A Body at Rest

By Kim S. Nash Print this article Print

Mattel's world-class competitive intelligence system crunches sales reports, children's play-pattern studies, and even findings on where kids go online. The system picked up signals that young girls, heavily influenced by the gyrations of pop star Britney

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.

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    This article was originally published on 2005-08-04
    Senior Writer
    Kim has covered the business of technology for 14 years, doing investigative work and writing about legal issues in the industry, including Microsoft Corp.'s antitrust trial. She has won numerous awards and has a B.S. degree in journalism from Boston University.
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