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.