P&G's Legendary Ex-CEO Explains Why Everyone Gets Strategy Wrong

Former P&G CEO A.G. Lafley was one of the most successful executives in the history of the 176-year-old company. Under Lafley, the company's value increased by more than $100 billion, and more than doubled its roster of billion-dollar brands.

In his upcoming book, "Playing To Win," which was co-written with Rotman School Of Management Dean Roger Martin and was released today, Lafley breaks down the strategic framework that he used throughout his time at the top, which he says can be applied to a company of any size.

There are countless books, articles, and courses on strategy. So why do people continue to get it wrong? We spoke to Lafley, who told Business Insider that there are three primary reasons.

Businesses and people don't like to make choices

"In Roger Martin's and my view, the essence of strategy is making 5 integrated — sometimes difficult — choices; so 5 choices to win. And a lot of us, a lot of human beings, don't like to make choices, right? Choices are difficult, we want to keep our options open, choices involve taking risks, and not only risk to the business but personal risk. So I think there's this sort of human resistance to making choices, and choices are the core of strategy."

People don't like thinking strategy, and focus on execution

"The second thing that goes on is I think that some people, maybe too many people, at for-profit, not-for-profit, small, medium and large businesses just don't like thinking strategy. They think that they know what their product and service is, they think that it's all about execution. 'If I execute better than the next guy, I'm going to win.' But the problem is that execution without the direction of a strategy, without the choices of a strategy, is all over the place. You might win occasionally but you're probably not going to win consistently, reliably or sustainably."

Companies go halfway and don't fully develop a strategy

"This is probably most common at Fortune 500 companies. They do part of the strategy job, but they don't do the whole thing. What do I mean by that? They have a vision or a mission, they might go out and do industry, company and competitor analysis, they might even put together an annual plan and budget. Those are parts of strategy, or they're the output of strategy but they're not strategy."

So what's the solution? According to Lafley, it's about making difficult and specific choices, and putting the entire weight of a business behind them.

"Strategy is five choices," Lafley said. "What is winning; where am I going to play to win; how am I going to win where I play; where are my core competencies that are going to enable me to win where I play; and what management systems and measures are going to help me execute my strategies?"

Companies have to define an ideal future in strategic terms, limit the field rather than try to please everybody, decide on the best strategy for that market, discover and use what they're best at, and determine how to support and measure its people as they carry out the strategy.

Especially in a large organization, that can't be done by one person. It has to become a part of the culture and thinking of the company.

"What we were really trying to accomplish at P&G was to help our managers and leaders become better thinkers and better doers, better strategists and better leaders," Lafley said. "The last thing I wanted to do was sit in my office and try to make strategy choices for 25 to 30 different industries in 90 different countries around the world. That made no sense, I wasn't qualified to do it, I wasn't capable of doing it. So what I wanted to do was help my managers and my leaders [who are] responsible for those businesses, those geographies and those brands, become better strategic choice-makers."

Strategy doesn't work unless everyone's aware of it, working together, and willing to make tough choices to support it.

Find the book here.

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