When wily veteran pro quarterbacks such as Peyton Manning and
Drew Brees drop back into the pocket for a pass play, everything
slows down for them -- the charging linemen come at them not as
heaving beasts but in an orderly assault, and their pass catchers
break into their routes and melt seamlessly into the flow of the
play.
A.G. Lafley, who in his tenure as chairman of Procter & Gamble
doubled P&G's sales and more than doubled its billion-dollar
brands to 23 from 10, tried to emulate what happens on the football
field.
"I did try to slow things down," he told me in a wide-ranging
video interview that reminded me more of a really great college
seminar. "And I did try to bring us back to fundamentals. It's
funny: I knew the market was moving fast and change was
accelerating, so I felt like we had to simplify what we did," he
explained on the same day he was inducted into the Advertising Hall
of Fame .
"We tried to start with goals and strategy. We viewed strategy
as choices about what business we wanted to be in and what
businesses we didn't want to be in. We viewed it as choices of
where we wanted our brands and categories to play and how we wanted
to win in each category," he added. One of Mr. Lafley's key
strategies was to attack on both the high end and the low end.
P&G created a new segment in beauty care called "mass-tige,"
and took a tired old brand like Olay from the mass $6-to-$10 price
point to $10 to $25 with a range of innovative products -- Olay
Total Effects, Olay Regenerist, Olay Definity and even Olay Pro-V
at $50. What P&G learned, Mr. Lafley said, is that its normal
channels of distribution would support high-technology products.
P&G compared Olay's performance with the best department-store
brands and gave the products to dermatologists and clinicians who
tested and endorsed them. And Olay joined the ranks of P&G's
billion-dollar brands.
A.G. Lafley
Mr. Lafley had several tours of duty in Asia, where outside of
Japan, products had to be very affordable. In China, Procter
researchers came up with the "core-chassis" concept for
personal-care and beauty-care formulations. For example, Mr. Lafley
said, the core chassis for toothpaste is cleaning and cavity
prevention. The core chassis P&G created in China became the
core chassis around the world, enabling the company to dramatically
lower the basic cost of Crest in the U.S. Onto the core chassis you
can add whitening, breath freshening, gum health, mint flavors --
just like Ford can add
leather seats and navigational equipment to its own core
chassis.
P&G these days is making a mighty effort to lower costs
(including switching a big part of its ad budget to digital), but
Mr. Lafley said that when he was at the helm, he tried to focus on
productivity.
Here's where the college professor comes out in Mr. Lafley: "If
you step way back and you look at our company or industry or any
national economy over time, demographics, innovation and
productivity drive growth, right? So more households form, the
demographics are positive, there's more innovation, more creation
of new products and services that add great value, and there's more
productivity. So we get more things made, more things done per
person or per unit of time."
Mr. Lafley continued: "If you get too fixated on costs,
especially short-term costs, or you get too fixated on quarterly
earnings -- which we tried very hard not to do -- or even annual
earnings … then you can let that pendulum swing too far in
one direction or another."
On the advertising front, Mr. Lafley said the company focused on
incentives for P&G and its agencies to grow together. "There
was a base that was pretty much guaranteed, and then agencies had a
lot of potential to earn above that ." If the ads worked, Procter
spent more money, just like the old commission days. "Most of my
career was spent in the commission days and we wanted to incent
people for growth . . . for advertising that works," he said.
Great advertising -- advertising that works -- has two
components, in Mr. Lafley's view. "It has what I would call a big
idea and it has an execution that engages the prospect or the
target . The big idea brings the brand and product promise to
life."
And he would push for brands to stay the course. "Too often
brands are in too big a hurry to change their position, as opposed
to reaffirm, retake and re-establish their position. I always felt
that we had to be very careful not to walk away from the users that
we had."
Mr. Lafley called Gillette "the largest and most successful
acquisition" the company has done to date. More importantly,
Gillette put P&G in new categories and regions "in a way that
would have taken us one, two or three decades to get there on our
own." And it strengthened P&G's positions in countries such as
Brazil, Korea, India and Russia.
On the other hand, Mr. Lafley told me he regrets selling Aleve
and Clearasil. "I think exiting pharmaceutical drugs was a good
move for us. But I think branded over-the-counter drugs and branded
unregulated health-care products are very fertile categories for
us."
The coffee business is another sore point for the Mr. Lafley.
When he joined the company, Maxwell House was the category leader.
Procter's Folgers turned that around after 30 years. But Folgers
eventually fell behind. The big winner was Starbucks, "which
created a totally new business model," he said. Winning on the
homefront are Nespresso and Keurig. Mr. Lafley said P&G tested
the single-serve concept but "we didn't get it as right as Keurig
and Nespresso did."
My final question to Mr. Lafley was what he was proudest of over
the span of his chairmanship at P&G. "I'm proudest of the
strength, the depth, the breadth in the organization that was there
on the last day I served the company. As P&G people go, so goes
the company, and we had a fabulous decade. We attracted and
recruited a lot of fabulous people, and we had a lot of opportunity
to grow a lot of great people, and most of them are still
there."