competitor’s performance results versus P&G’s—was illustrative. P&G had a run of six years of strong revenue and double-digit earnings per share growth, and Reckitt-Benckiser was outperforming even that. It wasn’t so much about Reckitt-Benckiser itself as it was about getting the general managers to question their assumptions and their current judgments. The push was to ask, “Who really is your best competitor? More importantly, what are they doing strategically and operationally that is better than you? Where and how do they outperform you? What could you learn from them and do differently?” Looking at the best competitor, no matter which company it might be, provides helpful insights into the multiple ways to win.
Summing Up
The essence of great strategy is making choices—clear, tough choices, like what businesses to be in and which not to be in, where to play in the businesses you choose, how you will win where you play, what capabilities and competencies you will turn into core strengths, and how your internal systems will turn those choices and capabilities into consistently excellent performance in the marketplace. And it all starts with an aspiration to win and a definition of what winning looks like.
Unless winning is the ultimate aspiration, a firm is unlikely to invest the right resources in sufficient amounts to create sustainable advantage. But aspirations alone are not enough. Leaf through a corporate annual report, and you will almost certainly find an aspirational vision or mission statement. Yet, with most corporations, it is very difficult to see how the mission statement translates into real strategy and ultimately strategic action. Too many top managers believe their strategy job is largely done when they share their aspiration with employees. Unfortunately, nothing happens after that. Without explicit where-to-play and how-to-win choices connected to the aspiration, a vision is frustrating and ultimately unfulfilling for employees. The company needs where and how choices in order to act. Without them, it can’t win. The next chapter will turn to the question of where to play.
WINNING ASPIRATION DOS AND DON’TS
| STRATEGY AS WINNING |
A.G. Lafley
In my now forty-plus years in business, I have found that most leaders do not like to make choices. They’d rather keep their options open. Choices force their hands, pin them down, and generate an uncomfortable degree of personal risk. I’ve also found that few leaders can truly define winning. They generally speak of short-term financial measures or a simple share of a narrowly defined market. In effect, by thinking about options instead of choices and failing to define winning robustly, these leaders choose to play but not to win. They wind up settling for average industry results at best.
The P&G I joined in the late 1970s was not very good at making choices and defining winning. In June 1977, I reported for duty as a brand assistant in the US laundry division, affectionately known as Big Soap. At the time, P&G sold fifteen laundry detergent and laundry soap brands and five dish detergent brands, considerably more than consumers needed or wanted, and more than its retail customers could profitably distribute, merchandise, and sell. Today, P&G has five laundry and three dish brands. Meanwhile, the business has consistently grown its net sales, market share, gross and operating margin, and value creation. Most importantly, P&G became the clear-cut leader in the US market. Once-formidable competitors Colgate-Palmolive and Unilever have effectively exited the categories in the United States; they’ve turned their remaining brands into contract-manufactured store brands, which in most cases are a weak third player to P&G and private-label brands. P&G’s victory in the North American laundry category is the culmination of a series of clear, connected, and mutually reinforcing strategic choices that began to be made in the early 1980s. A series of sector, category, and brand leaders have committed to winning in this category and have successfully found ways to do so.
Even as P&G got better at defining winning at the brand and category level, it hasn’t always had the same clarity at the company level, which has resulted in periods of underperformance. In the early 1980s, company leadership was frustrated by slowing top-line volume and sales growth rates and gave the direction to stimulate top-line growth organically and through acquisition. Without a clear strategy as to where to play or how to win, the result was a mishmash of acquisitions that never returned the cost of capital (Orange Crush, Ben Hill Griffin, Bain de Soleil, et al.) and a raft of failed new brands and new products, including Abound, Citrus Hill, Cold Snap, Encaprin, Solo, and Vibrant. In 1984–1985, the company experienced its first down profit year since World War II. In 1986, it took its first major restructuring and write-off. At that point, the call went out to Michel Porter and Monitor. It was P&G’s first experience with business strategy, and I was fortunate to be one of the guinea pigs in Porter’s first class.
Unfortunately, the first inoculation didn’t take. When the business began to get better, thanks to another major restructuring and stronger international growth, and the short-term financial results began to improve, P&G forgot most of what it had learned. When top-line growth slowed again in the late 1990s, the company reverted to the same helter-skelter, new-categories and new-brands, and M&A approach. This time, the bets were even bigger on new products and new technologies, including robots to clean homes, paper cups and plates, even new retail formats. And acquisitions ranged more broadly, including the PUR water company and the Iams pet food company. P&G seriously looked at Eastman Kodak Company, lost an auction to Pfizer for American Home Products, and pursued Warner-Lambert in an attempt to buy its way into the pharmaceuticals business. Not surprisingly, the wheels came off again.
By the time of my election to CEO in 2000, most of P&G’s businesses were missing their goals, many by a wide margin. The company was overinvested and overextended. It was not winning with those who mattered most—consumers and customers. When I visited all our top retailers in my first thirty days on the job, I found that P&G was their biggest supplier but nowhere near their best supplier. Consumers were abandoning P&G, as evidenced by declining trial rates and market share on most of our leading brands.
I was determined to get P&G’s strategy right. To me, right meant that P&G would focus on achievable ways to win with the consumers who mattered the most and against the very best competition. It meant leaders would make real strategic choices (identifying what they would do and not do, where they would play
