Leaders make a difference – P&G, GM, AT&T

by | Jun 10, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Lock-in

As I've given presentations around the country the last year I'm frequently asked about the role of leadership in Phoenix Principle companies.  All people can bring Phoenix Principle behaviors to their work teams and functional groups.  Yet there is no doubt that organizations do much better when the leaders are also committed to Phoenix Principle behaviors. 

Unfortunately, all too often, top leaders are more interested in Defend & Extend Management.  BusinessWeek's recent article "How to Succeed at Proctor & Gamble" talks about replacing CEO icons such as Charles Schwab, Michael Dell and Jack Welch.  Unfortunately, only one of these was a real Phoenix Principle leader – and the others ended up coming back to their organizations when the replacements tried too much D&E behavior – leaving their shareholders with far too low returns and only dreams of rising investment value.  Even more unfortunate is the fact that too many management gurus simply love to wax eloquently about leaders of big companies – regardless of their performance.  Such as Warren Bennis's description of A.G. Lafley at P&G as "Rushmorian."  Those at the top are given praise just because they got to the top.  Yet, we've all known leaders who were far from being praise-worthy.  Even the mundane can be loved by business reviewers that rely on them for money, access, ad dollars and influence.

There's a simple rule for identifying good leadership.  Grow revenues and profits while achieving above average rates of return and positioning the organizations for ongoing double digit growth upon departure.  It's not the size of the organization that determines the quality of a leader, it's the results.  We too often forget this.

Back to departing P&G CEO, Mr. Lafley.  Preparing to retire, he's taken the high ground of claiming to be "Mr. Innovation" for P&G.  Experts on innovation classify them into Variations, Derivatives, Platforms or Fundamental.  Using this classification scheme (from Praveen Gupta Managing Editor of the International Journal of Innovation Science and author of Business Innovation) we can see that Mr. Lafley was good at driving Variations and Derivatives at P&G.  But under his leadership what did P&G do to launch new platforms or fundamental new technologies?  While variations and derivatives drive new sales – "flavor of the month" marketing as it's sometimes called – they don't produce high profits because they are easily copied by competitors and offer relatively little new market growth.  They don't position a company for long-term growth because all variations and derivatives eventually run their course.  They may help retain customers for a while, but they rarely attract new ones.  Eventually, market shifts leave them weaker and unable to maintain results due to spending too much time and resource Defending & Extending what worked in the past.  Mr. Lafley has done little to Disrupt P&G's decades-old Success Formula or introduce White Space that would make P&G a role model for the new post-Industrial era. 

Too often, bigness stands for goodness among those choosing business leaders.  For example, GM is replacing departed CEO Rick Wagoner with Ed Whitacre according to the Detroit Free Press in "Former AT&T chief to lead GM."  Mr. Whitacre's claim to fame is that as a lifetime AT&T employee, when the company was forced to spin out the regional Bell phone companies he led Southwestern Bell through acquisitions until it recreated AT&T – as a much less innovative company.  Mr. Whitacre is a model of the custodial CEO determined to Defend & Extend the old business – in his case spending 20+ years recreating the AT&T judge Green took apart.  Where a judge unleashed the telecommunications revolution, Mr. Whitacre simply put back together a company that is no longer a leader in any growth markets.  Market leaders today are Apple and Google and those who are delivering value at the confluence of communication regardless of technology.

Today, few under age 30 even want a land-line – and most have no real concept of "long distance".   Can the man who put back together the pieces of AT&T, the leader in land-line telephones and old-fashioned "long distance service" be the kind of leader to push GM into the information economy?  Does he understand how to create new business models?  Or is he the kind of person dedicated to preserving business models created in the 1920s, 30s and 40s?  Can the man who let all the innovation of Ma Bell dissipate into new players while recreating an out-of-date business be expected to remake GM into a company that can compete with Kia and Tata Motors?

