I am just reading Game Changer by AG Laffley and Ram Charan, about how AG turned around Proctor & Gamble, trebling their profits and increasing the size of the company.
It’s a very interesting book which I highly recommend. Whilst it gives great insights into how they managed to do this, what is interesting to me is, how simple their ideas were and really should have been obvious to everyone.
I don’t mean to undermine what they did, not at all, but when you analyse it, it’s nothing really insightful or ground breaking. It’s not like they found a formula for turning led into gold or anything.
So how did they turn P&G around: first they put the customer at the heart of everything that they did; and secondly they looked to innovate in each and every aspect of their business; making innovation a repeatable process.
Basically, they put the customer first and then looked for continuous improvement in all areas of the business, looking for improvements that would benefit the customer, rather than just P&G.
All of this seems so obvious that it also makes me wonder what other companies are doing, and why they wouldn’t have the same focus.
The problem with P&G previously was that they we trapped in a spiral of growth through acquisition, then looking to drive synergies through cost cutting measures, all of which was done to drive up market share, supposedly increasing profits and keeping their share holders happy.
All this detracted them from what was truly important, which was their customers.
They had stopped looking to keep their customers happy, with the result that their products became second best, and in a commodity market, if you products are second best then you are looking to compete on price and this just erodes margins very quickly.
When AG took over, he changed the focus, and what is interesting is how he did it rather than what he did, and how he was able to do it over such a large organisation as P&G.
It takes real leadership to be able to make such a large scale sustainable change in such a large organisation. You need to have a clear and simple message that people can buy into, then you need to execute, and have the courage to continue even though there might be a short term impact on results.
One of the examples which struck me the most was how P&G, had people live with some of their customers in order to experience their lives, so that they could look to innovate from the customers perspective based, on their challenges, something they would never have understood if they had just remained in their labs looking to innovate.
The example was where they had people staying with a middle income mexican family, a market sector that P&G as struggling in.
Having spent time with them, they realised that these families main problem was not being able to afford the products, but that water was in such short supply that having a process which was 6 steps, Wash, Rinse, Rinse, Add Softener, Rinse & Rinse, used so much water, and so much time – some families had to carry the water from a well – that it wasn’t really practical.
Using this information P&G were able to come up with a product which allowed for a 3 step process, Wash, Add Softener & Rinse, this not only saved time but also saved water which was a valuable commodity.
This is so obvious when you look at the problem from the right perspective, i.e. the customer perspective.
I often think we in the west believe everyone has he same resources that we have, such as running water, which then doesn’t allow us to see problems as they are, and how can you solve a problem if you don’t really see it? You can’t!
Check out the book, it’s an interesting read and one I fully recommend.
It has a simple message
Put your customers at the heart of everything that you do.
Innovate everyone, in order to improve every aspect from production, through delivery and of course the finished product.
If you don’t then the message is also very clear, your company will be come obsolete very quickly.