly Tots, and the Princess line from Disney—are are all crowding into the doll aisle.

"It's a business that's more up for grabs than ever before," says Nancy Zwiers, who led worldwide marketing for Barbie for five years. "Now that Bratz has made inroads, it's become apparent to other companies that they can, too."

Mattel had the means to see it all coming. Yet it was still caught off guard.

The toymaker has a world-class corporate intelligence system that consists of teams of research scientists who manipulate internal and third-party data with statistical analysis and business intelligence software.

Pre-Bratz, they studied point-of-sale numbers from Wal-Mart and other key retailers that showed zigzagging sales for Barbie. The company also had "psychographic" data about how girls of different ages play, drawn from Mattel's private focus groups and observations at its own Child Test Center.

That data suggested, for instance, that older girls— age 8 to 12, known to marketers as "tweens"—were losing interest in traditional Barbie, attracted instead to pop stars in heavy makeup and trendy clothes.

Identifying threats early is the goal of a good business intelligence program.

But intelligence is only part of the equation, says George Day, a marketing professor at the University of Pennsylvania's Wharton School who has studied several industry giants that have missed cues from the marketplace and subsequently suffered. You need systems—human and technological—to interpret data, and then you need the wherewithal to act on it.

And that is where Mattel stumbled, according to consultants, such as Day, and several former Mattel managers, including Bruce Stein, who was chief operating officer and president of Mattel Worldwide from 1997 to 1999. Two factors blunted Mattel's reaction, they say: internal challenges that distracted management, and the company's disinclination to change its key product.

Mattel declined requests for interviews, citing busy executive schedules.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?
    Next page: The First Tentative Steps.


    Mattel did take tentative steps in 1999 and 2000 to address tweens' changing tastes with dolls such as Diva Starz, but the moves didn't click. Diva Starz' bright facial features and hipper clothing, for instance, stopped short of the new provocative styles being blasted on TV and in magazines.

    Mattel, says Jim Silver, an advisor to the Toy Industry Association, a trade group, didn't act swiftly and forcefully enough to insulate its cash cow. The company, he says, "thought [Bratz] would come and go," just another challenger without endurance. In 1991, for example, Mattel beat Hasbro's blonde, busty Miss America doll by introducing its own American Beauty Queen Barbie. Likewise, Tyco Toys' Little Mermaid doll initially skyrocketed but eventually drowned under a wave of mermaid Barbies from Mattel.

    Now, Mattel finds itself fully engaged in a no-holds-barred attempt to outmarket Bratz, incite new doll merchandising trends and keep Barbie on her throne. Mattel says it won't let up.

    It can't.

    Last year, Barbie, a perennial top seller, accounted for 30% of Mattel's $5.1 billion in sales and an estimated 40% of its $573 million profit. In the past 30 years, the Barbie product line has produced approximately $24 billion in sales.

    When Barbie is at risk, Mattel is at risk.

    "This is what happens when you get blindsided," Day says.

    The Mattel-MGA battle holds lessons for any company trying to create an effective market intelligence system. Any company can develop accurate research and sophisticated technology to manipulate it, Stein points out: "The key is in how data is interpreted and, secondly, management's willingness to respond to it."

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: A Body at Rest Stays at Rest.

    Stays at Rest">

    Well before the Bratz came hip-hopping along, Mattel, and the toy industry in general, had spotted a phenomenon called "age compression."

    The most recent generations of children are outgrowing traditional toys sooner. Not so long ago, girls up to age 12 played with Barbies. By 2000, tween girls were a generation weaned on Britney Spears gyrating on MTV in a schoolgirl uniform and crowned her their own pop icon.

    For growing-up-in-a-hurry tastes, Barbie had become a baby toy; Mattel understood that older girls were losing interest in its flagship doll—and that even little girls 6 and 7 years old were influenced by their big sisters.

    But starting in 2000, Mattel was focusing on a set of business challenges that included a transition at the top.

