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The fundamental question in business and in personal life is the same: What really matters? In this book one of America's most widely admired business leaders distills a lifetime of experience, including failures as well as successes, to reveal his answers.
John Pepper, president, CEO, and chairman of Procter & Gamble for a combined 16 years, underscores the importance of continuous change, innovation, and renewal as prerequisites for growth and sound leadership.
|Publisher:||Yale University Press|
|Sold by:||Barnes & Noble|
|File size:||1 MB|
About the Author
John Pepper is chairman of the board of the Walt Disney Company and chief executive officer of the National Underground Railroad Freedom Center. Previously, he served as vice president of finance and administration at
Yale University and in various executive positions at Procter & Gamble, including chairman of the board and chief executive officer. He is married, has four children, and lives in Wyoming, OH.
Read an Excerpt
What Really MattersService, Leadership, People, and Values
By John Pepper
Yale University PressCopyright © 2007 Procter & Gamble
All right reserved.
Chapter OneCreating Leadership Brands-and Keeping Them Young
Experience has taught us it is not enough to invent a new product. The real payoff is to manage that brand with such loving care that it continues to thrive year after year in a changing marketplace. -Ed Harness, former CEO of Procter & Gamble
In marketing circles, it is popular to talk about the "life cycle" of products. I am sometimes asked what is our theory on the life cycle of products, and my answer is very simple. We don't believe in it! I don't mean to say we haven't had brands die-we have-but in each case we failed to do our job. -Ed Harness
As 1999 came to a close, Procter & Gamble was named "Marketer of the Century" by Advertising Age. When the magazine's reporter phoned to tell me the news, he asked a simple question: "What do you believe was the greatest contribution P&G made to marketing over the course of the century?"
My answer was simple, also: "The unrelenting emphasis we place on creating and sustaining great leadership brands." As we'll see, many factors underpin P&G's success, but without its leadership brands, it would not be a company at all.As we'll also see, creating and sustaining leadership brands has been no easy feat. Although many other companies, such as Johnson & Johnson and General Electric, have created great brands that have stood the test of time, what has set P&G apart is its never-ending commitment to brands as living, dynamic entities that it can and must keep strong and growing.
Brand-Building Success Factors
Five factors are critical to any company's ability to create leadership brands and keep them young year after year, decade after decade. Only when all of these factors are present-not three or four, but all of them-will companies be able to create and build these important and profitable leadership brands.
A Passion for Providing New Benefits to Consumers
Two motivations drive the passion of successful corporate leaders: to improve the lives of consumers through company brands, and, by doing so, to help their businesses continue to lead and grow. P&G in particular operates with the mindset that its growth depends on both its ability to create brands with new benefits and its proficiency in establishing whole new businesses capable of growing over time. That is what disposable diapers and fabric softeners did when they were introduced years ago. It is what Febreze and Swiffer are doing today. This commitment to provide benefits never before available and to build businesses that didn't exist is not the province of any one person or position; instead it must be present at every level, from the CEO to the women and men who take the brands to consumers in the most remote areas of the world.
A Commitment to Understand Consumer Needs
Procter & Gamble was the first company to conduct broad-based, reliable consumer research. The endeavor started in 1924 as market researchers fanned out across the United States, calling on consumers in their homes. A commitment to effective consumer research has been a P&G tradition ever since. When its leaders have failed to honor this commitment, perhaps through undue focus on speed or a cavalier assumption that they know more than consumers, the business has suffered predictably.
You might think that P&G would have it all figured out by now, having pursued research for almost eight decades. It doesn't, and it never will. It has only been in the past couple of years, for example, that P&G has found that purchase intent is more accurately predicted when consumers compare products side by side in familiar market packaging with the prices indicated than when they compare products in unmarked packages without pricing. The science of market research continues to develop, and P&G, like many other companies, is continually enhancing its knowledge of consumer psychology and choice.
One of the innovations in how market research is performed is the Internet. Much of P&G's consumer research is now done online. Virtual test markets are used to save time and money. Further improvements in the speed and effectiveness of consumer research will be limited only by imagination and diligence. The outreach to consumers is becoming easier than ever, so there is little excuse for failing to investigate consumer needs.
