When they decided to roll out Pampers worldwide, they decided the best way to leverage their global scale was to install a single, sophisticated manufacturer system,
“using state of the art ‘converters’ that could produce all our diapers across all our different markets. … Because, in effect, we let the machines dictate our strategy, we didn’t see that our technology solution failed to address the real needs of emerging market consumers. When this became clear, we began to design new kinds of products specifically engineered for emerging market consumers [which] meant we had to reverse course on some very expensive manufacturing systems, and switch to different machines for different markets.”
Similarly, when they launched Crest and other oral-care products in countries like Brazil, they thought it would be easy to build a business there, on the basis of the brand reputation and equity they had developed elsewhere. What they didn’t, or preferred not to, recognize was that Colgate (their biggest competitor) had already built a far more extensive global distribution network and built up great brand loyalty. They lost “millions of dollars…before we realized we had to retreat from Brazil and get our house in order before returning.”
These are hard choices—true tests.
Of course, the new managing partner never knows where the first test will come from, and they’re not announced with Wagner’s “Entrance of the Guests” from Tannhauser or Handel’s “Arrival of the Queen of Sheba.”
The test may come in the form of a person: An important but antisocial partner who goes too far, an opportunity to pick up a high-revenue and attractive-looking lateral group but one which doesn’t speak to any of the firm’s strategic priorities, an inherited overhang of unproductive and de-skilled partners who are coasting. How you address each of these less-than-ideal problems will determine—and announce loud and clear to the firm—whether you have analytic rigor and executional discipline: In other words, intellectual integrity.
How did P&G implement this once they realized what they were up against?
They chose what they called the “integrated cascade of strategic choices,”and while it’s a bit of an MBA-speak mouthful, its essence is pure common sense and actually reflects essentially the same language and terminology we use with clients.
At P&G, they asked hundreds of company leaders worldwide and across all levels to develop choices explicitly using the cascade framework, which consists of five interdependent and mutually reinforcing choices:
- What’s “our winning aspiration?” [What is the firm actually trying to achieve?]
- Where will they do it?
- How will they win in the markets they’re choosing?
- What capabilities have to be in place in order for us to win?
- And what management systems are required?
The first element is obvious. As they say, “Winning matters. Settling for good enough means failing to make the tough choices and do the hard work of building outstanding capabilities.”
“Where” means in which markets, for which clients, in which product lines, and in what geographies.
How will you win often means identifying market segments where competition is weak or vulnerable, or newly emerging areas not yet seized and occupied by powerful incumbents. For P&G, for example, if mean shifting the focus of Olay from women over 50 who were targeting wrinkles to women 35 to 50 who were fighting the first signs of aging—a previously ignored segment. For household cleaning, it meant creating an entirely new category with Swiffer. In fragrances, it was as simple as focusing on males, not females.
Once you’ve (merely!) figured that out, then you can focus on the capabilities you need to do what you must in the new area exceedingly well, and to build or strengthen the management systems required to support, measure, and course-correct.
And the five elements are of a whole. In some sense it doesn’t matter terribly where you start so long as you explicitly make and articulate all five choices and ensure they’re coordinated. (You might think it odd to start with management systems, but if your firm is a plebiscitary Grecian democracy, you have to figure out what you can and can’t actually do from that staggeringly challenged platform—assuming you’re scared to change it.)
I’ve often written that “strategy means saying no,” and Lafley and Martin explicitly agree. They talk about P&G’s decision to exit the pharmaceutical business—which was quite profitable for them—because the entire supply chain, business model, and development process were totally unlike the consumer products businesses where P&G had developed and honed its core expertise.
In divesting this business, P&G walked away from billions of dollars of sales and profits, but it was the right decision. Walking away allowed the company to reinvest cash, human resources, and other assets in businesses that did have integrity with its overall set of strategy choices: beauty, home, and personal care.
This also required them to change the strategic review process itself, which “had become corporate theater,” where presidents of business lines trooped through rotely presenting bulletproof PowerPoints—”not a setting that encouraged integrity,” as they note.
Instead, the process became one of candid review and conversation, where the PowerPoints were delivered weeks in advance (think briefs before oral argument) so that the senior team would be able to use the actual meeting to probe and shift the emotional response to hard questions from one of to defensiveness to one of joint exploration.
This is where we get back to integrity: To do this right, you have to do it continually, not just once.
There’s no rulebook. Strategic choices require thoughtfulness, and deep organizational give and take.
You have to challenge assumptions. You have to challenge norms.
You cannot see the world as you wish it to be.
You have to ask difficult questions and follow through with even more difficult action.
But I hope you can agree on something else: Winning matters.
