A Two-Time CEO’s Advice to Disney’s Bob Iger

First, CEOs in our position must assess the state of the company they’re coming back to, and do it quickly. It’s important to see things as they are, not as others want them to be.

Less than a week after I got the call to return, I flew to Cincinnati and met with company leadership. The next day I spoke with investors, shareholders, major customers—including

Amazon,

Costco,

Kroger,

Target, Walmart—key business partners and strategic suppliers from across the country and around the world. The day after that, I pored over business and financial results as well as forecasts for the upcoming fiscal year. After three days I knew we were in deeper trouble than we realized. Our performance was lagging in nearly all of the expansion investments in more than a dozen developing countries. Most of the business units were falling short of their annual financial goals.

Second, returning CEOs need to familiarize themselves with the changes that took place in their absence. A lot happened during my three years away from P&G. Consumer needs and wants had shifted, with consumers demanding better performance, quality and value. E-commerce was growing quickly. The number of external stakeholders—government regulators, environmentalists, activists for other social causes—had increased, and their agendas had evolved. That’s not even counting changes in technologies, channel demands, competitor threats, investor expectations and so much more. Understanding the external forces that affect business performance is critical to shaping a business strategy.

Third, business strategy must be taken seriously. Ideally, strategy is an integrated set of choices that uniquely positions a company in its industry to create sustainable advantage and superior value relative to competition.

P&G made itself a top global company and industry leader in the first decade of this century by following a simple three-pronged strategy: exploit competitive advantages in core household and personal-care categories; extend into faster-growing, higher-margin home, beauty and personal-care categories; expand selectively into a few developing markets where P&G brands, products and business models maintained sustainable competitive advantage and delivered superior value creation.

Not all strategies succeed. My first successor focused on developing markets. Most of these consumers, however, didn’t generate enough revenue to outweigh the capital costs and operating expenses it took to reach them.

While P&G’s sales growth was slow in the 2½ years I served as second-time CEO, we laid the strategic foundation for future sales and share growth. Meanwhile, business unit operating margins began to improve steadily.

My team put P&G back on the path to growth by focusing on the few businesses where P&G had the best odds of winning market leadership and sustaining growth and value creation. We also decreased the company portfolio of businesses and brands. We divested eight categories of business (including batteries, cosmetics and pet food) and about 100 brands so that the leadership team could focus on the businesses and brands that had the best chance of delivering competitive advantage, superior growth and value creation.

Fourth, strong leaders identify and appoint other strong leaders. P&G needed leaders who could make strategic choices and lead innovation that delivered consistent growth in sales and value creation. The board and I found my successor,

David Taylor,

through a process that anonymized the feedback of potential candidates throughout their time at the company to assess which were the best at delivering business and financial results, building leadership teams, and living up to the company’s values. Anonymity guaranteed objectivity and meritocracy, deferring advocacy until the final stage of the selection process.

Mr. Taylor and I then selected the heads of the businesses and the functions, considering who would lead us in growth, innovation and value creation through the end of the decade. Under the leadership of

Jon Moeller,

who succeeded Mr. Taylor in 2021, those women and men are still leading the businesses, delivering reliable business and financial results for the company.

Fifth, returning CEOs have to be humble enough to accept that they can’t control everything. They must work hard to minimize risk. There’s no guarantee of success; a promising business strategy only improves the odds. Customers, competitors, investors and other stakeholders will judge you on your results.

I know that Mr. Iger faces the challenging task of reorienting Disney’s strategy and finding its next generation of leadership. I wish him all the best. If he can make sound strategic choices and select the right candidates for their next CEO and leadership team, then Disney can perform with excellence in the marketplace.

Mr. Lafley was CEO of Procter & Gamble, 2000-10 and 2013-15.