    Former Kraft Foods chief executive Robert Eckert arrived as its new chief executive, replacing Jill Barad, who as CEO had pushed Barbie into new venues such as CD-ROMs, digital cameras and even NASCAR with a car-racing Barbie doll.

    The company also was wrestling with the Barad-led acquisition of educational software maker The Learning Co., a deal blamed for Mattel's $431 million loss in 2000.

    Figuring out how to regain profitability topped Eckert's to-do list.

    "Mattel was vulnerable," says Ronald Goodstein, associate professor of marketing at Georgetown University in Washington D.C., and a consultant for Mattel in the mid-1990s about best practices in product branding. And the best time for a rival to strike with a new product, he adds, is when a company is looking inward.

    But former COO Stein says that even if Mattel executives had focused on the intelligence that Barbie was vulnerable and sounded a red alert, the company's instinct not to mess with the "hallowed ground" that was the highly profitable Barbie line would have muted the response.

    Although Mattel was willing to add accessories and appendages—even a fish tail in 1992 to brush back Tyco's Little Mermaid—remaking Barbie with heavy makeup and urban-chic outfits would have run up against years of policy not to break the mold. "The culture of protecting Barbie within Mattel is in their basic DNA," Stein says.

    Yet that reluctance to disturb Barbie—even with hard evidence of a market shift—coupled with the internal distractions, left the product line, and by extension Mattel itself, exposed.

    In any industry that experiences tectonic shifts, it's rare to see companies react to the early warning signs, even though they're generally visible, says Wharton professor Day, who has studied missteps at Mattel, Monsanto and other industry giants.

    Long-running success makes managers at large companies near-sighted, he says. Focused on a mainstay product, they tend to ignore fresh information that diverges from their accepted norm in three basic areas: marketplace trends, the interests of target consumers, and threats from competitors. For example:

  • Monsanto, a leader in plant biotechnology, failed to recognize a shift in marketplace mind-set in the late 1990s. Genetically modified crops like canola and variations of corn and soybeans were promoted as healthier than natural versions because of built-in benefits such as reduced saturated fat. Farmers liked them for their bioengineered protection against pests.

    But when a British scientist said in 1998 that genetically modified potatoes lowered the immune system responses of rats, other medical authorities chimed in with concerns about altered crops—and there soon followed a firestorm of protests and European government edicts against so-called "Frankenfoods."

    Investors panicked. Monsanto's stock price lost 20% through 1999. The then-$9.1 billion Monsanto was pushed into a merger with Pharmacia Corp., largely for the value of its pharmaceutical products.

  • Blockbuster, the ubiquitous $6 billion movie-rental chain, watched as Netflix, an online movie-rental company, grabbed 2.6 million customers in six years by eliminating late fees and offering convenient service through the mail.

    Cornered, Blockbuster in January decided to drop its late fees—worth at least $400 million in revenue. Still, Blockbuster said in financial documents that it had no choice other than "to eliminate the most prevalent customer complaints … and combat our competitors' use of this concept."

  • Microsoft, despite having a track record of spotting and eliminating up-and-coming competitors, such as WordPerfect and Novell, didn't see Netscape Communications coming with its Web browser in 1994. It took Microsoft 10 months to release its own browser—and even then, it was built on a product licensed from another company.

    Microsoft eventually clobbered Netscape, but the upstart's early, unexpected success forced Microsoft to revamp its core products, incorporating Internet features into every one of them.

    The list goes on, but Mattel didn't have to be on it.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Barbie's Eye for the Competition.

    s Eye for the Competition">

    Since its inception in 1945, Mattel has been collecting market intelligence in some form. While systems and procedures have been upgraded, refined and enhanced, the basics have remained the same.

    Mattel's market research department mixes and analyzes data that comes from the company's own financial and inventory systems, plus outside trend and demographic information from at least five market research firms, including ACNielsen; anecdotal research from focus groups; statistics from large consumer surveys; studies of children's play patterns; and sales figures from Wal-Mart and other giants.

    Mattel also continuously collects aggregate sales at hundreds of smaller retailers from market researcher NPD Group, which gathers monthly sales figures on Mattel's 107 product lines from store owners across the U.S. and Canada.