I have particularly noticed how crucial it is that we observe consumers as they live. What inconveniences do they face? What cries out for a solution? What can they afford? Intimacy with the consumer is critical if a company is to define a true consumer need that it can fill. Bob Dirksing, one of P&G's great product innovators, expressed this as having empathy with the consumer. That's why, for example, he tested a new spray cleaner package with people who have arthritis. Years later, he still recalled one consumer's poignant comment: "You know, no one ever cared about us before."
Caring about the consumer is indeed all-important. Caring leads P&G to identify the detail of a product's design that can add ten points to its acceptance. Caring causes its leadership to do that extra-small-scale test in the Middle East, which might show that a diaper design well-accepted in Western Europe does not effectively meet consumer needs in Saudi Arabia.
An Ability to Create Winning Strategies and Business Models
What constitutes a winning strategy and business model will vary by brand and by category. The models also may change within brands as consumer needs and preferences evolve and new technologies emerge. Still, a winning brand strategy and business model are invariably built on the following three elements:
1. Providing consumers with a product of superior performance that addresses a very important need. For Tide, this is superior cleaning of soiled fabrics; for Always, a clean, dry feeling of protection; for Bounty, faster, more complete absorption of spills; for Dawn, superior removal of grease.
2. Communicating these benefits to consumers through distinctive and compelling marketing.
"Hair so healthy it shines"-Pantene
"The best part of waking up is Folgers in your cup"-Folgers
"Dawn takes grease out of your way"-Dawn
"Strong enough for a man; made for a woman"-Secret
"The quicker picker-upper"-Bounty
"Love the skin you're in"-Olay
At its best, a brand's benefit promise will become a significant guide for future product and package design and development. In other words, instead of being simply a provocative expression of the brand's benefit, the promise will ideally become a template for improving that benefit. Indeed, a specific yet expansive description like "The best part of waking up is Folgers in your cup" can form the backbone of a marketing campaign that will support the brand for years, even decades. It could even drive it to market leadership, as it did for Folgers.
The importance of this link between the brand's performance benefits and the clear, fresh, compelling communication of those benefits requires that marketing, research and development, and customer business development people work closely together.
Creating holistic and tightly integrated innovation and marketing strategies that make a brand more appealing and harder to imitate is increasingly important today. Why? Because the number of choices for consumers has exploded. Best-in-class technology is migrating faster to other producers (including our own customers) and low-cost competition is growing. Only through holistic innovation will companies be able to create great leadership brands. This is why companies need to not only push harder for breakthrough, sustainable technical advantages, but also imaginatively employ every other element-product aesthetics, package design, marketing programs, and external endorsements-to create a brand that consumers trust as no other.
I like the way Jorge Mesquita, president of P&G's global home care business, expresses this challenge. He says that one should aspire to create brands that not only lead in their categories, but also transcend their categories to become an intangible, yet real, part of a country's culture and day-to-day life. As we'll see, that is exactly what P&G achieved with Tide and Dawn and is in the process of achieving with Olay and Swiffer. It is a priceless asset.
3. A product price that provides superior value for consumers and adequate financial returns for the company. In the end, the ultimate differentiator is superior value, which flows from the realized and perceived benefit of the brand and its price. This is nothing new. To establish a leadership brand, we have always needed a business model, including a cost structure, that delivers superior consumer value. Identifying and delivering the right mix of product design, marketing support, cost, and pricing is highly situational. It does not always mean inexpensive. It often differs from country to country. It is a moving target, changing along with consumers, competition, and market conditions.
In being committed to providing superior consumer value, corporate leaders cannot assume that yesterday's formula for success will work today. You'll see later how a company like P&G has gone off track from time to time in the value of its brands versus its competitions', and how dearly this has cost the company-that is, until the product's value was restored. I will also describe situations in which leaders concluded that they could operate only in the higher-priced segment of a category, believing that trying to operate in the mid- or low-priced segments would result in a money-losing proposition. This is a dangerous and erroneous assumption.
