February 6, 2013 by Speakers' Spotlight
Former Dean of The Rotman School of Management, Roger Martin, Pens New Book
Steve Denning, of Forbes.com, recently interviewed Roger Martin on his new book, Playing To Win: How Strategy Really Works.
SD: Why did you write this book?
Roger Martin: We feel that most people involved in strategy find it complicated, largely unpleasant and pretty unproductive. So we decided to write a book to show that strategy can and should be simple, fun and effective. It is written for anybody who needs to decide where to play and how to win. That really means pretty much anybody running any part of an organization – whether for-profit or not for profit. It most obviously applies to a CEO. But anybody running a business unit, a brand or a function needs to think about strategy in a similar fashion. We would go so far as to say that every individual who wants to be effective needs to ask themselves: ‘where should I play within the confines of my job, and how should I win – i.e. create maximum value – where I have chosen to focus my energies?’
SD: How does this book relate to the advent of customer capitalism that you have written about before? Is P&G a good example of customer capitalism, as suggested in your 2010 HBR article?
Roger Martin: The book is tightly tied to the idea of customer capitalism. The core premise of the book is that economic benefit will flow to shareholders only if the company chooses a clear set of customers to address and finds a way to create distinctive value for them. Value simply does not flow to shareholders based on some abstract desire to ‘maximize shareholder value.’ P&G is a good example – though far from the only example – of customer capitalism in that the entire culture of the company is grounded in the notion that delighting consumers – i.e. making their lives a little bit better every day – is the number one priority of the company. All good things flow from delighting consumers.
SD: P&G has received well-deserved credit for pioneering the holistic understanding of the customer. What were the main impacts of this on P&G’s business?
Roger Martin: The biggest impact was a better balance between paying attention to the physical/functional attributes of the consumer experience and the emotional/psychological attributes. In an earlier era, P&G brands delivered wonderfully on the former and had more spotty performance on the latter. Moms want their diaper to absorb urine and keep it away from their baby’s skin. But they also want to feel a sense of pride in the way their baby looks in its diaper. They won’t give up the former to get the latter. But if you can give the mom both, you will have a more powerful brand. That is what P&G gained from systematically gaining a more holistic understanding of the customer.
SD: P&G has many successful brands. Is “a house of brands” approach like P&G’s a handicap for developing genuine customer trust? Can customers really trust Olay or Crest or Tide? Or would they have to know more about the company behind those brands and its values and how it operates?
Roger Martin: Both approaches clearly work in the world of brands. Apple has one and P&G has many. P&G believes that customers do totally trust Olay, Crest and Tide; and the data shows that pretty clearly. The advantage is that each brand can be developed with imagery that is entirely independent and customized to the particular consumer experience – which is very different for Olay versus Crest versus Tide.
That having been said, it doesn’t have to be all or nothing and P&G’s Olympic initiative demonstrates that. It ties the brands to the P&G family in a very public way. So there is a bit of both for P&G.
SD: How did the approach of drawing on external innovation emerge? How large a contribution has this made to P&G’s performance? What role will it play in the future?
Roger Martin: It was motivated by a great integrative thinker – AG Lafley. He was not satisfied by the pace and level of innovation at P&G as of 2000 and wanted to get more innovation without spending more resources on R&D and commercialization. The key to the breakthrough thinking was to recognize that the fundamental economics of invention and commercialization are entirely different. And the economics of commercialization dramatically favored P&G while those for invention did not. So Connect + Develop was a way to dramatically increase the pipeline of inventions to put through P&G’s commercialization machine.
It has been very important to P&G’s performance. There has been more and better innovation without an increase in the cost of innovation. As for the future, it is quite likely that the Connect +Develop ecosystem has not nearly matured yet. Systems like this take a while to grow. So my suspicion is that it will be more important in the future than the past.
SD: This book is called, Playing to Win. Like your earlier books, The Game Changer and Fixing The Game, its title is about winning and games. Are you making the case that business should be viewed as winning a game?
Roger Martin: No. It really is not at all about making a case. Sport is simply a metaphor designed to help the reader relate and understand. There is lots of evidence (as Craig Wynett of P&G would explain to you!) that we only understand the world through metaphor: without a metaphor, we can’t understand anything. Sport is so well, deeply and widely understood that it serves as a good metaphor that we believe will enable readers to internalize the conceptual points that we make.
SD: What constitutes a “win” for P&G? In the opening chapter, the book presents Olay as a strong win for P&G, through having transformed a struggling $800 million brand into “a $2.5 billion brand with high margins and a consumer base in the heart of the market” (p.14) That’s clearly a win in terms of shareholder capitalism. Is this the right way to portray a win in terms of customer capitalism, where making money is a result, rather than the goal?
Roger Martin: For P&G, winning means more consumers loving and using its product than anybody else’s and that is the big win for Olay. The transformation of Olay turned it into the #1 brand in its market worldwide. And it is profitable enough that there are ample resources available to keep on reinvesting in maintaining it as the best brand in its category. And I have never intimated that I don’t want shareholders to win. This is the only way that they can win sustainably – by winning the hearts and minds of consumers with a delightful offering.
SD: Studies suggest that as few as 2% of women around the world are willing to describe themselves as beautiful. Are P&G and the beauty industry doing enough to create wins for their customers?
Roger Martin: The combined contribution of the fashion and beauty industries and Hollywood to negative or problematic self-perceptions of female beauty is probably substantial. But there are genuine efforts in the beauty business to counter the dominant message from these industries – i.e. you need to have flawless skin, stunning hair, a beautiful face and not a pound of fat. Dove (Unilever), with its campaign for real beauty, is one example. P&G’s Cover Girl is another with Queen Latifah and Ellen DeGeneres as celebrity spokespersons. I am sure that more needs to be done across these industries, but P&G is certainly taking steps in a helpful direction.
SD: Over the last decade or so, P&G has been successful in creating or maintaining a large number of leading brands. In doing so, it has worked largely within existing channels and business models. It has not, like Apple [AAPL] or Amazon [AMZN], regularly innovated in a major way its business model or developed new platforms for delivery of products or services. Should developing new platforms and business models be a larger part of P&G’s future?
Roger Martin: This is not entirely true. P&G has built SK-II, a tiny and largely inconsequential brand at the time of P&G’s 1991 acquisition of its parent Max Factor, to a billion dollar brand that is sold entirely through advisor-assisted counter sales in the prestige channel – which is totally outside P&G’s ‘existing channels and business models.’ Also, when P&G bought Wella in 2003, it became a significant player in the hair salon business – yet another new business model. And it is now in the car wash business with its Mr. Clean-branded franchises. And there are more.
I think it would be more accurate to say that P&G has always experimented and always will experiment with new channels and business models. However, given how fantastically successful the current business model is, it is doubtful that there will be a precipitous, wholesale shift in its business model.
SD: What are the principal lessons from P&G’s experience that you see for other companies?
Roger Martin: There are lots of obvious lessons – deep consumer understanding; dedication to intensive brand building; relentless investment in innovation; building of global scale – but I might focus on one that is not so obvious: the promote-from-within culture. Most observers see it as self-obsessed and self-limiting – you limit yourself from bringing on board anybody senior from the outside. After hanging around P&G for almost three decades, I have come to believe that there is real strength to promote-from-within. The attention to recruiting at the entry level and the subsequent development of those young professionals is profound – the best I have seen in 32 years in business. It is not as though non-promote-from-within organizations can’t invest the same resources and energy into recruiting and development – it is just that they don’t seem to do so. As a consequence, I pay more attention to promote-from-within as a philosophy than I used to.
By Steve Denning
February 4, 2013