Any kind of person can become the leader of a company.  Businesses are not democracies. The people at the top get there through a combination of factors.  There is no litmus test to be a CEO – not even consistent production of good results.  But in far too many many cases the historical road to the top has been by being the champion of D&E Management; by caretaking the old Success Formula, never letting anyone attack it.  They have avoided Disruptions, ignored new competitors, and risen because they were more interested in "protecting the core" than producing above-average results (often protecting a seriously rotting core).  Much to the chagrin of shareholders in many cases.

Now that the world has shifted, we need people leading companies that can modify old Success Formulas to changing market circumstances.  Leaders who are able to develop and promote future scenarios that can guide the company to prosperity, not merely extend past practices.  Leaders who obsess about competitors to identify market shifts and new opportunities for growth.  Leaders who are not afraid to attack old Lock-ins, Disrupting the status quo so the business can evolve.  Leaders who cherish White Space and keep multiple market tests operating so the company can move toward what works for meeting emerging client needs.  Leaders like Lee Iacocca, Jack Welch, Steve Jobs and John Chambers.  They can improve corporate longevity by shifting their organizations with the marketplace, maintaining revenue and profit growth supporting job growth and increased vendor sales.

When you gotta go -:) P&G toilet database

by | Mar 27, 2009 | General, Innovation, Openness, Television, Travel, Web/Tech

If you can read this blog and not grin (or maybe even laugh) you're more grisly than me.

MediaPost.com posted "P&G Backs Public Toilet Database Site, App."  Proctor & Gamble, supporting Charmin branding, has agreed to financially support the web site www.SitorSquat.com, which was originally developed by a New York homemaker.  According to the Charmin brand manager this is considered part of the overall marketing effort which includes providing toilets at public events.  His goal is that by helping people find clean places to go, it will help them remember to buy Charmin when they are at the grocery.

You have to admit, it's a clever and far from traditional idea.  And certainly most of us have been in situations whether for ourselves or for someone with us (including children) we'd like to know the location of a toilet – especially a clean one.  That the database can be downloaded, or accessed via the web or iPhone or Blackberry makes it a usable tool.  Perhaps as valuable as an on-line restaurant guide. In times of "crisis" it could be the most valuable app on your iPhone.

But, despite the cleverness, P&G is operating in D&E mode rather than really growing toilet paper sales.  The app does not discern whether the facility's paper is nice, soft Charmin, or more industrial single ply product.  Nor does it even promote Charmin in rating the toilets.  The stars seem to be more closely tied to mop and rag use by janitors, and accessibility, than anything else.  It's unclear that this will increase demand for Charmin, much less toilet paper, and probably does little more than reinforce the brand name, by merely putting it on the site.

If P&G really wanted to grow the market for toilet paper, it would be more aggressive.  For us world travelers, there are many places where toilet paper isn't as common as the USA – such as India.  We all know of various health risks in India (mostly due to water issues), and P&G would be well served to promote hygiene in the developing world, including the use of disposable personal cleaning products like toilet paper.  Further, P&G could develop products that use less wood pulp thus having less environmental impact, in effect a "green" toilet paper, that would incent additional use by the ecology-oriented.  Or P&G could develop product from recycled or other waste material that has an even lower carbon footprint than paper (corn stalks? corn husks? banana leaves? straw?), again promoting use in the developing world (that often lacks enough wood) as well as environmental advocates.

While the database is interesting, and no doubt will get used, its business value will most likely be nill.  A funny news column, but of no value to P&G shareholders. It doesn't help P&G address future needs of people regarding toilet paper (ecology, etc.), nor does it address the use of competitive products (which is non-use, or natural fibers [leaves] in the developing world).  P&G has taken a clever new generation product like an iPhone app, and turned it into a very traditional, industrial use which is basic brand awareness reinforcement.  Really not White Space, because no goals are given the project nor any positive results expected from it. 

But, you have to admit, it's definitely "outside the box" thinking – especially for a company as stodgy as P&G.  There is no doubt, this is an innovative (if sustaining) innovation in brand marketing – including the building of a web/iPhone app to promote a product.  You'd just like to see P&G go a bit further in its efforts to find growth for shareholders.  Have a happy weekend!