    Mattel seeds its Oracle and IBM DB2 databases with data on units sold, models, prices and dates, and analyzes past and present sales patterns by brand, geography and other categories—all to help forecast the future.

    Analysts at Mattel can run database queries to spot sales trends and conduct profit-and-loss studies by product. Marketing managers like to measure the effectiveness of TV commercials by looking at store-level sales data before and after an ad campaign begins, says Jennifer Caveza, a former marketing brand manager for Mattel's Fisher-Price division.

    The numbers also are analyzed in light of observational data from outside researchers and Mattel's own scientists, including "mall intercept" interviews with girls and anecdotes about the competition collected from Mattel's field sales agents, who chat up buyers at the big retail chains.

    Employees up and down the Mattel hierarchy are expected to collect and discuss intelligence, using e-mailed updates, text reports filed at private Web sites, and monthly meetings among brand marketers, market researchers, sales managers and product designers.

    Even the part-timers Mattel hires in the busy fall season to drive from store to store to set up merchandise and ensure that stores are giving Mattel its negotiated shelf space file daily reports to headquarters on what they find, via a secured Web site.

    CEO Eckert himself visits toy stores to eyeball inventory levels of competing products.

    Meanwhile, senior consumer research analysts with MBA degrees conduct focus groups and interviews with girls, and then speak as the "voice of the consumer" in presentations to senior managers in the consumer research department. Senior associates in the company's corporate strategic planning group—positions that require not just MBAs but Ivy League MBAs—assess competitors to determine whether to try to beat them or buy them out.

    These senior associates, according to job descriptions at Mattel's Web site, also track market shifts in toy categories such as fashion dolls, baby dolls and ride-on vehicles to improve brand sales and profits, and regularly prepare material for Eckert, chief financial officer Kevin Farr and senior vice presidents.

    One source of valuable hands-on information is visits by Mattel researchers to children's homes (with parents' OK, of course) to observe and understand play patterns.

    For example, if researchers see Barbie dolls displayed on a shelf above a girl's dresser, even if the girls like them, it's an indication they don't play with them regularly. They may even be forgotten, says Zwiers, the former Barbie marketing executive, who founded Funosophy, a toy-brand consulting firm in Long Beach, Calif., after leaving Mattel in 1999.

    It's more encouraging to see dolls lying on a pillow on the bed, which indicates they are loved and held. Similarly, dolls seen on the floor next to a box of doll clothes indicates active play.

    Seeing what else is in the room also tells a story. Mattel doesn't want to find Barbie on the closet floor and Sasha and Yasmin Bratz on the pillow.

    "Having girls tell you in their own words what they have on their bed and why, and what they have stuffed away in their toy box and why, can be so much more revealing than asking a lot of canned questions," she says.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Hard Analysis Gets Answers on Soft Subjects.

    Answers on Soft Subjects">

    Mattel can record such observations in content analysis software, like Nvivo from QSR International of Australia, which scans for keywords, analyzes their context and weights them for importance. For example, each toy identified in an interview can become a data point, as can the order in which a girl names her favorites. Analyze enough of those interviews, and a toy company can see what girls think of its own and its competitors' products.

    Mattel recently has added to its mix business-analysis products from Hyperion Software, Business Objects and others. Analysts use these products to answer questions about a data set, such as "How many Cali Girl Barbies did we sell in the first nine months of last year, and how does that compare to the sales level we're ramping so far this year?"

    The products also can be used to produce executive "dashboards" that distill current data on sales, profitability, operating costs and other metrics to produce color-coded reports and alerts for senior managers.

    Finally, Mattel casts a wide net to understand the overall marketplace, so it can determine how societal trends, such as 12-year-olds downloading music, might affect Barbie sales. (Say, should Mattel approach Apple Computer about an iPod cross-licensing deal?)

    Mattel works with ACNielsen to track TV viewing habits but also consumption of other media. For example, ACNielsen monitors magazine readership statistics and Internet traffic to better understand what girls do when they're not buying toys.

