Most companies don’t think much about how to disrupt their operations, especially when things are going well. If their world is falling to pieces, then they might — usually only in desperation — start discussing how they can radically change their products, services, or delivery model. By then, of course, it’s usually too late.
The real innovators are sailing smoothly across the ocean but see and act on the need to disrupt long before they start taking on water. And what’s even more unique is when two high-growth, highly successful ships join forces to collaboratively disrupt the waters in their industry.
Tom Muccio, who spent 33 years with Procter & Gamble, was a big part of this type of collaborative disruption when he led a nascent P&G team that formed a game-changing partnership with Walmart.
He shared a good deal of his story and several change-related leadership lessons during our recent conversation on Off the Rak, and he goes into even more detail in his new book, Collaborative Disruption.
A huge challenge many leaders face is just recognizing that the success of today can’t be sustained without significant change. So one of the things that interested me most during our talk was how P&G and Walmart knew change was needed and how they knew they needed to invest in it together.
In the late 1980s, P&G was already well established as the world’s biggest consumer product supplier, and Walmart was an up-and-growing retailer that focused mainly on rural markets — big, but nowhere near what it is today. Both companies easily could have stuck to what they were doing well. But Tom talked about five factors that led leaders at the highest levels of Walmart and P&G to commit to a collaborative re-invention of how suppliers and retailers work together.
One, they knew changes were happening in the market. The retail environment in 1986 looked very different from today, and not just because there was no online shopping. The main national retailers were Sears and J.C. Penny. Even the top grocery stores were mainly regional or multi-regional. Then discount stores started popping up, and Walmart, Kmart, and Target were changing how consumers shopped.
Two, they knew changes were happening with technology. Advancements with the internet, computers, and mobile phones were driving new opportunities for how companies could collect and process data, as well as more sophisticated ways of communicating.
Three, they knew there was inertia in the status quo. P&G had gone to market in pretty much the same way for more than 20 years, primarily using eight product divisions that worked autonomously from each other and dealt with retailers by geographic location. This created complications and frustration with non-traditional customers like Walmart that had or were developing a national footprint and sold products from multiple P&G divisions.
Four, they knew a key player was changing the game. Walmart’s concept of everyday low prices was changing consumer expectations and forcing suppliers like P&G to rethink how they brought products to market. Old models in supply chains and in marketing were shifting to drive faster turnarounds and more consistently low prices.
Five, they knew the relationship between the two companies stank. “When you put all those factors together,” Tom told me, “the relationship between P&G and Walmart, when we started, was very adversarial. There was a winner and loser in every decision. It was very transactional and short term. It was very internally focused within both companies.”
Sam Walton, the founder of Walmart, was the first to recognize the need for a more collaborative relationship with P&G. He eventually got the ear of his counterpart at P&G, and the two companies agreed to explore new ways of working together.
In the meantime, Tom had led an internal team at P&G that researched and proposed a “new way to go to market.” That plan came off the P&G shelves and became the foundation for creating disruptive change. Tom helped build a team that set up an office in Arkansas near Walmart’s home office and that worked directly with their counterparts at the retailer to create ways they could work together to achieve shared goals.
Executing on the plan, of course, became an entirely different challenge. While there was support at the top, there was resistance within both Walmart and P&G to the proposed changes to structures, policies, and ways of interacting with each other. So for a few lessons on how they overcame such obstacles, tune in for Part II of this blog series in Off the Rak+ tomorrow (subscribe here).
Until then, take a look at your company and your partnerships. Is it time to disrupt the waters?
