As informative as Karen Dillon’s “I Think of My Failures as a Gift” interview with Procter & Gamble’s A.G. Lafley was, my jaw still dropped reading the retired CEO’s description of one of his favorite “gifts.”
As Lafley recalled, P&G had planned to quietly test market Vibrant — their bleach offering to rival Clorox — in out-of-the-way Portland, Maine. Bad move. Clorox found out.
“Do you know what Clorox did? They gave every household in Portland, Maine, a free gallon of Clorox bleach — delivered to the front door. Game, set, match to Clorox. We’d already bought all the advertising. We’d spent most of the launch money on sampling and couponing. And nobody in Portland, Maine, was going to need bleach for several months. I think they even gave consumers a $1 off coupon for the next gallon. They basically sent us a message that said, ‘Don’t ever think about entering the bleach category.’”
Clorox effectively trashed P&G’s new product initiative. I don’t want to say “dirty tricks,” (whoops, I just said it) but Clorox certainly took an innovative approach to squelching P&G’s innovative threat. An excellent business case could be made that Clorox’s “Portland Massacre” was — dollar-for-dollar — its most strategically important (anti)marketing innovation that year. They throttled a potential David — or Goliath — in its test-marketing crib.
What vital lesson did Lafley take away from this new product debacle? “We certainly learned how to defend leading brand franchises. When Clorox tried to enter the laundry detergent business a few years later, we sent them a similarly clear and direct message — and they ultimately withdrew their entry.”
In other words, P&G would become just as ruthless as its competition. Does that mean that innovation in this marketplace is less about offering the best value to customers than preventing your competition from offering the best valuable to customers?
Legalities aside (and I am assuming that world-class companies like Clorox and P&G obey the law), the competitive ethics of innovation seem shrouded in gray. Presumably, P&G and Clorox both believe they’re behaving ethically on behalf of their customers and shareholders when they “defend leading franchises” by deliberately disrupting new product development by rivals. Should “innovative disruptors” — as opposed to “disruptive innovators” — get special R&D funding and top management support to undermine competitive threats? After all, sometimes the best offense is a good defense. Or is this sort of intervention better described as “sometimes the best defense is a good offense?”
If Google had Google-bombed — or Bing-bombed — Bing when Microsoft was testing its rival search service for launch, would that be the technical and ethical equivalent of Clorox’s Vibrant white-out? What if Microsoft gave away a Kinnect in a Nintendo test-market in Japan? Or, to push the P&G ethical envelope a bit, what if the consumer packaged goods giant defended one of its leading brand franchises by “pulling a Clorox” on Unilever in France? Would the Europeans see that as “all’s fair” behavior? Or as something that invites retaliation and escalation? Calling Professor Schelling!
No one doubts that global markets have become more competitive. Virtually every world-class company believes that innovation is increasingly important for success. No great leap of logic is required to see that infiltrating, undermining and subverting your competition’s innovation investments could give you greater returns on your own.
So is Lafley’s “gift” an innovation outlier? Or is it a signal from one of the world’s most successful CEOs that taking out a competitor can be just as important as creating new value for a customer?
I don’t know. Do you?
Let me know what you think:
Was what Clorox did to P&G ethical?
If your lawyers and colleagues gave you the go ahead, would you invest time and ingenuity to subvert a new product market test by a hated rival?
Do you expect your competition to do to you what P&G and Clorox have done to each other?