    Its NetRatings Internet analysis service functions a bit like its TV ratings service. Families volunteer to have their online activities tracked and recorded. When a member of a Nielsen family sits down at the computer, a screen displays the names of members of the household. If 8-year-old Ariana clicks on her name, NetRatings, with parental permission, tracks wherever she goes online using software installed on the machine.

    "We'll tell them, 'Here are the most popular shows for 8-year-old girls, here's where they're going online, here's what they're reading and here's where you should spend your advertising dollars,'" says Corey Jeffery, a senior analyst at Nielsen/NetRatings.

    In response to the popularity of the American Idol TV show and Web site among older girls, Mattel launched American Idol Barbie in January.

    The company also uses software tools from Cognos, SAS Institute and SPSS to mix and match internal findings with outside market or economic statistics.

    Using Cognos analytic tools, for example, Mattel can track the income level of families that buy traditional Barbie products or newer My Scene dolls by triangulating point-of-sale data from different stores, such as Sears or Target or KB Toys, with U.S. Census data on household incomes by ZIP code.

    It can also determine, say, whether Internet traffic by geographical region is a leading or lagging indicator of sales for Barbie. If click counts at Barbie.com's American Idol section soar in California in September, but show no similar spikes in Florida, Mattel has a strong indication of where it needs American Idol products on shelves and where to punch up marketing before the holiday shopping season.

    With statistics tools from SAS and SPSS, Mattel's consumer research managers use regression analysis—modeling what-if scenarios by figuring out the relationships among variables such as disposable income, retail locations, weekly sales trends, price fluctuations for the soft plastic of which Barbie is made in Indonesian factories—to get a sense of future trends.

    One kind of question: "If Wal-Mart will allow My Scene dolls 12 feet more shelf space in half of its 3,000 stores and we run a $3-off consumer coupon in Nickelodeon magazine, how many points of market share could we steal back from Bratz next quarter?"

    The combined intelligence—numerical, observational and aggregated information, from both outside research firms and Mattel itself—helps Mattel's strategic planning group fill in what Mattel Brands president Matthew Bousquette calls a "pyramid" of products aimed at girls of different ages and tastes.

    Fairytopia Barbies, for instance, include dolls dressed as fairies with light-up wings for little girls, and $15 bottles of eau de toilette created by perfumer partner Puig Beauty and Fashion Group, for older girls.

    To get a feel for the future, Mattel designers create sketches and foam-core prototypes to show to prospective customers of different ages. Researchers then pose a simply worded but critical question, says Patricia Lewis, former director of marketing for Barbie in the mid-1980s and, later, an executive at several competing toy companies.

    "We would ask girls, 'Are you ready for this type of doll?'" she recalls.

    The answers reveal what girls view as a step beyond them in maturity—and what they may reach for as they grow, she says. Asking mothers the same thing gives a glimpse of the support or resistance Mattel might encounter with new dolls. "You do need to keep the moms in consideration," she notes.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Mattel Upgrades IT to Crunch Better Barbie Numbers.

    Crunch Better Barbie Numbers">

    Gathering and crunching all this data takes processing power. Mattel has acknowledged in conference calls with financial analysts that the hardware and software to support its overall technology strategy needed help in the late 1990s and early 2000s.

    Mattel's former chief information officer Joseph Eckroth, who left in June to become CIO at real-estate investment company New Century Financial Corp., has said that when he arrived in 2000, he found that Mattel's information systems were a decade old. There were 200 "fragmented" enterprise systems in manufacturing, inventory management and transportation that didn't easily share data.

    About 80% of them were custom built, which was "a limiting factor on our employees' productivity and operating efficiency," Eckroth told financial analysts during an April 2002 conference call. Dianne Douglas, formerly head of investor relations, has been named Mattel's new CIO.

    A company that runs dozens of older applications built by in-house programmers can find its technology staff spending most of its time maintaining the software and creating interfaces between any new software and the older applications.

