P&G, the maker of Pampers diapers, Gillette razors and Head and Shoulders shampoo is struggling to regain its market footing after firing CEO Bob McDonald and bringing back former CEO A.G. Lafley. For three and a half years former CEO Bob McDonald declared that P&G “wanted to touch and improve the lives of more consumers, in more parts of the world, more completely” with its products. That’s a laudable vision but unfortunately it was never backed up with a strategy – the “how”. Alo Dibadj, a market analyst speaking about P&G said it well: “There was a vision – the problem is that it didn’t work. Touching and improving lives lacked clarity and left employees unsure whether they should lower prices or innovate more”. 1
When leaders substitute visions, missions, purposes, plans, or goals for the real work of strategy, they send their firms adrift. So what the hell is a strategy anyway?
The vision and objectives are the ‘what’. A business strategy is the ‘how’. All business strategies allocate scarce resources to areas of the business where they can earn the greatest return. Any “strategy presentation” that does not allocate scarce resources is simply a report. Finally, all business strategies have three parts:
- Portfolio strategy: tells us what products or services on which the firm will focus to achieve its goals
- Segmentation strategy: has two subsets – market segmentation and customer segmentation. Market segmentation tells us what markets the company will focus on. Customer segmentation tells us on which customers within those attractive markets the firm will focus.
- Positioning strategy: defines the value proposition and messaging that will get your target customers excited about purchasing or licensing your product or service.
Only when the positioning strategy is completed can the tactics (Price / Product / Place (distribution) / Promotion) be set.
Finally a strategy is flexible and is constantly being reviewed and tweaked to make it stronger and more relevant. Significant wholesale changes to a strategy should only be made when there is a major shift in the market or when it clearly is not working.
P&G’s CEO, Bob McDonald, set the ‘what’ (“to touch and improve the lives of more consumers, in more parts of the world, more completely”). Unfortunately he never set the ‘how’; the strategy. Great market statements are laudable but give no clear direction. Give people a plan for focusing resources – develop a strategy!
1. How Leaders Mistake Execution for Strategy (and Why That Damages Both) by Ken Favaro