It is important to emphasize that for every brand, these five choices must clearly fit together. As a strategist, you can start anywhere in the choice cascade, but you must make all five choices and they must all be coordinated. This is the truly challenging part of strategy. The choices themselves are not terribly complex or difficult. But integrating them, and refusing to stop thinking until they genuinely reinforce one another, takes true intellectual integrity.
Moreover, in a large company, the choices made at the category, function, and company-wide level must also fit together and reinforce one another. The choices made by the Bounty paper towel team, for instance, must have integrity with the overall P&G choices made by the CEO and senior team.
Sometimes, when the cohesion between choices isn’t strong enough, divestiture is the best answer. This was the case for P&G’s pharmaceuticals business. It was a strong and growing business, with important brands and products. But over time, it became clear that the kinds of choices, capabilities, and systems required to win in this business did not mesh well enough with the company’s core businesses. P&G is at its best when it can develop branded products through a standardized innovation process, sell through its best customers (such as Walmart and Walgreen Company), and develop a long-term relationship with its end consumers. In pharmaceuticals, there is a highly specialized and complex development process with many steps not in common with our standard approach—including blind trials and FDA approvals. The industry also has a different marketing model from that of consumer products. It sells directly to doctors and pharmacies; consumers don’t make the purchase decisions and may never know the brand name of the drug, or who makes it. In the end, we divested a profitable pharmaceutical business, believing it could be more successful elsewhere.
In divesting this business, P&G walked away from billions of dollars of sales and profits, but it was the right decision. Walking away allowed the company to reinvest cash, human resources, and other assets in businesses that did have integrity with its overall set of strategy choices: beauty, home, and personal care. When P&G acquired Gillette in 2002, it was as much for the sake of integrity—for its fit with the firm’s choices and competencies—as it was for the strength of its male grooming, personal-care, and oral-care brands.
Building Integrity at P&G
The five cascading choices provide a structure within which to practice intellectual integrity. Participants are continually drawn back to the same crucial decisions: what to aspire to, where to play, how to win there, which capabilities to build, and which management systems to set up. This framework removes a great deal of fear and anxiety, especially among lower-level managers and those far from headquarters, about doing the right thing.
But, like any other system involving behavior change, the cascade process takes some time to learn and requires concerted attention. At P&G, once we recognized the importance of consistent, integrated decision making, we looked for other ways to foster it. We knew that integrity is not a fixed quality that people inherit at birth; it can be cultivated and developed, in part through training but mostly through better business practice and by encouraging the right types of conversations.
We thus began to explicitly identify up-and-coming high-potential executives and coach them in strategy, inquiry, and the process of making integrated choices. We redesigned the strategic review process, turning it into a vehicle for building the strategic integrity muscles of our entire leadership cadre. Previously, annual strategy reviews were like corporate theater—a setting that did not encourage integrity. The presidents of P&G’s businesses and their teams trooped in before the company’s most senior executives with bulletproof PowerPoint presentations. The presenters naturally wanted to show their results, defend their decisions, and get out of the room as rapidly as possible. They didn’t welcome critical probing of the logic of their choices. When senior leadership felt that resistance, they either kept their reservations private or piled on with attacks—in which case the presenting team had no choice but to take the criticism and then slink out, proverbial tails between their legs.