In our fine fragrances business, intellectual integrity meant taking the long view. Fine fragrances can be an intensely competitive field, so we made an important where-to-play choice to focus first on the male fragrances segment, which was considerably less competitive than the women’s market. To win in fragrances over the long term, we built on our existing expertise. P&G has long been the world’s largest purchaser of fragrances, which go into laundry detergents, soaps, shampoos, conditioners, deodorants, dish soaps, fabric softeners, and other products. We put our deep experience in combining scents and formulating appealing fragrances to work on licensed fragrance brands like Hugo Boss and Lacoste. As we expanded our fragrance lines, eventually turning to women’s brands as well, our scale enabled us to both purchase our ingredients and manufacture our products very cost-effectively. Over time, we grew more sophisticated in understanding consumer reactions to fragrances. This further enhanced our formulation expertise. It enabled us to build a strong business in beauty care.
Cohesion and Cascades
These first three choices—our winning aspiration, where to play, and how to win—are closely tied to the final two choices on the cascade: “What capabilities must be in place for us to win?” and “What management systems are required?”
Capabilities are those things you must do exceedingly well in order to deliver on your aspiration, where-to-play, and how-to-win choices. In thinking about our capabilities in light of our other choices, we came to see our core capabilities as deep consumer understanding, innovation, brand building, going to market with customers and suppliers, and global scale. In each of these areas, we had room to deepen and grow our expertise.
In terms of scale, we had tended to focus on scale within a brand or category, such as laundry detergent or beauty care. We had to work hard to expand our thinking about scale to encompass the whole company—for example, by bringing our global business services (IT, HR, and other internal functions) together into one department. This encouraged the leaders of our global business services to ask how they could better serve their internal customers globally, and how they could smartly outsource their lower-value-added activities. Now, the real scale advantages began to accrue. We reduced costs across the company, worked more closely with customers in ways that increased our importance to them, and managed our supplier relationships in new ways that made all of us better. These changes were possible only because of our growing intellectual integrity.
Finally, one must ask, “What internal management systems are required?” Select the ones that can best ensure that your required capabilities add up to a platform for advantage. Systems and measures are essential to building capabilities and supporting the other strategic choices. But to have intellectual integrity, a leader must make an explicit choice to develop these systems.
At P&G, for instance, when it came to our branding capability, we had traditionally done a poor job of systematically learning from our marketing successes and failures. Most institutional knowledge on brand building and marketing was captured in pithy one-page memos or passed down in anecdotal storytelling by managers who had lived through the experience. The implicit message was that if young brand managers and assistant brand managers hung around seasoned brand builders long enough, they would master all they had to learn about marketing in due course.
In 2000, for the first time in the company’s history, we launched a project to codify P&G’s approach to brand building. The resulting “Brand-Building Framework” (BBF) laid out the company’s approach in one coherent document, which is still regularly updated. With the BBF frameworks in place, new P&G marketers can learn the trade more quickly, and senior managers have an organized and written resource to guide their efforts. The BBF serves as a management system that nurtures and enhances the critical brand-building capacity of P&G. Organizational infrastructure like this was central to everything we did, and it enabled us to improve the overall integrity of decisions made throughout P&G.