    Corporate intelligence amounts to understanding your customers, sensing the competition's next moves and knowing yourself. A lack of reliable, timely data from a company's own accounting, supply chain and other core applications impedes the flow of information to decision-makers.

    Eckroth explained during the analyst call how the inefficient technology had hurt Mattel's ability to compete: "[By] the time an event has occurred—let's say a change in demand for a specific product—and the information is made available to the people who need to react to it, it is often too late to take action to effectively minimize a risk or maximize an opportunity."

    Early in 2002, Eckroth and Eckert launched an overhaul of Mattel's information systems. They wanted to make the technology department more efficient with off-the-shelf applications that needed less "manual intervention" by developers and support staff.

    They also wanted to use technology to make the company as a whole more efficient. Focal points included replacing 2,000 old personal computers; upgrading the disjointed, customized enterprise software; and installing a data warehouse for better decision-making.

    "Every year we are incurring millions of dollars in lost opportunities," Eckroth said in 2002, "whether it's ... to manage inventories better, reduce our cycle times, improve our customer service or eliminate non-value-added work, all because our systems infrastructure is not up to date."

    Eckroth steered Mattel toward packaged software. That included buying Hyperion products, including Essbase, for financial and research analysis in early 2002; Mattell also standardized on Oracle financial applications and databases in late 2002, and deployed Computer Associates' ERWin data-modeling tool. In 2003 and 2004, Mattel focused on rolling out Oracle Financials so its offices worldwide could see and report unified budget and other financial data.

    Consistent data makes forecasting more accurate, which in turn feeds better data into internal intelligence reports.

    But Mattel's mistake related to Bratz wasn't so much that it wasn't getting data; the information was processed and delivered. What mattered was the company's ineffective response, says Ben Gilad, a competitive intelligence expert and author of Early Warning, which outlines corporate intelligence problems, including Mattel's. Mattel, he says in an interview, "completely missed on the early signals and it caused them to lose the edge."

    In the period from 2000 to 2002 when MGA bore down, financial data from Mattel's accounting systems indicated sales dips for Barbie. Mattel does not give dollar figures for U.S. Barbie sales, but disclosed that domestic sales of the doll line dropped 12% in 2001 and another 2% in 2002. Ultimately, U.S. Barbie sales would fall 15% in 2003 and 15% last year.

    In those four years, according to industry estimates, U.S. Barbie sales dropped $500 million.

    At the same time, the company had to deal with the fallout from the $3.5 billion acquisition of The Learning Co. Even former CEO Barad's impressive achievement of taking Barbie from a $200 million brand when she started managing the doll line in 1982, to $1.8 billion in 1997—the year she became chief executive—wasn't enough to salvage her job. She resigned in February 2000 under pressure from the board, ending her 18-year career at Mattel.

    After three months with no permanent leader, the company tapped the more conservative Eckert, a newcomer to the toy business, to fix the mess at Mattel. On top of it all, Toys R Us—which, with Wal-Mart, accounted for 40% of Mattel's sales in 2000—was pulling product orders as it struggled to stay alive.

    "Mattel was in a desperate time when I came on," CIO Eckroth told an audience at an Oracle customer meeting in 2003. "Bob needed to get the company back on track."

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Recovering From a Bad Relationship.

    Relationship">

    To stop the bleeding from The Learning Co., Eckert signed an unusual deal. He gave The Learning Co. to Gores Technology Group, a turnaround firm in Los Angeles, in exchange for "future consideration." Mattel would get a share of any profits Gores could coax from a revitalized Learning Co., or part of the proceeds if, as eventually happened, Gores sold it. Mattel got $21.3 million—a sliver of what it paid. But Eckert had freed Mattel from the drag of funding a money-losing software firm.

    Eckert also forged a financial realignment plan in late 2000, to save $200 million over the period from 2001 through 2003. Mattel closed factories in Kentucky and Mexico along with some international offices, and lopped 2,570 people from its 27,000 workforce.

    Amid Mattel's upheaval, Bratz' mojo grew.

