AG Lafley on leading with simplicity

Did you also manage to cascade down this way of working across the board?

We tried very hard to do so because we wanted the strategy work at the country level to be done in the country. We did a whole bunch of different things. When I went to the country, my review with them was as I described: going through strategic objectives, goals, strategy choices, innovations they were bringing to market, their leadership team and talent pool and how they were performing against their operating plan. Two, we created an executive leadership program and a lot of online and in-person courses because we believed that you could teach “playing to win” strategy and leadership. Some of the countries and categories did extremely well. Others struggled and we tried to enable, empower and help them deliver results. If they couldn’t, you changed the leadership or some team members so you can put together the team you need to get the results you want.

On the topic of choosing where to win, how did you decide on which opportunities were worth pursuing and which ones weren’t?

First of all, the only decisions that my relatively small executive team and I made were the “where to play” decisions and “how to win” decisions for the entire corporation: operating on a multi-industry, multi-sector, multi-category and multinational basis. Where to play at that level was largely a portfolio set of decisions: what industries, sectors, categories and countries? The second area we spent a lot of time on was how to win. How do we need to keep evolving our business model so that we can perform better, support the country, category or sector better? We focused on building core capabilities and competencies. We made multibillion dollar investments in understanding consumers and proprietary research techniques, some of which we developed and some of which we acquired. We invested a significant amount of money in innovation. We spent more on R&D than our next five competitors combined. We were going to win or lose on innovation. Lastly, we invested a lot more than most other companies in the hiring, development and growth of our talent and leadership. 

You spent an outsized amount of money on different kinds of innovation including open innovation in the form of P&G Connect + Develop. How did you think through it because it was a gamble after all? 

We didn’t invest all that money at one time. We took all of our investments in innovation one step at a time, testing and learning as we went along. Connect + Develop was a test and learn opportunity. Our hypothesis was that while we were inventive and one of the top 10 patentors in the US and in many countries around the world, there were a lot of great inventors out there. We wanted access to inventions and technologies that might have application in our industry sectors and categories. If we insourced some of this innovation and inventiveness, we could put P&G’s commercialization capabilities to use. 

Back then P&G had 10,000 researchers and engineers in R&D, and they were very concerned that we were outsourcing R&D. But we were insourcing additional “R” (research) so that we could “D” (develop) and commercialize it. Once people understood that, they started working with first-rate scientists from our suppliers, BASF, Novozymes, research universities and research laboratories. They got stimulated. But it was hard to get it started.

A lot of open innovation gets shot down within companies due to cultural issues. 

It’s a big cultural issue. We tried to encourage them to give it a try, engage in one experiment. We’d put chemists from P&G together with chemists from BASF, and all of a sudden they were creating new polymers that we could use at both companies. It was a win-win for the research scientists. They got a lot of appreciation and recognition. 

If a great research scientist was stubborn and they didn’t want anybody in their laboratory except their handpicked lab technicians, we would find ways to inject positive opportunities into their labs. We’d ask them: “Could you test this for us?” It’s hard to turn that down if you’re a scientist. It didn’t work all the time. But when we started the program, about 10% of the new products and improved products that we took to the marketplace had one or more outside co-innovators or partners. By 2005-2006, it was 40-50%. 

We benefited from a culture that was strong on ownership, leadership and innovation. That helped, but wasn’t sufficient. Everybody had to try it for themselves to see whether it worked in their case. Some industries, categories, sectors moved quickly and had success so that was a motivator. 

At P&G you focused a lot on human empathy. In today’s world of data, AI and analytics, do you think we are at risk of losing the focus on the human aspect of the customer? 

There’s clearly a role for collecting the data that’s relevant and important, and understanding it as well as you can. But I also deeply believe there’s a role for human empathetic insight and understanding. I’ve worked with FIGS, a startup that went public. Think of it as the combination of Lululemon and Nike, a health care uniform alternative to scrubs. They use a lot of data. But CEO Trina Spear and her team also invest a lot of time face-to-face in hospitals and health clinics, with the nurses and primary care physicians who are their primary customers, trying to really understand what life is like in a 12-hour shift and how that impacts what they wear and how what they wear has to perform, fit and feel. So I don’t see a way around that.

AI and machine learning could become more of a commodity and less of a competitive advantage, especially at large, sophisticated companies that have relatively unlimited budgets and human resources to throw against this opportunity. They’re going to be competing at the edge of what they can do with databases and AI. The differentiator will be human beings. There’ll be an advantage to the individuals, leaders, people, companies that can discern unarticulated needs and wants.