Marketing Club Kicks Off Distinguished Speakers Series with P&G CEO

What keeps A.G. Lafley, chairman and chief executive officer of Procter & Gamble, up at night? Growth. It is the toughest problem the largest companies, such as P&G, face today, explained Lafley to a packed audience in the Spangler auditorium on Friday, September 22.

In fact, in order for P&G to achieve its stated growth objectives, the company will need to add $3.5 to 4.0 billion of revenues each year, which is equivalent to the size of P&G’s current Latin American business or a new Tide brand extension each year.

Lafley recalled that he was appointed to his current position during the crisis of 2000, when P&G lost $50 billion in market capitalization and investors and employees alike had lost confidence in the company. Since 2000, Lafley has led P&G to an impressive turnaround. The company has delivered consistent double-digit EPS growth, grown market capitalization to over $200 billion, and diversified into beauty and personal care with the mega-acquisitions of Wella and Gillette. What contributed to P&G’s remarkable turnaround and sustainable growth? Lafley highlighted eight key factors to P&G’s success.

1. Purpose & Values – P&G has a set of values passed down from generations of employees. This set of values, grounded in the commitment to “improve peoples’ lives,” guided Lafley and his team’s actions during this transformational period.

2. Goals – Because external goals are commitments to key constituents, Lafley reset external goals to be more attainable. Internal goals remained as stretch targets.

3. Strategies – Prior to 2000, P&G had lost touch with consumers and over-invested. Lafley refocused P&G’s strategies of where to play and how to win on the company’s set of core capabilities.

4. Strengths – Lafley identified P&G’s key strengths as intimate consumer understanding, a portfolio of iconic brands, unrivaled innovation capabilities, robust go-to-market systems, and global scale and learning. These strengths, when orchestrated together, delivered sustainable growth for P&G.

5. Organizational Structure – Lafley emphasized the importance of systems and structure as tools to sustain competitive advantage.

6. Innovation – A transformative culture, as defined by Lafley, must inherently be an innovative culture. He called innovation the “lifeblood” of P&G. Lafley has unleashed innovation at P&G by defining it more broadly and making it central to every employee’s job.

7. Leadership & People – P&G is an environment that attracts and retains top talent. This type of environment, Lafley suggested, is the most capable of unlocking and unleashing creativity and initiative.

8. Culture – Lafley suggested success, ironically, can be a barrier to growth. To break down barriers to growth, Lafley has created a culture at P&G that is simultaneously courageous and collaborative.

After a 20-minute Q&A session, in which Lafley answered questions ranging from P&G’s M&A strategy (expect about one point of growth from M&A activity) to what the company will look like in 20 years (more healthcare but not pharmaceuticals), Lafley attended an intimate cocktail reception hosted by the Marketing Club in the Williams Room. For almost an hour, Lafley joked and laughed with students about his experiences as an HBS student. He described section life (formerly in Section B) as “intense” and recalled how he found ways to read his cases faster. Lafley also encouraged students to put themselves into new and different environments, in particular, by taking classes at the Kennedy School and Law School. He commented that by taking classes across the river, he learned how to work with different people, a skill he has valued throughout his 29-year career at Procter & Gamble.

October 3, 2006
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