An Ability to Develop Technologies Internally and Externally
Procter & Gamble is perhaps engaged in work across more technologies than any other consumer goods company in the world. From surfactants to polymers, from nitrates to nutritionals, from bone-building elements to flavors and fragrances, P&G has improved a product in one part of the business by using breakthrough technology originally developed in another part of the business.
For example, it was P&G's competency in controlling calcium to achieve superior cleaning in its laundry detergents that led to the technologies controlling bone mineral resorption used in our osteoporosis-fighting drug, Didronel. Many companies talk about synergies, but P&G was able to take advantage of what the entire company had to offer by making knowledge transfer a part of its business.
Chuck Fullgraf, who played a leading role in creating P&G's toilet goods and paper businesses in the 1960s and '70s, put it this way: "Whenever we looked at entering a new business like shampoo or dentifrice, the first question was, 'Do we have technology applicable to this new area?' And if so, 'Do we visualize improvements we can implement that would make the product more attractive for the consumer?'"
P&G's ability to answer this question positively was an important reason why the company acquired the Richardson-Vicks Company in 1985 and Iams pet food in 1999. The Olay and Pantene brands have benefited from technologies that P&G developed, and P&G health care and life science technologies, which improve the health of pets' teeth and control their weight, have helped almost double Iams's business in less than four years, making it one of the most successful acquisitions in P&G's history. More recently, too, the opportunity to use proprietary P&G hair colorant technology was a powerful reason for the acquisition of Clairol's hair and colorant brands in 2001, and Wella's brands in 2003.
Cross-fertilization of ideas can occur not only in technology advances, but also in conceptual and marketing insights:
Olay achieved great success by presenting its Total Effects formula as addressing the "seven signs of skin aging." In a way, this approach was counterintuitive. Olay was promising multiple benefits-seven of them-thereby flying in the face of the familiar edict that you should promise only one. But because P&G placed these benefits under a meaningful umbrella, women knew and appreciated what the company was talking about.
The Pantene brand team learned from Olay's success, developing a product and marketing campaign that addressed the six problems associated with dry and frizzy hair. Crest has reapplied this lesson, introducing a "revitalization" formula that offers a combination of whitening, remineralization, and breath-freshening benefits.
Opportunities to gain competitive advantage through interconnectedness abound in any large corporation. But the sharing of knowledge and experience does not happen automatically. It takes a mindset that attaches great strategic importance to interconnectedness, along with simple structures and processes to ensure the timely, practical sharing of what works and what doesn't.
Connections with external sources are also essential to success. The opportunities are unlimited. It's easy to forget that many of the greatest innovations at Procter & Gamble originated from external sources. Examples include the original formula for Ivory; the hydrogenation process used in Crisco; the critical surfactant technology in Tide; key fluoride technology in Crest; and, most recently, patents and products underpinning Swiffer and Crest Spin Brush. Developing innovations from external resources is especially important today, because of the dramatic shift in the source of innovation. Although in the early 1970s only 5 percent of all patents awarded went to small companies, today that figure is 30 percent. As a leader of research at P&G once said, we are moving away from "know how" to "know who."
The Role of the "Champion" Corporate Leader
Brand-building successes are often described as if they were destined to happen, but of course, they were not. They occurred only because of the insight of individuals who were unrelenting in pursuing their visions for a great business. They happened because someone saw a way to bring forth an innovation to satisfy consumers or gain stronger support from trade customers. They happened because people were determined and able to gain a big edge over the competition.
Champions lie at the heart of any organization's success. P&G literally would not have Tide, Pampers, Crest, Olay, Pantene, Bounce, or Actonel (or many other leadership brands) if it had not been for individuals who advocated passionately for what they believed in, often in the face of opposition. Champions take the initiative. They don't do so blindly; that is, they don't allow their advocacy to overwhelm their objectivity. But they are willing to stick their necks out to make a difference. One example from my time at P&G stands out: Carolyn Bergholz and Mary Jensen, leaders in research and development at the company, helped persuade me to acquire Tampax in 1997. The CEO of Tampax had contacted me to indicate he was open to selling us the brand. I was concerned that this acquisition might involve us again in what had been one of the most searing experiences Procter & Gamble had ever encountered-the decision to withdraw Rely from the market because of its potential involvement in the serious disease toxic shock syndrome. Bergholz and Jensen told me that ever since Rely the company had been conducting exhaustive research and had been working with outside experts to understand the disease. They also demonstrated why, with clearer usage instructions, as well as our research and analysis, Tampax did not carry a risk of toxic shock syndrome. It was a crucial intervention for me. We made the acquisition. And they were right about the safety of Tampax products.
