The news that Hostess Brands (aka Interstate Bakeries), maker of the legendary Twinkie, is closing its doors after 80 some years is all the rage these days.
Along with that news is the argument about why they are closing their doors. There are so many claims and counter-claims running around that it’s starting to sound like the beginning of a bad detective movie. Hostess is dead! Whodunit?
Some people are claiming that union demands killed Hostess, others that tripling the CEO’s pay did the job. More than likely, what really did the job was the death of a thousand knives: a series of cascading errors that put them in the position where their demise was inevitable; it was just a question of what specific event finished them off.
Of course, to really understand what happened, we then have to ask the question, “How did the cascade get started? What happened, or didn’t happen, what changed or didn’t change, to make the vulnerable in the first place?”
Here we can see the power of organizational culture at work. Specifically, we can see what happens when two cultures that were tightly aligned drift apart from one other.
When Hostess was founded in 1930, it was a product of the culture of the time: created by people living and working in that time period. The foods it sold were the foods of the day, the things people wanted. Over the years, Hostess became very successful selling twinkies, Wonder Bread, and the like. They weren’t just the best thing since sliced bread, they were the sliced bread!
Culture, of course, is the residue of success: the accumulated lessons an organization learns over time about how to successfully navigate the world. Those lessons can be hard to unlearn. Sometimes bankruptcy will do it, but not always. In the case of Hostess, they went bankrupt in 2004 and spent the next five years in Chapter 11 bankruptcy protection. When they emerged from Chapter 11 in 2009, however, they had apparently failed to learn some lessons, specifically:
1. Sliced bread was no longer quite the rage it had been in 1930.Indeed, today artisan breads, local breads, and the like are extremely popular. Wonder bread is no longer the first choice of many parents.
2. The dessert market changed. Twinkies are not so cool or fun anymore. They are the object of jokes and experiments to see how long before the go bad, or how much oil can one absorb, and so forth. They are not a school lunch staple as they were even 30 or 40 years ago. Same for Hostess cupcakes, ding-dongs, and the rest.
Are there additional factors? Sure. Supposedly Hostess never really modernized its distribution system and it’s not at all clear how much their internal management ever adopted modern goal-setting and motivational techniques. Fundamentally, though, what killed Hostess is the same thing that almost killed IBM in 1992: their market changed; their culture did not. Unlike IBM, Hostess didn’t have the same willingness to confront unpleasant realities and make necessary changes soon enough.
The rest is merely detail.