Saturday, September 19, 2009

Inside Procter & Gamble's New Values-Based Strategy

03:23 PM Monday September 14, 2009

By Rosabeth Moss Kanter

On the anniversary of Lehman Brothers' fall, the question remains: What, if anything, has changed in the mentality of the financial community? While Wall Street wallows in tales of the fallen, a different, more promising approach to capitalism is rising.

Procter & Gamble, the world's largest consumer products company, has just announced a stunning new business strategy to jump-start growth. It begins in a startling, almost counterintuitive way — with company values and sense of purpose. Invoke the heart and care about human needs, the strategy seems to say, and the money will follow.

New CEO Bob McDonald, who assumed office in July, is on the road promoting P&G's "purpose-inspired growth" strategy of "touching and improving more consumers' lives in more parts of the world... more completely."

On September 10, on an analyst call followed by a talk at the Gillette factory in South Boston where I joined him, McDonald explained the financial implications of this focus. It's simple arithmetic. If 7 billion consumers currently spend an average of $14 a year on P&G products, then finding ways to meet their needs that would increase that spending over 5 years by $2 a year (an affordable target), would create a growth spurt for the business.

P&G invests heavily in innovation, outspends the competition in R&D, and targets emerging markets with growth potential. But to execute, P&G is redoubling emphasis on its culture and values.

McDonald calls P&G's purpose the most consistent factor in a 171-year history of growth. When he showed it on screen in South Boston, the room nodded reverentially. "We will provide branded products of superior quality and value that improve the lives of the world's consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creations, allowing our people, our shareholders, and the communities in which we live and work to prosper."

Gillette's Himalaya team, a global group based partly in Boston but focused on India, is already charged up. In India, about half of men's shaves are done in barbershops where barbers break double-sided blades in two and use them repeatedly. (Ouch! Unsanitary and bloody inconvenient.) The team's razor-and-blade innovation, they report, involves simplification to the essential features to do the job, an affordable cost through manufacturing innovations, and new way to reach lower-income shavers. They preach health as well as grooming benefits.

P&G Brazil foreshadowed this approach. Ten years ago, P&G's business was dying; employees feared a shutdown. The fastest growing segment of the population was low-income consumers, but P&G's global premium products were not a match. Local teams, taking the purpose and values seriously, felt that they were not improving lives because families were using cheap inferior products or nothing, e.g., still using tedious processes such as washing cloth diapers by hand that kept some family members out of the work force. The team lived with families, scrutinized every P&G process, and created innovative products they dubbed basico (for "essential" in Portuguese). The team felt they were doing good for the world, not just making money for the company. Their strong sense of purpose propelled unprecedented collaboration across functions and with customers, for whom the excitement was captivating. (Blow-by-blow details can be found in my new book SuperCorp.)

When the first basico products were launched (women's hygiene, diapers, and "greener" laundry detergent), demand immediately outpaced supply. They quickly captured market share through small neighborhood shops, substituting colorful store displays for costly TV advertising. Premium products were lifted too. The business in Brazil became a profitable global growth model, and not just for emerging countries. Tide Basic was recently introduced in the U.S.
Any business can adopt a variation of this strategy if leaders understand the rising importance of values. Leading with values is important for the new generation of employees, for finding innovations in underserved markets, and for getting respect from the public and favorable treatment from government. Here are lessons for everyone:

1. Inspire employees to add their hearts to their heads. An executive at another large company who describes herself as a mercenary plunged into a project to build an energy-saving technology ready to focus on just the financials, but found herself a true believer when other team members talked about their desire to change the world. People cared more and worked harder because values were tapped.

2. Add a third P to performance measurement: potential for impact. Measure how well you're doing not just by the past (better or worse than last year) or by peers (ahead or behind competition), but by potential. Which audiences, customers, clients, recipients are not being reached? What are the unsolved problems and unmet needs? Seeing untapped potential raises aspirations.

3. If purpose-inspired opportunities and commercial considerations seem to conflict, find another way. P&G struggled with a profitable market for water purification powder but kept it alive by establishing a non-profit organization with government and NGO partners to take it on. The values were enhanced, not diluted.
Of course, to lead by values requires having them in the first place. Perhaps that's why Lehman Brothers and the other financial failures fell — because they fell short. I urge business to rise up to prosperity the P&G values-focused way.

Six Steps to a Successful Product Rollout

All too often, what began as a great new product idea becomes unrecognizable once it gets to store shelves.

Why? Because, basically, there are too many moving parts during the process. Brand managers and marketing leaders have to first find a great consumer insight and then create a great concept with a great positioning from the insight. From there, executives need to create a product that fully delivers the benefit created from the insight. Finally, they must create advertising, packaging, and marketing that highlights the product benefits and sells them in a believable manner.

