Crayons Frame

Crayola was one of the most beloved children’s brands of the 20th century. Yet by early in the new century, the company had run out of gas. Its revenue grew by just 3% over the four years ending in 2004—a decline after subtracting inflation. As recounted in the academic publication Journal of Brand Strategy, “Crayola was beginning to be thought of as an evergreen brand with limited growth potential.”

But then, suddenly, the company’s sales exploded. By 2010, its revenue was 64% higher than in 2004. What brought on this stunning shift from stagnant to outstanding?

It began with the leadership team asking themselves a simple question—one that every company keen to grow its business should ask itself: what business are we in?

Sophisticated yet simple

This may seem like an obvious and overly simplistic question. Yet, if you consider the answer carefully, it can open up new markets, develop new revenue streams and enhance existing ones, direct and inspire new innovation, and motivate and align your employees. Your answer can be a catalyst for substantial growth.

The flip side is that if you don’t know the answer—or, worse, ignore it—your company may focus on the wrong things, emphasize the wrong benefits, create inefficiencies, miss opportunities and leave money on the table.

To demonstrate the sophistication of this simple question—what business are you in?—answer it for yourself right now. Or, better yet, ask your management team to do so. If the answer includes the product or service that your firm provides, it’s likely not the right answer.

Crayola’s answer

At Crayola, a traditional knee-jerk answer would have been, “We’re in the business of selling crayons.” But, as I always counsel my CEO clients, the question isn’t what do you do or make, it’s what business are you in? In order to answer that question and reap the benefits of the answer, you need to consider:

  • What are the true needs that my products or services are meeting for my clients?
  • What are the real benefits that my products or services are offering?

When Crayola’s management went deeper and explored those questions, they realized that they were in the business of “helping parents and teachers raise inspired, creative children.” It wasn’t about the products Crayola produced—these were just a means to an end—but about the underlying needs the firm’s market had that Crayola was uniquely capable of meeting.

This answer led Crayola into a process that radically changed the firm’s fortunes. The company restructured, brought a new product-innovation process to life and reshaped the company culture so that Crayola could better deliver on its brand promise. And the company’s rate of sales growth took off.

Answering this question properly often creates opportunities for new revenue streams that wouldn’t even have been considered before. At Crayola, the company’s answer meant it didn’t need to stay just within the box of manufacturing crayons, but instead could expand its vision and scope to other products and services that would meet the ultimate need of helping parents and teachers raise inspired, creative kids.

Once the company’s management understood this, they realized that the number of revenue-generating options open to them was restricted only by their own imagination and capabilities—not by some preconceived and impulsive answer to a simple yet sophisticated question. And, as well as launching new products, Crayola made other changes to ensure that the company could deliver on its answer. These included developing an employee-immersion program that details how the company translates the answer into everyday responsibilities.

Seven steps to answering the question for your company

Here’s how your business can carry out the process that proved so fruitful for Crayola:

1. Gather for a full morning session a cross-functional team of 10 to 15 people who represent all the major areas of your business and who are seen as rising stars—no timecard punchers.

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