What The Economic Development Profession Can Learn From P&G

Ed BurghardWe’re moving away from the current mass marketing model, away from push and toward pull.  Consumers will only become more demanding.  They want to have a conversation, to dialogue, to participate, to be more in control.

A.G. Lafley speech to the Association of National Advertisers 10-15-2000

By Edward Burghard
Google

I recently attended a conference on Regional Collaboration.  The keynote speaker was Jeff Weedman (CEO of Cintrifuse and VP of Global Business Development at P&G).  Jeff told the story about P&G’s turn around by focusing on the “consumer is boss” paradigm.  He emphasized that in economic development it is also important to define the true “boss” (or beneficiary of the work) and to constantly put that “boss” at the center of all strategic choices.  In doing so, you are able to drive mission clarity, better enable collaborative behavior, and catalyze success.

It was a great talk and I particularly enjoyed it because I lived the story over my 33-year career at P&G.  When I joined the Company, consumer understanding was a clear competitive advantage or the brands P&G sold.  The Company pioneered market research methodologies to better understand consumer needs and the drivers of their purchase decisions.  Consumer insights were the foundation of P&G’s R&D efforts.  The focus drove operational efficiency and effectiveness.

Then the landscape shifted and customers began to exert an increasing influence in the go-to-market strategies that P&G adopted.  In the 1980’s P&G started creating customer teams to better understand the needs of customers and how P&G products could do a better job of meeting those needs.  It introduced a level of complexity into the P&G organizational structure that was new and distracting from the Company’s historical focus on consumers.  In his paper entitled “The Multi-Dimensional and Reconfigurable Organization” . Jay Galbraith describes what he calls P&G’s four-pillar structure (visually described by Figure 1 in the paper).  It isn’t hard to see how the voice of the consumer got lost in the complexity of the global management structure at P&G.  As a Marketing Director, I felt the tension between customer teams who tended to operate on the paradigm the “Customer is boss”, and brand teams who retained the paradigm the “Consumer is boss”.  It should be no surprise the needs of customers for improved margin and the needs of consumers for solutions to their problems weren’t always aligned.

From my perspective, this operational and philosophical conflict between a customer-centric versus consumer-centric paradigm is what A.G. Lafley was to inherit from Durk Jaeger when on June 6, 2000 John Pepper (former Chairman and CEO of P&G) asked him “Are you prepared to accept the CEO job at P&G?”

A.G.’s decision to refocus the entire P&G Organization (including customer teams) on “Consumer is boss” was nothing short of brilliant.  A.G. realized that for P&G to fully achieve its stated promise it was mandatory that the Company reconfirmed “Consumer is boss”.

P&G Promise

“Two billion times a day, P&G brands touch the lives of people around the world.  P&G people work to make sure those brands live up to their promise to make everyday life just a little bit better.  P&G – Touching lives, improving life”

Implications For Economic Development

What can be learned from the P&G story?

As A.G. said in 2000, consumers “want to have a conversation.  They want to be part of the dialogue, to participate, to be more in control.”  A.G. could have just as easily been describing what the residents of your community want.  With the advent of the internet and social media, the old push model of making strategic decisions with limited (or selective) input from residents is quickly becoming obsolete.  Residents are demanding a greater voice in the process and setting a higher standard of performance for both elected officials and economic development professionals.  Just as P&G concluded, direct engagement with the need beneficiary (in their case the consumer, in the case of the economic development profession the resident) is the new key to sustainable success.

The reapplicable lesson from the P&G experience is that the economic development profession is too focused on a “Business is boss” paradigm.  This is reflected by the profession’s over emphasis on job creation, retention and expansion.  Instead, the profession needs to adopt the paradigm of “Resident is boss”.

Just as P&G decided that the ultimate beneficiaries of the Company’s efforts were consumers, so too should the economic development profession recognize that the end beneficiary of its work is the residents of the communities they serve.

Just like P&G recognized over focusing on one part of the value chain (customers) created complexity and potential conflicts in the strategic decision process, so too should the economic development profession recognize that over focusing on meeting the needs of business can potentially be detrimental to improving the lives of residents.

Learning

By adopting the paradigm of the “resident is boss”, the economic development profession can focus on designing and deploying strategies that positively impact the lives of residents.

In the past, one excuse was the lack of a reliable measurement to evaluate performance.  But, now that is no longer the case for states and major MSA’s (and hopefully soon for any community).