    Zwiers, the former Barbie marketing leader, says her alma mater needed to work harder to figure out where to take Barbie.

    "Leadership at the very top of Mattel had changed," she notes. "There was not the same understanding of the level of ferocity needed to cut someone off immediately and not let them gain a foothold."

    Former Barbie marketing director Lewis says Mattel intelligence had picked up wisps of age compression from internal surveys and external lifestyle studies even when she was there in the mid-1980s.

    Mattel did bring out dolls wearing flashier clothes, such as its Diva Starz line. But with no competitor yet capitalizing on those concepts—and Barbie's sales still growing—Mattel didn't push this new direction.

    "Mattel did not have an incentive to turn the fashion-doll aesthetic upside down," Zwiers says. "Only someone trying to unseat Barbie could do that."

    When Bratz arrived next to Diva Starz on toy-store shelves, the Mattel dolls' rounded heads and muted makeup looked immature. Diva Starz are still available but have been repositioned for "transitional" girls age 6 to 8, rather than tweens.

    In addition to the My Scene dolls, in June 2003 Mattel tried to further dilute the market for trendy dolls, adding an even edgier line called Flavas. But the dolls, meant to evoke the hip-hop music scene, incensed some parents who felt Mattel had turned Barbie into a tart. By early 2004, Eckert killed the product.

    "Every year we have products that work well and products that don't and simply said, Flavas was one of those that didn't work well," he told financial analysts in a February 2003 conference call.

    Mattel acknowledges that today few segments of its Barbie product line are doing well—mostly those intended for girls under age 5. Other Barbie versions, including those competing against Bratz, "need more work," Eckert acknowledged in an April conference call with financial analysts. He vowed to continue "rebuilding relevance with girls."

    The lesson? A giant that rules its market can't get comfortable, says Day of the Wharton School. Instead, he says, it should create crisis internally, to teach itself how to respond when trouble does appear.

    If Mattel, as part of its intelligence operation, had set up an internal "attack team" to strategize about how it would compete with itself, he says, it would have known to move faster when MGA first launched Bratz. "Ask yourself what have been your blind spots in the past and what's happening there now," he says (see sidebar, p. 45).

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Barbie Fights Back.

    Fights Back">

    Mattel is fighting back against Bratz not only cheek-to-jowl on store shelves, but in court.

    Several Mattel veterans now work at MGA and are involved in legal battles. Mattel is suing product designer Carter Bryant, a former Mattel doll designer, for allegedly spilling confidential information and taking Mattel ideas with him to MGA.

    Also included in the suit are 10 unnamed MGA employees accused of helping Bryant breach fiduciary, loyalty and confidentiality duties to Mattel.

    Bryant has denied all charges and is countersuing Mattel for allegedly forcing him to sign an overly broad employment agreement when he started work there. Bryant says, for example, that the contract prohibited him from revealing routine information such as the identities of Mattel employees and their skills and knowledge.

    In April, MGA sued Mattel, accusing it of acts of unfair competition and intellectual property infringement related to the resemblance between My Scene and Bratz dolls. All cases are pending in U.S. District Court in Los Angeles.

    Meanwhile, Mattel has swamped toy stores with new doll products—Barbies that look like the stars on American Idol and 19-year-old movie actress Lindsay Lohan (Herbie: Fully Loaded), as well as Fashion Fever Barbie dolls endorsed by Hilary Duff, who stars in Disney's popular Lizzie McGuire TV show about middle-school girls.

    In June, Mattel announced Barbie would hit the road, with an actress touring next year in a live show based on Barbie's Fairytopia incarnation, which sells well among girls 3 to 5. The My Scene dolls have many new accessories, including a limousine with hot tub. This fall, My Scene Goes Hollywood, a direct-to-video animated movie, is due out.

    Still, retailers typically give My Scene less shelf space than Bratz. At a Toys R Us in Calgary, Alberta, for example, My Scene claimed 36 feet to Bratz' 52 feet. The disparity was greater at a Wal-Mart in Peekskill, N.Y., where My Scene got 16 feet to Bratz' 60 feet.

