I THINK OF MY FAILURES AS A GIFT, SAYS P&G’S LAFLEY
Learning from the greatest business leaders of the world – Part 20
WE BOUGHT GILLETTE BECAUSE WE THOUGHT GILLETTE WOULD BE A FABULOUS PLATFORM FOR MALE PERSONAL CARE INNOVATION FOR THE NEXT 50 OR 100 YEARS
THE PROBLEM AT P&G IN 2000 WAS NOT THAT WE WEREN’T INVENTIVE. IT WAS THAT WE WEREN’T TURNING THAT INVENTION INTO INNOVATION CREATING VALUE OR A BETTER EXPERIENCE FOR CUSTOMERS
Alan George Lafley (born in June 13, 1947) is an American businessman who led consumer goods maker Procter & Gamble (P&G) for two separate stints, from 2000 to 2010 and again from 2013 to 2015, during which he served as chairman, President and CEO. In 2015, he stepped down as CEO to become executive chairman of P&G, eventually retiring in June 2016.
Lafley graduated from Hamilton College in 1969 and took a commission with the U.S. Navy during the Vietnam War. On return, he studied at Harvard Business School, receiving his M.B.A. in 1977. He joined P&G upon his graduation.
He worked his way up the company, working on major brands before becoming president of laundry and cleaning products. He served as president of P&G Far East, building the company’s business in China and revitalising its cosmetics business in Japan.
By 2010 becoming the President of both global beauty care and of P&G USA.ONE day Lafley got a call from the chairman, telling him to take the company jet and return to headquarters. Next morning it was announced that Lafley was taking over as CEO, after the disastrous 17-month reign of Lafley’s predecessor had led the company into what some commentators called a ‘death spiral.’
His predecessor had tried to shake the company and had implemented what Time magazine described in 2002 as ‘an overly aggressive, ill-timed restructuring programme’ that left many of the company’s 110,000 employees ‘in new jobs, disoriented and distracted.’ There had also been a number of unsuccessful new product launches.
“The biggest decision we made was to move to an open innovation platform,” Lafley told astrategic Growth Forum in 2010. “The problem at P&G in 2000 was not that we weren’t inventive. It was that we weren’t turning that invention into innovation creating value or a better experience for customers”
With Lafley leading the company for all of the 2000s, P&G more than doubled the sales since the beginning of the decade. During that time, the company’s portfolio of billion-dollar brands grew from 10 to 24 and the number of brands with sales between $500 million and $1 billion increased five-fold with Lafley at P&G’S helmand profits had quadrupled.
What really did he do?
Lafley decided that many of the existing management team did not have the right mindset to make the necessary changes ‘as a collaborative team.’ Over half of p&gs top 30 executives were replaced from within the company.
Lafley rationalised P&G’S product range to focus on the core areas of household products, baby care and, increasingly, health and beauty and male grooming. P&G acquired Clairol’s hair-care business for $5 billion in 2001 - the company’s biggest acquisition to that date.
In 2005, the company made the huge $57 billion acquisition of Gillette, making P&G the world’s biggest household goods manufacturer, pushing rival Unilever into second place. “we bought Gillette because we thought Gillette would be a fabulous platform for male personal care innovation for the next 50 or 100 years,” Lafley told in 2011 P&G had traditionally developed all of its own new products. Lafley looked outside. “We reached out to universities and research laboratories and tried to get the word out to individual entrepreneurs. One of the things we did was we ran these big innovation fairs.”
P&G tapped into its network of past employees and launched a website inviting new ideas from the world at large. The open innovation strategy has resulted in over 2,000 agreements with innovation partners, and, according to Businessweek, more than half of all products brought to market in 2008 included at least one component from an outside partner.
“You’re going to fail and you’re going to fail multiple times,’ he told a journalist. ‘I always encouraged fast failure and I preferred cheap failure.” Addressing a university meeting, Lafley said, “The overarching purpose of a business should be to create and serve a customer with value. Every organization should have strategic short, medium-, and long-range goals. I also emphasize “winning” and the need to know when you are winning (which is impossible without specific goal-setting). A company that strives to be the best can eventually become number one.”
What lessons can we learn from Lafley?
Strategies: lafley defines strategy as the “choices to win.” For example, a company must define the geographical area and the type of clients it wants to serve. Most importantly, organizations should grow from their core business and play to their strengths.
Structure: It’s important to be crystal clear on how the way a business is organized to deliver its strategy will be implemented. Lafley once said, “Treat your company like an amoeba that is constantly changing its shape to eat and survive. The business leaders must be willing to change quickly when they see opportunities.”
System: Lafley doesnot believe that businesses should develop detailed budgets and plans more than two years in advance. The economy and technology are rapidly changing and there are many variables that come into play over time. However, it is in order to “dream” ahead 5 to 10 years in general terms.
Leadership: While employing the outstanding employees is very important, businesses cannot achieve success without creative leaders to develop and implement the vision. Strong leadership is instrumental in learning from the past and guiding organizations into the future. lafley insisted that every leader must set the standards and live by them because Lafley said, “your team members and subordinates will be watching every move you make and don’t make.”
Hedgehog Principle: Lafley says, “One common mistake a leader does is chasing too many projects instead of doing fewer things really well. Instead, successful leaders practice the “Hedgehog Principle”, focusing on their passions, their areas of expertise, and the activities that are most profitable to the company. But there are no quick fixes. It takes time to get the right people on the train and excited to head toward a common destination!
Culture: Lafley says, “Every organization should be customer-focused, and leaders must stay in close contact with the employees who are out in the trenches. This allows the organization to change as customer needs evolve. But a business cannot wait for the consumer to express a need, but rather should predict needs before the customer even realizes them.” That is why leaders need to encourage employees to learn as much about the customer as possible. Move around with consumers to directly witness their interactions with products and get experience first-hand how the customers used them and what needed to be changed!
Advice to present leaders: When a journalist asked Lafley what advice, he would give today’s young leaders to help them accomplish their goals, he said, “A leader’s most pressing challenge is to get everyone working in the same direction in all key areas. You have to see things as they are and not what you want them to be. You have to be transparent and open to suggestions and criticism. And the most important aspect of effective leaders is to listen, listen, and listen.”
Keys to success: In a recent Forbes magazine article, Lafley was asked the secret of his success. He said, “I believe if we take care of our customers, if we create more customers, if we make those customers loyal to us, and if we inspire our employees, the results are definitely going to be fine.”