Xavier University’s research into the American Dream provides a practical way to move the discussion from theory to reality.  Their American Dream Composite Index™ (ADCI) powered by dunnhumby quantifies the American Dream and defines it in terms of 35 dimensions that can be used to guide local strategic planning.  On an annual basis, performance scores for each of these dimensions (as well as five sub-indexes and the overall ADCI rating) can be measured.  The ADCI score estimates the degree to which residents feel they are achieving their American Dream.  In my opinion, it is an ideal measure for a “Resident is boss” paradigm.

Importantly, the ADCI research documents five areas economic development professionals, community leaders and elected officials need to consider when making strategic choices in order to better enable community residents to achieve their American Dream.  Every choice should be assessed for:

Economic Impact – Resident satisfaction, freedom and progress with respect to their finances, job, home ownership and health care.

Well-Being Impact – Resident contentment, health, and prosperity.

Societal Impact – Resident perception of the extent to which the government, businesses, and people are being fair and trustworthy.

Diversity Impact – Resident attitudes toward assimilation of differences.

Environmental Impact – The degree to which residents experience pollution in the air, food, water and land.

My Take on an Economic Development Profession Promise

Under a “Resident is boss” paradigm, the promise would be –

“The work of economic development professionals touches the lives of all residents in the community they serve.  Economic development professionals work to better enable those residents to achieve their American Dream. Economic Development – Bringing the American Dream to Life for the Residents of our Communities”

How Well Is Your State Enabling The American Dream?

Discover the state that best enables achievement of the American Dream based on a measure of resident’s sentiment.

American Dream Duck Cover

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9 Comments so far

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  2. Graham Robertson

    April 14, 2014

    I like that “Consumer is Boss” idea. I always used to say “we only have one source of revenue and that’s the consumer” As your article points out, there is a conflict with the customer, but my view is they want to know and see that you are selling through to THEIR consumer.

  3. Bob Stoyand

    April 14, 2014

    I don’t agree that the resident is the (entire) boss unless the resident is willing to pay the entire cost of the services and social costs of running the city.

    It is crucial that cities recognize that business has a place at the table when it comes to figuring out what their needs are as well and are considered as part of the boss equation.

    In order to have a reasonable tax base to make it affordable to live in an urban environment the business – residential tax split should be targeted in the 20% – 80% area.

    It is important that the tax source that is going to offset the personal residential taxes by 20% should have a voice and be considered in the decision making process as well.

    Business is also the source of jobs for the residents and if business’s close because they are not heard (or considered) then the residents will be looking for work out of town or moving themselves for work.

    Business also carries a heavy share of the tax load in that they do not use any of the schools, parks, social amenities and they also are responsible for paying for many services in addition to taxes such as cleaning their own lot and garbage pick-up.

    My position is cities must also give business the attention that they deserve. Most business’s are small business’s owned by individuals that are willing to risk their own money and time to make a living for themselves and provide jobs to others. They deserve to be listened to and focused on as well.

  4. Edward

    April 14, 2014

    Bob – Nobody would argue that giving business attention and meeting their needs is important. In fact, the post makes the point that jobs and job growth is an important part of delivering the American Dream. The take-away should be that focusing on “Business as boss” falls well short of what is required and if taken to the extreme can actually be detrimental. In my opinion, your tax split argument actually supports the concept that the “Resident is boss”, and business is an important, but subordinate target audience. I would certainly agree businesses should be given attention and a voice at the table. But, investment decisions should ultimately be made based on the goal of better enabling residents to achieve their American Dream. In most cases, this will align with business needs. I’d also make the point communities that do a better job of enabling residents to achieve their American Dream are better serving their businesses by becoming a magnet for top talent (or at least reducing the barriers to top talent attraction). In my discussion with CEOs, their #1 need is top talent to replace baby boomer retirees and support expansion.

  5. Bob Viney

    April 14, 2014

    Ed, I think we can sometimes take too dogmatic an approach when discussing the strategic focus of a specific program or initiative. No complex business or community development organization can have only one focus, as you point out above. In P&G’s “consumer is boss” approach, the needs and interests of the trade customer and the manufacturing partners were not ignored, and sometimes, they became the central focus of specific efforts. When we focus on the consumer as the center of the strategic bulls-eye, we also have to hit some of the goals critical to the adjacent outer rings as well in implementation.

    As you point out, focusing on the Quality of Life has to include a major element of economic prosperity and job creation. It’s hard to have a great quality of life for residents without that, so one element cannot be separated from the other. I doubt there’s any real disagreement on that point.

    Recall that the focus of the Think Regional program was on doing a better job of Attracting the Investments that lead to economic development, job growth and thus quality of life enhancement. Should not such an approach focus upon the group that provides the investments? So the focus of an investment attraction initiative (different than general economic development initiative) would seem to be most appropriately focused on meeting the needs of business investors FIRST, while then also ensuring that investment activities once attracted appropriately reflect the needs of the community, in terms of multiple quality of life issues, including transportation infrastructure, environmental issues, appropriate zoning and land use, etc.

