The Purpose of Strategy is to Win: An interview with A.G. Lafley

When A.G. Lafley took over as chief executive of Procter & Gamble in 2000, and later became chairman, the company produced a dizzying array of well-known brands and products including Tide, Pampers, Crest, Always and Pantene. But its portfolio of products also included coffee, snack foods, peanut butter, shortening and oils, household cleaners and pharmaceutical drugs. Lafley began asking himself: What businesses should P&G be in?

Lafley approached his job as chief executive as a product innovator and strategist. His strategy chops were earned during a 33-year career at P&G and through his interactions with Roger L. Martin, a former consultant who is dean of the Rotman School of Management at the University of Toronto. Over the course of nearly 10 years, when Lafley was CEO, the two men met regularly to discuss P&G’s challenges and prospects and to review its strategic issues and opportunities.

The fruits of these discussions can be seen and measured. When he took over as chief executive, P&G’s market capitalization was in the $50 billion to $60 billion range. When he retired in 2010, it was $160 billion. Gone were less-strategic brands and businesses. Lafley sharpened P&G’s focus to concentrate on household and personal care products. To that end, he acquired the razor maker and personal grooming products company Gillette, which accounted for nearly half of P&G’s growth in market value.

With decades of experience between them, Lafley and Martin decided to capture their learning in a book called “Playing to Win: How Strategy Really Works” (Harvard Business Review Press). The book draws on the foundations of master strategists like Peter Drucker and Michael Porter, a professor at Harvard Business School. (Lafley worked with Drucker, and Martin worked with Porter while a consultant at Monitor Group). But even more importantly, it is based on the insights and real-world experiences of Lafley when he was at P&G’s helm.

To explain their perspective on strategy, Lafley met with Michael Distefano, Korn/Ferry International’s senior vice president and chief marketing officer, and Joel Kurtzman, editor-in-chief of Korn/Ferry Briefings on Talent & Leadership. What follows are excerpts from their conversation.

Why did you write this book?

Lafley: To give CEOs, business and functional leaders, managers of all kinds a simple, practical guide to business strategy. … A “do-it-yourself” playbook that would encourage clearer, better choices and result in better performance and results. The basic idea was to bring together a practitioner, which is what I am, and a theorist, which is what my co-author, Roger Martin, is, even though we both practice and we both conceptualize. We both believe you can only really understand strategy by bringing those two perspectives together. That’s why we included P&G’s performance results in the book from when I led the company. But there’s something even more important we wanted to convey.

What’s that?

Lafley: For a lot of reasons, CEOs, presidents, governors, mayors, heads of hospitals and schools, don’t understand what strategy is all about. We wanted to help them.

What is strategy all about?

Lafley: It’s about winning. It’s not about just playing the game. It’s about winning, and you need to be very clear what winning means. In our view, it means three things — uniquely positioning a firm in its industry, creating sustainable advantage and delivering superior value versus the competition. It’s important that you make the necessary choices to get all three elements right.

One interesting idea in the book is that leaders don’t like to make choices, they like to have options. What did you mean by that?

Lafley: There’s a mindset among CEOs and other leaders that they don’t want to get pinned down or painted into a corner. They want to keep all their options open. Why do they want that? Because they don’t want to take on the risk of making a bad choice or a wrong choice. But the fact is, strategy is all about making choices — choosing where you’re going to play and how you’re going to win, along with what winning means.

Is it fair to say many CEOs choose to play but not necessarily to win?

Lafley: Yes. That’s why so many companies turn in lackluster results, because they just want to stay in the game — they just want to hold on to their jobs. But what’s really going on in the CEO universe? In the ‘80s, the average CEO served for something like eight to ten years. In the last couple of years, the average CEO’s tenure is three or four years. Why is that? It’s because the stakeholders aren’t happy with the results she or he is delivering. And why aren’t the results good? I’d argue it’s because they don’t know what winning means — and they won’t make the hard choices that really distinguish and separate their company from the rest of the pack.

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