How CEOs Can Get It Right

Newly re-appointed P&G CEO A.G. Lafley says too many CEOs stumble over business strategy. It comes down to two principles: choice and winning; and all organizations, regardless of size, can score big when they get it right.

May 26 2013 by JP Donlon

What companies have the best castles and moats?
First, no castle lasts forever. There’s an interesting case in play now. I’ll bet the iPod was a success beyond Steve Jobs’ dreams because the Japanese had failed with MP3 players. They had the technology, but they didn’t get the human interface. He got the human interface and I bet he sold a lot more of those than he ever thought he would. But it’s going to be interesting to see what happens. I’m carrying around a Dell computer and a Blackberry, but [I] also have an iPad and an iPhone. I’ll be playing with a Galaxy in about a week because I’ve got to look at it side-by-side. Many of my friends say the Galaxy does everything one needs. It’s a great smartphone. But I’m probably not going to move off of the iPad just yet because I’m comfortable with it. It works. It does everything I need it to do and more.

Walmart has a good moat, although the dollar stores and others have chipped away from underneath. Are they a huge threat to Walmart? No, but they’re probably an irritation. And they cut into Walmart’s primary customers, the people who earn under $40,000 a year.

Let’s stay with retail for a moment. Walgreens and CVS will remain a duopoly; it is a segment that is going to grow because of demographics and healthcare consumption. They have an easier road ahead. Eckerd got bought out. Rite-Aid’s just barely hanging on. Most drug stores have been consolidated out of business. Costco’s got a very good position. Their share of that segment is very strong. There’s a duopoly in DIY with Home Depot and Lowe’s.

Let’s leave retail. Vespa USA has a very strong moat, as does Ferrari and Porsche. Could Porsche sell more cars? Probably. But I’m not sure how many more they want to sell because BMW has become a volume producer of cars, and it’s tougher. When we broke up Ma Bell, the [regional Bell operating companies] (RBOCs) built regional moats, and now it’s come full circle back to Verizon and AT&T. Not to use too many P&G examples, but Gillette built an impressive moat, particularly with its Venus brand aimed at women and its Oral B products. When I worked on the Tide brand early in the 1980s, it had a 20 percent market share in North America. Today, it’s closer to 40 to 50 percent.

Do you reckon your successor has taken any of these ideas on board in sorting out P&G’s recent difficulties?
If you listen to Bob [McDonald] and Jon Moeller [CFO], especially in the last six to nine months, they’ve gotten a lot clearer about the choices that they’re making. And if you cut through it all, they’ve prioritized certain categories in certain geographies and emerging markets and [are] driving productivity alongside innovation. The results have improved over the last six to nine months; they have become clearer about what they were trying to do. Some were anxious that they were maybe trying to do too much. We discuss a classic, flawed strategy in our book: trying to be all things to all people, trying to serve all [of] your customers at the same time [and] trying to take on all your competitors at the same time. That’s risky.