    Your point is well argued that business investment and economic development, once attracted, will be most successful when the implementation of investment activities take into account the important elements that drive quality of life for residents. Ignoring that element will eventually undermine the ability to attract investments, since the quality of life that exists at any time is also important to investors.

    I personally believe that the value of Think Regional was simply to help the region come together in a collaborative effort to do a better job of competing for and attracting investments from business; and that to achieve that purpose, the program should have those businesses looking to make investments as it’s principle, but not exclusive focus, to help bring the right resources and innovations together for success in attracting new investments. Appropriately, I believe the “measures of success” of this initiative over time will primarily be the level of new investments attracted and existing expansion investments retained, and secondarily, to track the improvements in the quality of life that come from the appropriate implementation of these investments.

    Thanks for participating at Think Regional and emphasizing the role of this element in the implementation of investments. I hope you will continue to be actively engaged in that important Issue Action Group.

  6. Ed Burghard

    April 14, 2014

    Bob – The test of a successful business attraction program should not be how many companies moved to a location or how happy those companies are operating from a location. The real test is whether residents of the community are better or worse off from the attraction effort. Companies that have a negative impact on the environment, or companies that provide low wage jobs, or companies that require a community to sacrifice discretionary investment on education or infrastructure are possible negative outcomes of a Business is Boss focus. You need only to look at the history of boom:bust communities to see the risk of a devastating result of putting business needs above consumer needs. This is what was happening when P&G put customer needs above consumer needs. Product innovation slowed and shopper insight became more important than consumer insight. What P&G realized was by focusing on improving the lives of consumers they were actually better able to help customers deliver a good shopper experience. By focusing on helping residents better achieve their American Dream, communities will actually make strategic choices that result in better serving the needs of businesses. Interestingly, a research study among business executives suggest CEOs want their employees to more fully achieve their American Dream and believe it improves P&L performance. CEOs also indicated they would preferentially select locations for business operations where residents felt like they were achieving more of their American Dream.

  7. Ed Burghard

    April 14, 2014

    Bob – As a P&G alum, you will know the P&G saying I am paraphrasing – The needs of residents and the needs of a community are inseparable.

  8. Randy Welker

    April 15, 2014

    Ed, having been a loyal Cincinnatian but now a Florida resident, it is still hard for me to accept the idea that a multi national company can be guided by resident satisfaction and quality of life. The Fenholloway River pollution was a travesty. The river was designated as an industrial river, but I would still maintain that there was little thought about anything but corporate profits as the dumping of industrial waste left a scar on the community.

    Whether if was in Lower Price Hill or in Sharonville, we were exposed to the costs of cleaning up the industrial waste product that was dumped in the communities.

    I know this not the focus of your comments, but let’s not be naive as we continue to work to attract companies to our cities. The underlying motivation is not on residents.

  9. Edward

    April 15, 2014

    Randy – Just to be clear, communities still need to be able to meet a company’s project criteria to make the short list of locations in the site selection process. But, when the short list is defined differentiators like quality of life become very important. Here is a link that shares results of a survey I ran among business executives that suggests the degree to which residents feel they are achieving their American Dream can be an important point of difference in the final decision – http://strengtheningbrandamerica.com/blog/2013/01/2012-business-executive-survey-results-the-american-dream/ Your point about the dumping of waste illustrates my point that enabling residents to better achieve their American Dream should be the focus of local economic development decisions. Recognizing that the interests of business and the interests of residents are not always aligned and thinking through both the short and long-term implications of having a company set up an operation in your community is key to creating sustainable prosperity. I find that too often, major compromises are made by communities in the dogmatic pursuit of jobs. And, that communities often fail to account for the opportunity costs associated with those decisions. One recent example I was involved in was a community that had a limited amount of available land. The leadership was considering a request from a big box retailer to put a store on the property. When I got them to think through the opportunity cost of committing that asset to a business that would do little to improve the ability of their residents to achieve their American Dream (as background, there were 3 similar retailers already in operation within a 10-mile radius), community leaders started to understand the real opportunity costs associated with the deal. Another example is a community impacted by the shale energy industry that built a new wing on their elementary school to address the short term needs of the population influx they were experiencing. When the drilling phase shifted to production and the workers (with their families) moved on, the community was left with an underutilized asset and an on-going expense. You can find example after example like these across the nation. If you adopt a paradigm of “Resident is boss”, it forces you to think through the implications of economic development choices on the lives of residents. It also gives you permission to not compete for capital investment that is judged to be a win for the business and a loss for the community.

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