A.G. Lafley Defines Effective Business Strategy

eg Lafley thanks for joining me we're talking about your new book that's out now called playing to win how strategy really works so you outline in the book obviously sort of the Technic or tenants of effective business strategy through the lens of your experiences to EO of Procter & Gamble what are the universal truths of effective business strategy effective business strategies are essentially choices to win in the marketplace with a very specific group of customers or consumers and I would argue that most people probably think that's what they're always doing right you know when they're choosing the wrong avenues I think a lot of a lot of folks will tell you that they have a strategy and they may or may not some don't really have one they may have a vision they may have a mission they may have a plan but they probably don't have a strategy that answers all five choices and I'll come to those in a second or they have a strategy but it's flawed in some way they're trying to be all things to all people they're really not making choices they're not making choices about what is winning or where they're going to play and as importantly where they're not going to play right how they're really going to win what really are their core capabilities and competencies to win and how they're going to measure the progress well I would argue that those measures have changed and certainly when we talk about marketing we talk a lot about how that the metrics have shifted so much and and more than ever marketing organizations have to keep a real clear handle on sort of what their objectives are and how they're measuring for those do you think that effective strategy is more now these days of the smaller entrepreneurial startups or they ness is it necessarily the the core ability of the larger companies like a PNG for example I think the fundamental metric for most businesses and even for a lot of not-for-profits the fundamental measure of winning is am i creating a customer and am i creating more customers and are my customers more loyal to me do they love my product mordioux they love my service more do they think it's a better value and therefore as a result do more of them try me - more of them by me and do more of them use me loyally I mean if you think of the local symphony or the local movie theater or the local Playhouse they're in the business of creating customers that become regular users of their product and service sure it's the same thing for P&G it's the same thing for GE it's the same same thing for a small startup business ok but now you clearly were at a company where marketing was king a brand led business can the same be said of a company that isn't so brand centric I think so because even if you take b2b businesses industrial product businesses or business service businesses they still have customers they're only successful if they create new customers and more customers no sales without customers right no profit without sales so I would argue it's just as important they need to change their mindset a little bit they tend to be more product driven more engineering driven more technology driven and they need to become more market driven and they need to think about how their industry organizes into customer segments and what those customer segments really want need and that begs the question what's the role of brand at those organizations - well I think brand is actually becoming more important in in b2b organizations certainly more important in service organizations we were talking earlier about how law firms need to brand themselves accounting firms need to brand themselves all kinds of service L healthcare increasingly is branding itself now I think a brand is important a brand fundamentally is a promise to a customer why should you purchase my product and preference to all the other choices that you have if you get the brand right it's a relationship with the customer and if you get the brand really right your customers not only buy you and use you they become ambassadors for your brand they tell their friends about you is the strategy the business strategy that P&G employed when you were there the right strategy for P&G today broadly P&G strategy hasn't changed for 175 years I mean P&G is on a differentiated consumer focused branded product strategy so what's changed over the years we focus on different industries the decade that you know our team had the responsibility for leading the company we moved out of the food and beverage business when I joined the company in the mid 70s a third of the company was in food and beverages when I left in 2010 we virtually sold off all of the food and beverage businesses because we thought they were commoditizing they were clearly local businesses not global businesses so the industry choices change and that's part of strategy we moved deeper in the household care and we moved into personal care beauty care in health care in a big way in the last decade the innovations change right okay frankly the consumer segments change right there are new generations of consumers and how they interact with the brands in the company obviously totally different I mean the way my mother's generation wants to respond and relate to a brand is quite different than the way my granddaughter right you know wants to respond and relate to a brand so a lot of things change the marketplace is dynamic consumers change competition changes but I think some of the fundamentals you know don't really change all that cool that begs another question I mean you know what you know what are the absolutes when dealing with with business strategy and you know how much does there need to be at that core strategy versus sort of something that's constantly evolving well I think therefore any business no I think there are two fundamentals of strategy that are pretty timeless one part is how do you position yourself versus the other choices the consumer or customer has in the market and that in our model we call the where to play choice and how to win choice and the other part is what are your core capabilities that make you different and more competitive and better and we talk about that as core competencies or capabilities and at P&G they were very straightforward deeper understanding of consumers innovation leader in household care and personal care brand leader not just building brands that already are established but creating new brands every decade the ability to partner with our customers and our suppliers and other innovators and finally the ability to scale our learning on a global basis those were our five core competencies and they were decisive in our industry and they distinguished us when we really did them well you know we were successful with consumers in the market right but at the same time you have that sort of core basis there needs to be obviously evolution constant evolution and change and the evolution and change comes I think in two big areas the consumer you serve yep okay we talked about the old lay story in the book we acquired oleh with Richards and Vic's in the mid 80s was a good brand all right we built the brand we built the brand from a hundred million in sales in the mid mid 80s to several hundred million in sales by the end of the 90s but what was going on our consumer base was aging mm-hmm in the late 90s the biggest segment was this anti-aging anti-wrinkle segment that was relevant important to 50 year olds and up okay so we were in danger of shepherding a brand to the last user sure and we said gee this has got to change first if we're going to become a real player in beauty care we're gonna have to have a global skin care business and brand and secondly we've got to find a way to relate to women of all ages so the first thing we did is we did our consumer homework and we learned that guess what women at 30 and 35 are already starting to pay attention to different signs of aging drying skin age spots sun damage you know the list goes on we did our homework with consumers and we moved the point of entry for anti-aging from fifty to thirty to thirty five we created boutique lines of products that looked like and performed better than the best prestige products and then we sold them at a price point between prestige and mass and we sold them in mass channels so that is about the price that really is unbelievable it was unbelievable so all of us in Olay that was selling for five to ten dollars over the next six years we introduced four boutiques total effects Regenerist affinity and pro-x all of a sudden ole's price ranged from $15 to $60 the product was fantastic and all of a sudden we had a business that was two and a half billion dollars instead of a half a billion dollars so there you go that's changed that was a lot of change and we connected to a changing consumer base and frankly a changing set of needs and dynamics last quick question global brands obviously yes was was the world that you know PNG certainly played and a lot of other companies these days are how has the definition of a global brand a truly global brand evolved over the years as well wow that's a big question I guess I'd say two things one in our consumer household care and personal care categories most of the consumers make very local decisions for themselves they shop very locally and they're influenced by a lot of stimuli in the store and advertising and publicity that's pretty local and you always have to remind yourself of that so when you have a brand that you think has the potential to be global you have to make sure you can connect it locally to the consumer and I think we've at P&G we were most successful when we kept our finger on the pulse of the local consumer we're willing to create products in our line okay and in price points and packaging offerings that appealed locally and at the same time we were able to create an image and have a single promise that was Universal and applied really on a worldwide basis it was a delicate balance definitely and that still applies today still a delicate balance

Channel: Forbes

Views: 90,243

Keywords: forbes, a g lafley, ag lafley, a.g. lafley, procter & gamble, p&g, playing to win, book, author, business, strategy, effective, marketing, market, behind the brand, BTB, brand, branding, ceo, jennifer rooney, cmo

Id: FlurK3LeTpg

Length: 11min 49sec (709 seconds)

Published: Fri Mar 22 2013