WASHINGTON–There is a sweet lesson to be found for credit unions in a Cinnabon roll.
An executive who helped turn that company around as president at age 31 told credit unions at CUNA’s GAC here that legacy businesses will always be afraid by what innovation businesses do, but that they owe it to their members to have leaders who are disruptive and innovative. But they must also understand two fundamental truths about any company’s brand.
“Brand building may seem odd and not interesting for legacy credit unions, where so many of your members are multi-generation members,” said Kat Cole. “But you need to not just appeal to a current member, but to future employees, you have to be incredible at brand building and storytelling.”
Cole, who began working at Hooters while in high school, was named a VP of the restaurant chain by 26, then president of Cinnabon at 31, before becoming group president with Focus Brands, parent company to Cinnabon and numerous other restaurant brands. Cole shared with her credit union audience some keen insights learned during her career on how to build and retain resilient brands.
Known for cinnamon rolls the “size of your face,” according to Cole, today Cinnabon has more than 6,000 stores in 68 countries around the world owned by 1,600 franchise partners.
“To launch something I have to get 1,600 business partners around the world to agree,” said Cole. “What that forces you to be good at is storytelling to create advocacy. We have to do that every day to get the basics of business done. For the last 10 years, we have faced a high degree of disruption, regulation, and new entrants in the market that have forced us to fight for every customer and every dollar in ways we never have before, and forced us to tell our story.”
Voting With Feet & Wallet
Cinnabon was hit hard by a confluence of factors in recent years, including the recession that drove down visits to shopping malls where many Cinabbon stores are located, increased attention to healthier alternatives, and new taxes in cities and states on sugar-based foods.
“We had to march on Capitol Hill and talk about our move to better ingredients and smaller portions, but also that this was about personal choice,” said Cole. “We sat down and said we’re going to fight for everything we can to help our businesses survive at the government level, but we also have to win at the customer level by having people vote with their feet and their wallet.”
It was in that process of reinventing the business that Cole said she and Cinnabon learned a number of lessons and business tenets that still guide her.
“I sat down with franchisees and realized we needed to innovate. We had been making Cinnabons the same way for 30 years, and we still do,” said Cole. “I talked to our employees. There are two truths to brands that win today and drive brand health: relevance and differentiation. Talk to your next generation of credit union members and find out if you’re relevant to them today. If not, why not? And are you different in some way to other financial services? There is a lot of strategic and tactical work that needs to be done.”
Cole told credit unions it’s not enough to simply be different, it’s the relevance piece that also needs to be apparent. That can mean challenging some core assumptions and having some uncomfortable conversations, as Cole and Cinnabon found out.
Project 599
“Our franchisees said ‘What we do is so special, no one does it like we do; people coming to us for decades.’ But that clearly is not translating to sales,” said Cole. “We were in a position of lack of relevance. People were saying they don’t want high sugar, high gluten deserts. We are high sugar, high fat. We said, ‘Don’t eat it every day. Please. But there’s nothing more delicious if you want to have something special every once in a while.”
With all the attention on calories, Cinnabon launched an internal initiative called “Project 599” as part of an effort to get the number of calories in a Cinnabon below 600. But Cole eventually nixed the effort, despite the investment.
“Some crazy things can happen in innovation initiatives. Sometimes, executives get so caught up in an idea,” shared Cole. “Reducing the calories felt so right, but it wasn’t going to mean $1 in additional transactions. Yet it felt good, looked good, and we were putting resources around it. But there was another problem with this innovation. If you keep something the same size but reduce the calories, then you have to put in artificial ingredients. We were inadvertently creating another problem. The most well-intended innovation, which we thought would do something for the business, would have actually caused a reduction in business. It takes true leadership courage to stop a train in motion. So many people try to convince you that because a train is in motion you should allow it to procced. That’s the funny thing about solving problems for any legacy business.”
Cinnabon ultimately opted to focus more on a product it already had in place: mini-bons with 320 calories. But it only did that after overcoming pushback from franchisees who were afraid current customers would simply be trading down to a lower-priced item.
Overcoming Pushback
“They asked, ‘Why would I offer something smaller when I am already getting them to pay more?’” said Cole. “The answer was because there is an entire universe of consumers currently paying zero. And these opportunities are in every industry. Our sales jumped 6% to 7% and we cannibalized zero. We had been looking for something new to fix things when it was there all along.”
The lesson for credit unions, she said, is to take a look at the price point on products and services already offered to see if there are ways to make them more accessible to members who aren’t currently using them.
But that doesn’t mean everyone in a credit union’s management team will embrace the change. “The legacy business will always be scared by what the innovation business does,” said Cole. “But you owe it to your communities to have leaders who are disruptive and innovative.”
Early Lessons In Life
For Cole, lessons in disruption came early in life. She revealed that her mother finally walked away from her “raging alcoholic” father when she was nine years old, taking her two sisters with her even though her mother had “no resources and no one to turn to” in their hometown of Jacksonville, Fla.
“It was my first business lesson in being a disruptive business leader, which I didn’t know at the time,” said Cole. “When my mother said ‘That’s it, I’m done, I’m leaving,’ I did not cry. I said, ‘What took you so long?’ The lesson in that is the people who are closest to the action, the front-line worker, the call center employee, know what the right thing to do is long before the leader does. But they typically don’t have, A), the language to articulate what the problem is or what the solution might be and B), they don’t have the authority to do something about it.”
Cole said her mother fed three children on $10 a week for three years, “and her credit union membership saved us during that time.”
A Life Pivot
A gifted student, Cole became the first in her family to go to college, where she was enrolled in engineering school. But then life stepped in again.
“I was working at Hooters and all the cooks quit one day—not sure what happened, someone stole their weed or something, and they all quit,” said Cole to laughs from her audience. “That was a day I learned an interesting lesson about humans. I learned there are two types of people when things get tough: There are the maintainers, who stand back and see what’s going to happen, and then there are those who rush into the fire. That’s me, and it’s not always smart. So, on that day me and a few other people jumped into the kitchen, and the reality is it’s not that hard. When chicken wings float, they’re done. I also realized that day I love cooking and being in the kitchen.”
For the next six months Cole said she learned to work every job in the restaurant, including management, which led to a phone call from the headquarters office asking if she’d like to go to Australia to open the first-ever Hooters franchise there. She was 19 at the time.
“That led to a career path I can only describe as insane. I started opening franchises at 19; so it was clearly not a sophisticated company. By 20 I had opened 10 restaurants on four continents in 10 countries.”
Ultimately, Cole dropped out of college, which she said is OK only if someone has a “compelling alternative.”
Advice For Credit Unions
Now in senior management with a larger corporation, Cole offered this advice to credit unions regarding their own businesses.
“If we can build an environment where employees are proud of what we do, they help to build things they are proud of,” she said. “This is true of members, too. They will advocate for you to your next group of members and employees. Your cost of member acquisition goes down drastically when you focus on giving amazing experiences to the ones you have.”
That old-fashioned word-of-mouth messaging remains as valuable as ever, she added.
“No one trusts advertising, and they barely trust marketing,” Cole said. “But what they do trust, and this hasn’t changed, is peer recommendations. They trust people telling them about the great opportunity they got with you. And then you amplify it with social media.”
Cole said if credit unions don’t tell their stories and share the message, competitors will tell it for them in forms that will not be favorable.
“Use that as fuel to break through patterns and create discomfort,” she recommended. “But on the other side of that is a matching tenet: Just because we can do something doesn’t mean you should. The connectivity this industry has to the community is literally unsurpassed. But it can’t define you if members of your community are having their needs met by other providers today.”