Smart and successful marketing executives know how to juggle all these balls and still end up with a great new product that fulfills that terrific idea they started with. The key: managing the consumer insight – in other words, keeping the insight "in sight." Keeping the original insight in focus allows it to guide the entire process, which is the pathway to success in the marketplace. An "insight manager," whether it’s someone inhouse or is an outside expert, can keep all these development efforts focused on the insight and its benefits and not let them go astray.

As for the six steps to a successful rollout:

Step 1: Find and identify the consumer insight. The key to finding a big new insight is understanding consumer needs and wants as well as how they view and use the product category in question. Trying to "sell the consumer" on your views is seldom successful; listening to consumers’ language and watching their actions will point you straight to terrific new insights.

For example, Procter & Gamble's efforts in 1985 to create a bold new advertising campaign for Folgers coffee began by watching consumers make coffee and by listening to their descriptions of their process of waking up in the morning. From these efforts came the insight that people wake up to the smell of coffee before they get to the taste. 

Thus was born "The best part of waking up…" The insight worked so well, it's still guiding the marketing campaign today—20 years later. Ask yourself, What about your product or organization triggers an emotional response stronger than the commodity itself?

Once you’ve identified possible insights, objectively and quantifiably test them to determine if they are truly bold, new insights. Only when you’ve decided that the insights have the potential to be groundbreaking should you proceed to the concept development phase.

Step 2: Develop and screen a concept. A truly good insight has the ability to be executed in numerous ways. If you can develop only one possible concept from an insight, it is simply not an insight. Once you have identified the myriad potential concepts, you can develop executions and screen them to find the most compelling (and unique) delivery of your insight.

Step 3: Develop and quantify the product. Having identified the right concept, developing the product to deliver on the promises of the concept—in other words, delivering the insight through the product performance—is key. If the product fails to live up to the promises, the entire business proposition will fail. At this stage concept fulfillment, cannibalization estimates, and volumetrics can tell you if you have been successful.

Again, Folgers provides an excellent example of a product working to fulfill the original insight. P&G developed a special "aroma-roast" process that guaranteed it was getting as much coffee aroma from each bean as possible. And its recent introduction of an "aroma-seal" can that keeps the beans fresh and aromatic – remains consistent with the original insight.

Step 4: Develop and screen the advertising. This is not where the advertising or public relations agency should get involved; by this time it is too late in the process for an agency to begin reinterpreting the product benefits. Good marketing communications should "sell" the insight. If the product's unique selling proposition is not conveyed in the advertising, it is a waste of money. By engaging the agency in the development process it can aid in guiding the project and will be in a much better position to write copy that is true to the insight. Working closely at the conceptual stage with the brand research and brand marketing agency is critical, as advertising is not the place for trial and error.

What you should do now is screen multiple campaigns to objectively find the one that best communicates the original insight and the unique selling proposition. Not only should the winning campaign be motivating and unique, it should also convey new information, communicate the features and benefits that are most important (that is, the ones that consumers have already indicated they buy into), and generate the emotional reaction necessary to get consumers to bond with the brand.

Step 5: Develop and screen the packaging. For many brands, packaging is the primary, if not the only, advertising the consumer will see. Therefore, packaging development needs to clearly focus on the insight and sell the benefits that come out of this. As with your advertising or PR agency, your packaging agency must understand the insight and not try to reinterpret the direction. And as with the other forms of advertising, multiple packaging options should be considered to find the direction that is most motivating and distinctive, does the best job of communicating benefits, and leaves consumers with the favorable emotional reaction you are looking to achieve. A brand packaging firm should be brought into the equation early in the process, allowing the packaging firm to offer best practice advice on how'to execute the idea efficiently, effectively and at the best cost. The best idea, unable to be executed or executed at tremendous cost, is not a bargain.

Step 6: Introduce the marketing and promotion materials. These, too, should be true to the insight. Introduce the product as the breakthrough it is, not just another line extension.

Remember, the consumer should always drive your efforts. When you get off track and the consumers tell you as much, you must listen. This is the reason you keep checking with them, to make sure you have stayed true to their original guidance. Listening is the single best way to improve your product, advertising, and packaging efforts.

Jack Gordon is CEO of AcuPoll Research, a Cincinnati-based is a global brand building research agency. Bill Vernick is a consultant with Brandmine, a division of MRA Services, and a veteran copywriter, producer, and creative director who has worked on such campaigns as Folgers’ “Best Part of Wakin’ Up…”