How P&G Debates Strategy
AG Lafley, the former CEO of Procter and Gamble, realized no one has a monopoly on good strategic thinking. So he found a way to give his teams an edge.
The team had to learn to “incubate” untested ideas until the problem solvers could take a whack at fixing them.”
The chance of catching a well-known company in a glaring mistake is what gets journalists up in the morning. Like the time CBS turned down Monday Night Football or when Mars Candy told Steven Spielberg not to use M&Ms in “E.T.” And who can forget the time Blockbuster passed up Netflix for $50 million, then proceeded to go bankrupt? Although these moves seem braindead in hindsight, they were taken by experts based on hard data and thorough analysis. So how could anything so obvious go so wrong? That was the question AG Lafley, CEO of P&G, desperately wanted to answer because he was facing a similar “bet the company” moment.
The Wall of Failure
P&G is regarded as the top brand platform for consumer goods in the world, a reputation that suggests it can create a strategy in its sleep. But the company has its share of bloopers, and it goes to extra effort to make sure everyone knows it. According to P.R. Week, there is a display at P&G headquarters called a “wall of failure.” It is a place product managers can browse the timeline of products that bombed, promotions that didn’t promote, and extensions that failed to extend. The wall includes such flops as Febreze Scentstories, the air freshener that looked like a CD player. When the brand team made the inspired decision to have Shania Twain sing in the commercial, it only added to the confusion. A willingness to face up to mistakes is part of the P&G secret to success, but there is a second reason the company likes to study mistakes. It goes to the heart of how the company comes up with the big idea.
Oil for Old Ladies
As P&G’s Lafley pondered the problem of what led superior teams to make inferior decisions, it was clear this wasn’t just an academic question. He needed to come up with a radical shift in the way the company was dealing with a major category. Skincare was the fastest-growing segment of the beauty business, and P&G’s only entrant was an aging product called Oil of Olay. It competed with Nivea, L’Oreal, and Clinique, and all anyone needed to know was that the market snidely referred to it as “oil for old ladies.” The company missed the shift to skincare, and the question wasn’t just how to get back in the game but was it over?
Lafley decided to look at all the factors that contributed to the success of brand teams at P&G. He analyzed the methods employed by asking was it the people or the process that made the difference? Was the data wrong or the analysis? How could failure spring from a team where everyone was an expert? The answer turned out quite differently from what he expected.
The choices that rose out of this process ranged from acquiring Clinique to rebranding “Covergirl” as a platform. It led to a robust, interesting set of options, which is the purpose of the idea generation process. Ultimately, the team recognized that the best “possibility” was to reframe Oil of Olay into a “masstige” brand known as Olay. Today, Olay is a nearly 3 billion dollar brand that caters to upscale younger women through mass distribution channels. The way Lafley’s team arrived at this strategically brilliant but “far out of left field” consensus was through an approach he molded on the scientific method.
“When we are too critical, it restricts creative thinking, and we neglect less obvious but brilliant ideas.”
— A.G. Lafley, CEO P&G
- Failed teams made the same fatal mistake by reaching decisions when they should be exploring possibilities.
- What this implied was the problem a creative process designed to generate ideas could not stand up to scrutiny in the early going.
- This is what led to failures at CBS, M&M, and Blockbuster: no one on those teams imagined a future that turned out the way it did.
Getting Debate Right
Lafley knew that when strategy teams meet to debate, it can be “difficult and even acrimonious.” He had participated in umpteen of these sessions where decision-makers typically go offsite to review thick binders while everyone’s eyes glaze over. He believed that this type of meeting ends up as “negotiations between powerful executives with strong preconceptions.” And skeptics begin to undermine the decision.
To come up with the right skincare strategy, Lafley had to fix the group dynamics. He understood from his experience as a product manager for Ivory Snow that all teams suffer from biases, regardless of how astute or experienced they may be. That means they miss the possibilities at the start. To fix it, he had to change the way the culture worked.
He identified how to put together a debate team. What was essential was to get the order of the steps right. The result was one of the most successful branding exercises in P&G history.
The Strategy Debate Team
- Small: limit group size but not diversity. Eight is great. Jeff Bezos calls it a two pizza meeting (the amount eight people need to stuff themselves!)
- Diversity: include different backgrounds, people who worked in unusual environments, operational types and poets, people outside the firm’s culture. Be sure to have people across generations and demographics.
- Expertise: Not everyone should be an expert on the subject. The outspokenness of the novice can be as helpful as the experienced hand.
- Leader: Choose a respected problem solver or an expert outsider as a leader. Not the team’s boss, in any case.
Debate Ground Rules
Lafley knew that a debate of this sort can get acrimonious. What happens is that the decision-makers go off-site and review binders of much-discussed market research. Such meetings end up as negotiations between powerful executives with strong preconceptions. Then, skeptics begin to undermine it.
The P&G method takes the ego out of the equation.
- Uncritical: All possibilities are accepted without debate.
- Some are supposed to make people uncomfortable.
- No one dominates the debate, especially the idea proposer
- Conditions pass the “must-have” test
- Be skeptic, not a cynic.
- Seek explanations not defenses
- Consensus moves the ball
- Truth is discovery not opinion
- Skeptics test the conditions
- No bosses involved — teams run the show
Three Stages to Decision Making
Once the “software” is in place, now it is time to make the “hardware” decisions. This means establishing possibilities, framing conditions, and choosing a finalist.
- The possibilities framing stage is open-ended with ideas accepted uncritically and subject to testing at a later stage.
- The team should form a consensus around ideas worth keeping, and it should be a broad list, with some that make people uncomfortable.
- The team should review a list of market conditions required for success and test it against each idea before it decides to include it on a final list of possibilities.
- After arriving at a final set of possibilities that meet all critical conditions, if there is still a skeptic, that person should take the lead in applying the right test for that possibility.
- The risk, of course, is that a skeptic might set an unachievable standard.
- In practice, this does not happen because people usually demonstrate skepticism because they don’t feel heard.
The outcome of a good debate is one idea that intrigues the group and feels like a winner and one idea that stretches the group’s comfort level. If neither condition is met, it is time for another round of possibility generation.
Lafley wrote about this experience in his book Playing To Win: How Strategy Really Works. He makes clear that the real problem with teams is when they reject novel ideas before we have an honest debate. It is often those crazy, out of the box ideas that lead to the right solution.