The five choices make up the strategic choice cascade, the foundation of our strategy work and the core of this book.
To really think through strategy, though, the cascade isn’t quite enough. In chapter 7, we will provide another tool—the strategy logic flow, a framework designed to helpfully direct your thinking to the key analyses that inform your five strategy choices. Then, in chapter 8, we provide a specific methodology for making sense of conflicting strategic options, a process—called reverse engineering—for making strategic choices with others. Taken together, the five choices, one framework, and one process provide a playbook for crafting strategy in any organization.
Our intent is to provide you with a do-it-yourself guide to strategy. We offer you the concepts, process, and practical tools you need to create and develop a winning strategy for your business, function, or organization—a strategy that serves your customers better and enables you to compete more successfully and to win.
The world needs more business leaders who understand strategy and are capable of leading the strategy process for their companies. It needs strategic capabilities at all organizational levels in industries of all kinds, in government, in health care, in education, and in the social sector. Strategy needn’t be mysterious. Conceptually, it is simple and straightforward. It requires clear and hard thinking, real creativity, courage, and personal leadership. But it can be done.
Chapter One
Strategy Is Choice
By the late 1990s it became clear that P&G really needed to win in skin care. Skin care (including soaps, cleansers, moisturizers, lotions, and other treatments) constitutes about a quarter of the total beauty industry and has the potential to be highly profitable. When done well, it can engender intense consumer loyalty compared with other beauty categories like hair care, cosmetics, and fragrances.1 Plus, there’s significant knowledge and skill transfer from skin care to these other categories in terms of technology and consumer insights. To be a credible player in the beauty business, P&G needed leading hair-care and skin-care brands. Skin care was the weak link. In particular, Oil of Olay was struggling. It wasn’t P&G’s only skin-care brand, but it was by far the largest and best known.
Unfortunately, the brand had baggage. Oil of Olay was seen as old-fashioned and no longer relevant. It had come to be derisively called “Oil of Old Lady,” a not entirely unfair characterization, as its customer base was growing older every year. More and more, when selecting a skin-care regimen, women were passing over Oil of Olay in favor of brands with more to offer. Oil of Olay’s core product (pink cream in a simple plastic bottle), sold mainly through drugstores at the bargain-basement price of $3.99, just wasn’t competitive against an ever-growing range of skin-care alternatives. By the late 1990s, Oil of Olay sales were clocking in below $800 million a year, nowhere close to the industry leaders in the $50 billion skin-care category.
All this presented a difficult strategic choice and generated a number of possible responses. P&G could maintain status quo on Oil of Olay and launch a more relevant alternative under a different brand name to compete for a new generation of consumers. But building a skin-care brand from scratch to market leadership could take years, even decades. P&G could go for an immediate fix, buying an established skin-care leader (think Estée Lauder’s Clinique or Beiersdorf’s Nivea brand) to more credibly compete in the category. But an acquisition would be both expensive and speculative. Plus, over the previous decade, P&G had actively pursued several opportunities for leading brands with no success. P&G could attempt to extend one of its leading beauty brands, like Cover Girl, into the skin-care category. This too would be highly speculative. How easily could even a leading cosmetics brand gain traction in skin care? Finally, P&G could attempt to revive a fading but still valuable Oil of Olay to compete in a new segment. This meant finding a way to reinvent the brand in the minds of consumers, a big investment with no guarantee of success. But P&G believed that the Oil of Olay brand had potential, especially with the right push behind it.
The good news was that there was still widespread consumer awareness of Oil of Olay, and as every good marketer knows, awareness precedes trial. Michael Kuremsky, Oil of Olay’s North American brand manager at the time, summed up the state of affairs: “There was still a lot of promise. [But] there was really no plan.”2 The team wanted to turn the promise into a plan. The plan was to remake Oil of Olay—its brand, its business model, its package and product, its value proposition, and even its name. Out went “Oil of,” and the brand was rechristened “Olay.”3
Rethinking Olay
Together with Susan Arnold, then president of global beauty, we focused on the mid- and long-term strategy for beauty, working to establish P&G as a credible contender in the sector. As P&G learned the beauty game, it could win across the categories. So, P&G invested in the SK-II brand (a super-premium Japanese skin-care line acquired when P&G bought Max Factor in 1991), Cover Girl (P&G’s leading cosmetics brand), Pantene (its biggest shampoo and conditioner brand), Head & Shoulders (its leading antidandruff shampoo line), and Herbal Essences (its hair-care brand aimed at a younger demographic). The company bought Wella and Clairol, to create a position in hair styling and color. And it pursued acquisitions that could build leadership in skin care. The Olay team, meanwhile, worked to reinvent the brand.
Led by Gina Drosos (then general manager for the skin-care business), the team set to work to understand its consumers and its competition. The team members discovered, to no one’s surprise, that Olay’s existing customers were price sensitive and only minimally invested in skin care. Conventional wisdom was that the most attractive consumer segment was women aged fifty-plus and concerned with fighting wrinkles. These women would pay significant premiums for promising products, and this was where the leading brands tended to focus. But, Drosos recalls, “We found, as we looked at consumer needs in the market, that there was real growth potential with consumers who were thirty-five-plus, when they noticed their first lines and wrinkles. Before that, a lot of women were still using hand and body lotions on their face or really nothing at all.”4 The midthirties seemed to be a potential point of entry in women’s skin care. At this age, consumers become more aware of, and committed to, a regimen—cleansing, toning, and moisturizing and using day creams, night creams, weekly facials, and other treatments to keep the appearance of youthful, healthy skin. In their midthirties, women tend to become more highly committed to skin care and are more willing to pay for quality and innovation. They seek out a preferred brand on a regular basis and try new offerings from it. They become loyal devotees. These were the consumers Olay needed, but to play in this segment, Olay would have to up its game significantly.
Traditionally in the beauty industry, department store brands have taken the lead on innovation, developing new products and better products that, over time, trickle down to the mass market. Given P&G’s greater scale, lower distribution costs, and considerable in-house R&D capabilities, there was an opportunity to lead on innovation from the middle of the market. “We could flip this consumer paradigm that the best technology trickles down,” Drosos says. “We could have the best technology come from Olay.” So, P&G scientists went to work on sourcing and developing better and more-effective compounds—skin-care products that could dramatically outperform existing products in the market. Rather than focus exclusively on wrinkles as a product benefit, Olay broadened the value proposition.
The research showed that wrinkles were but one of many concerns. Joe Listro, Olay’s R&D vice president, notes, “Besides wrinkles, there was dry skin, age spots, and uneven skin tone problems. Consumers were telling us, ‘We have these other needs.’ We were working on technologies from a skin-biology and noticeable-appearance standpoint. We identified a material combination called VitaNiacin that showed noticeable benefits across a range of these factors that could actually improve the appearance of skin.”5 Olay sought to redefine what anti-aging products could do. The result was a series of new products, beginning with Olay Total Effects in 1999,