We've also seen powerful championship from P&G partners. P&G would not have the Cheer brand as it exists today had it not been for leaders at Leo Burnett advertising agency insisting decades ago that we should move to an "all temperature" strategy. Folgers would not be the market leader today if it were not for leaders at the then Cunningham and Walsh advertising agency working with counterparts at P&G to create and execute the brilliant advertising campaign "The best part of waking up is Folgers in your cup."
Whether P&G's greatest brand-building successes came from the company, an outside firm, or an agency partner, they happened because of champions: people of great conviction, courage, and persistence. That will always be the case.
Keeping Brands Young
Creating new brands that consumers will try and that will compete well in the marketplace is a formidable challenge. Few new brands and products in our industry pass this crucial hurdle. In fact, on average, eight of ten new product launches fail in the first two years.
Excerpted from What Really Matters by John Pepper Copyright © 2007 by Procter & Gamble. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Introduction: My Early Years in Business....................1
Part One Foundations for Success....................9
1 Creating Leadership Brands-and Keeping Them Young....................11
2 Let the Consumer Decide....................41
3 Going for the Big Win....................67
Part Two Staying in the Lead....................103
4 The Rewards of Doing Good....................105
5 The Power of Community....................123
Part Three How We Live Our Lives....................161
6 A Passionate Sense of Ownership....................163
7 The Benefits of Diversity and the Challenge of Achieving It....................186
8 A Personal Model for Living....................203
9 A Family Affair....................253
Conclusion: Enduring Values in an Age of Innovation....................263
Appendix 1: Biographies of Key Leaders....................269
Appendix 2: Redesigning Your Organizational Structure to Achieve Your Purpose....................274
Sources and Selected Bibliography....................283
Q: What really matters?
A: In a personal mission statement I wrote at about the age of 30, I committed myself to be all I can be, developing to the fullest, following my best instincts, learning constantly, and trying to be true to what I believe is right. Beyond that, I committed to being of service to my family above all, to Procter & Gamble, and to the community. As I say many times in my book, I believe that people and their values are the foundation of achieving any great purpose over time.
Q: P&G has a knack for winning in the marketplace, but is there a danger of being too successful?
A: The risk of being too successfuland too complacentis always present, and it is important to recognize that what’s good enough today won’t be good enough tomorrow. It is imperative to make innovation and improvement a way of life, to listen to dissident points of view, and to ask what new thing will make today's businesses obsolete.
Q: How does what you’ve written apply to your leadership roles at Yale and at the National Underground Railroad Freedom Center?
A: In the end, every for-profit and nonprofit organization is ultimately a service business, and its success depends on adding value to those whom it serves. The quality of the relationships among people is vital to any enterprise, and those relationships must be founded in a culture infused with integrity, a zest for innovation and for winning, mutual trust, respect, and at its best, affection.
Q: You really believe in the importance of family to business life, don’t you?
A: Yes, I really do. I know I couldn’t have achieved anything remotely close to what I have in business or life if it had not been for my family, starting with my wife, Francie, and also my children. And, beyond my personal experience, I believe P&G’s concern for the welfare of its employees’ families constitutes part of the set of values that encouraged so many talented men and women to make their entire careers there.
Q: Are there lessons in What Really Matters that have prepared you for what lies ahead as chairman of the board at Disney?
A. I am sure that my lifelong commitment to be of maximum service will be the guiding factor in how I spend my time and what I make my biggest priorities. The business of the board will be based on my conviction in the value of open communication, people being able to say what's on their mind, and honest, transparent relationships.