Since he arrived in the company’s Chinese headquarters in Guangzhou in 1999 to oversee marketing of fabric and home care brands, both China and P&G have grown substantially. The U.S.-based consumer goods giant is now the largest media buyer in China, the world’s third-largest ad market according to TNS Media Intelligence, and it has evolved into a nimble, innovative marketer.
Most recently serving as VP of beauty care for Greater China, Mr. Lally, who recently turned 40, has undergone a dramatic personal transformation of his own in recent years. The once-stodgy Scotsman is now a hip and healthy father of three young daughters who is known in Guangzhou as “DJ Austin,” a reference to his popular radio program, “These Days,” that has introduced indie rock to the mainland.
Earlier this week, he spoke with AdAgeChina Editor Normandy Madden about changes in China over the past seven years, and what his successors should watch out for.
AdAgeChina: How do you describe China today compared to the country you moved to in 1999?
Austin Lally: Five years ago, people said P&G had a pricing problem. It didn’t, it had a cost problem. We needed to get our costs right in the supply chain to reduce prices rather than try to force consumers to pay high retail prices. Every consumer in China has spending power, our opportunity is putting together attractive propositions at the right cost. Safeguard is a great example, it’s the best-selling cleanser in the country and its market share is just as high in small towns as it is in the largest cities. If the brand is attractive enough and can touch many aspects of Chinese consumers, it will work.
AdAgeChina: What’s the biggest mistake multinational marketers make in China?
Mr. Lally: Working in averages, thinking of an “average China.” It’s become obvious to me that China is very diverse and that diversity has increased during the time I’ve been there. You have to embrace groups of Chinese consumers as they are in product performance and development, rather than try to meet the average.
AdAgeChina: How has P&G evolved over the past seven years?
Mr. Lally: It’s much bigger, so it’s a challenge to maintain the supply of talent necessary for an organization of our size. Apart from size, P&G is a much more Chinese organization than the company I joined, that’s one of the critical success drivers and one of the things I’m most proud of as I leave China.
We don’t subscribe to the myth of the superhero boss, one manager who does everything. You need the best talent you can find in every position. When I look at the organization today, we have Chinese and Asian talent right across the business in very senior positions. The marketing department is heavily Chinese, and heavily female, reflecting our predominance in beauty care business now, women like Stevie Wong [one of the executives who will be taking over Mr. Austin’s role]. That’s going to make the biggest difference in the next ten or twenty years, by helping us develop a competitive advantage through the quality of people we’ve retained.
AdAgeChina: Tell me about something you experienced in China that really surprised you.
Mr. Lally: The quality and imagination of Chinese retailers and Chinese competitors. Some people overseas see the world in terms of global retailers and global branders, and view China as a white canvas that we can all go and paint on. The flaw in that thinking is that in a nation of 1.4 billion, there are a lot of talented, smart, hungry, driven, patriotic entrepreneurs and consumers.
The idea that everything in China is going to be about global businesses interacting with each other is a mistake. Strong local Chinese companies are also participating and helping drive the China growth story. In the fabric care business, for example, many people expected China would turn into a three-horse town dominated by P&G, Unilever and Henkel.
As retailers like Wal-Mart and Carrefour build nice positions in China, they are also facing stiff competition from talented Chinese retailers. When you visit these stores, the environment, competitive pricing and shopping experience is often world-class and hard to distinguish from a global retailer.
But today, there are a number of strong local players, which has forced us to think about how to win against local companies who are entrenched in China. We see Lenovo buying IBM and a Chinese car company now owns the trademark for Rover. These things would have been unthinkable three or four years ago but they are increasingly common today. Newcomers should take local companies as seriously as global competitors.
AdAgeChina: Two years ago, you made a major transition from P&G’s home and fabric care division to its beauty business. What changes did you make?
Mr. Lally: We had to improve in some areas, like beauty counseling. We have a great position in skin care with Olay and SKII, much of which is counseled. That comes as a surprise to people in other markets where Olay is a drugstore brand, but in China, it’s usually sold one-to-one by a beauty care professional at a counter. Building that expertise with training and development so every consumer gets top performance is a challenge.
Beauty is our largest division in China, but I felt we didn’t have an internal culture that smelled enough like a beauty company. So I’ve been changing the feel of the office to be a cool, hip place to work to elevate the personal sensitivity of the men and women in our organization to the beauty business. We provide makeovers for the staff, and while a lot of offices around the world have casual Fridays, we have fashion Fridays, to encourage people to dress up for the office like they’re going out at night. When you get into the elevator at P&G’s office in Guangzhou now, you now know who the beauty employees are by their appearance.
AdAgeChina: Your look today is very trendy, so it seems like you gave yourself a makeover as well…
Mr. Lally: The move allowed me to add a few more ideas to my personal palette. I do a lot of coaching and training for P&G and the idea I try to take to those sessions is the power of agility. For organizations to change successfully they have to be agile, or they just break in two, and that starts from personal agility. You can’t lead an organization to change unless you are comfortable with change. People need to keep stretching themselves out of their comfort zone and normal routine. My radio show came from that philosophy. Marketers need ways to recharge their batteries outside the office to continue coming to consumers with passion and a high energy level. The show has helped me reinforce that message.
AdAgeChina: Your weekly radio show has been a hit in Guangzhou, will you miss it when you move to Germany?
Mr. Lally: No, because there’s nothing you can’t do with an Apple PowerBook. The radio station is repeating old shows through September but from October 1, I’ll start a new season. It will be recorded in my basement in Frankfurt and uploaded to the station’s server and broadcast from there.
AdAgeChina: What’s your favorite band?
Mr. Austin: I have three--the Pixies, the Ramones and the Clash.
AdAgeChina: What’s the most important thing marketers coming to China need to understand?
Mr. Lally: Listen to your Chinese employees, retail partners and consumers, and when you think you’ve figured it out, shut up and keep listening. You’ll get good advice from talented Chinese.
AdAgeChina: What will you miss about China?
Mr. Lally: The pace of change. It’s hard for Europeans who’ve never been in Asia to really get their head around how fast things happen in this dynamic environment, where people have huge passion to win. Outside China, the world is a bit older and slower. That’s my challenge re-entering European life, bringing some of that passion and desire to change back with me.
Other appointment news in Greater China
[hong kong] Davey Lui has joined WBA, the branding and design unit of WPP Group’s Grey Global Group, as creative director in Hong Kong. Previously, he was creative director of Proximity, the below-the-line arm of Omnicom Group’s BBDO Worldwide, also in Hong Kong.
[hong kong] The International Herald Tribune (IHT) has appointed Leonard Apcar has deputy managing director for Asia and head of its Hong Kong newsroom, serving the IHT and The New York Times newspapers and web sites. Previously Mr. Apcar, who succeeds Nick Stout, was editor-in-chief of NYTimes.com in New York.