P&G's Returning Hero Faces Shifting Landscape for Second Act

Procter & Gamble Chairman, President and CEO Alan Lafley Photograph by Francis Specker/Bloomberg

Ah, the returning hero.

For Procter & Gamble shareholders, it’s easy to get wistful about the glory days under A.G. Lafley. From the time he took over in June 2000 to his retirement nine years later, Lafley turned P&G from a sluggish underperformer to an innovation machine. He reinvigorated design, tightened the product line, and helped consumers get excited about diapers and detergent again. Think of him as the Steve Jobs of the grocery aisle.

Like Jobs, he has a chance to prove his magic again, thanks to the catalytic powers of activist shareholder Bill Ackman. Now that Bob McDonald has made a hasty exit, the question is whether Lafley can replicate his previous success—as Jobs did at Apple—or whether he’ll find himself in a situation more akin to another former icon. That would be Ron Johnson, who built Apple’s retail presence but then stumbled when Ackman tapped him to translate that kind of thinking to J.C. Penney.

Lafley, of course, is returning to a company he knows well. Having spent most of his working life at P&G, he knows the players, the customers, the levers to pull in moving products. The biggest change is in the environment. While McDonald has revived the U.S. business with such products as Tide Pods, he’s had less success in the emerging markets where investors expect to see rapid growth. As people in China, Indonesia, and other markets make more money, they’re supposed to switch from local stuff to brand names such as Crest. The fact that they’re not doing it as quickly as one would expect may say something about P&G’s marketing, or its product missteps, or the strength of other competitors.

Much has changed in the last four years. China’s explosive growth has cooled somewhat. Traditional brands are facing increased competition from innovative players worldwide. Consumer habits are shifting because of factors that range from social media to an increased focus on local producers. Some of those forces offer opportunities to Lafley; some may prove to be headwinds beyond his control.

Lafley is in good company when it comes to taking up the mantle of leadership again. Howard Schultz did it at Starbucks with great success. Michael Dell, on the other hand, has faced well-documented challenges as CEO 2.0 at Dell.

Luckily, Lafley hasn’t been spending the past four years on the golf course. Instead, he’s witnessed the shifting environment first hand as a senior adviser to a portfolio of companies at Clayton Dubilier & Rice (the same firm that cast Jack Welch in a similar role). He’s also written several books and tried hard to distill the formula that worked so well during his tenure at the top of P&G. While he has all the ingredients to recreate that success again, even Ackman realizes the recipe will have to change.

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