    Barbie had more real estate than either doll line at both locations, but Barbie sales still languish. Retailers measure sales and profits per square and linear foot, and generally give more space to products that generate higher margins.

    Mattel's financial picture is better than when Eckert arrived in 2000, yet five years later he still struggles with Barbie. Last month, Mattel reported that Barbie sales dropped 4% worldwide for the second quarter. "We still have a lot of work to do on Barbie," he said last month. He noted that he has tried to make Mattel less reliant on any single brand, but that Barbie continues to be "an important, sizable business for us."

    Meanwhile, in its latest annual report, Mattel vows its No. 1 goal is "invigoration of the Barbie brand."

    Yasmin, Jade, Sasha and Cloe don't look worried.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?

    Next page: Barbie by the Numbers.

    by the Numbers">
    Base Case:


    Headquarters: 333 Continental Blvd., El Segundo, CA 90245
    Phone: (310) 252-2000
    Business: Makes and markets toys, including Barbie, Hot Wheels and Fisher-Price products.
    Chief Executive Officer: Robert Eckert
    Financials in 2004: $5.1 billion in sales; $573 million in profits; net profit margin of 11%.
    Challenge: To maintain Barbie's place as the top-selling fashion doll in the world, and a cash cow for Mattel, amid an onslaught of doll challengers.

    BASELINE GOALS:

    • Generate 50% of sales outside the U.S., up from 42% last year.
    • Cut overhead costs as a percentage of sales to between 17% and 18%, down from 20% last year.
    • Increase operating margin as a percentage of sales to 20%, up from 14% last year.
    • Continue to decrease reliance on Wal-Mart, Toys R Us and Target, which combined accounted for 46% of sales last year, down from 50% in 2002, in favor of smaller retailers and online sales.

  • Story Guide:
    How Barbie Lost Her Groove Great product; historical franchise; huge market share; unbelievable customer affinity. And rapidly dropping popularity
  • The First Tentative Steps: Mattel did see signs of trouble and started to react; but not strongly enough.
  • A Body at Rest Stays at Rest: Mattel isn't the only company that failed to react quickly, even to clear warning signs.
  • Barbie's Eye for the Competition: From the beginning, the Barbie franchise was protected by intelligence gathering and analysis, which helped Mattel reinvent her for every generation of girls.
  • Hard Analysis Gets Answers on Soft Subjects: "Are you ready for this doll?" "Whatever." "Hello, connect me with Design...."
  • Mattel Upgrades IT to Crunch Better Barbie Numbers: You're not going to predict the future with a white-box desktop and an Excel file.
  • Recovering From a Bad Relationship: Acquiring The Learning Co. turned out not to be the best move Mattel ever made. CIO: Mattel was in a desperate time when I came on."
  • Barbie Fights Back: Mattel floods store shelves with new product, sues MCA and makes reviving Barbie its No. 1 corporate goal. Bratz still dominate toy-store shelves.
  • Barbie by the Numbers: Who's who and what's what at Mattel. Business stats paint a portrait of Barbie's creators.

    Operational Details on the Barbie Situation:

    Barbie's Heroes: Mattel's intelligence agents, their bosses, and who played what role in the problematic reinvention of Barbie.
    Roadblock: CEOs can be the Greatest Obstacle to Success. Mattel's intelligence told it kids wanted hipper Barbies; CEO Robert Eckert and Mattel reacted slowly, and paid the price.
    World Class Tool Box: Mattel uses a sophisticated set of data and intelligence tools to steer the Barbie franchise.
    Near-Sighted Corporate Intelligence Can Be as Deadly as the Competition. Rival companies with successful toys put Barbie in a tough spot. Politics, social pressures and fashion changes can sink you or—as Japanese car-makers demonstrated—make you a winner.
    ACNielsen: Retail Riches. Every day, ACNielsen gathers data associated with millions of retail purchases, from apples in Arizona and Barbies in Boston. It charges a bundle for the results. Is it worth it?