The Turnaround Case

The Turnaround

In 1985, as the first step in developing a program he called "Ichidai Hiyaku" ("The Great Flying Leap"), Jager analyzed the causes of P&G's spectacular failure in Japan. One of his key findings was that the company had not recognized the distinctive needs and habits of the very demanding Japanese consumer. (For instance, P&G Japan had built its laundry-detergent business around All Temperature Cheer, a product that ignored the Japanese practice of doing the laundry in tap water, not a range of water temperatures.) Furthermore, he found that the company had not respected the innovative capability of Japanese companies such as Kao and Lion, which turned out to be among the world's toughest competitors. (After creating the market for disposable diapers in Japan, for example, P&G Japan watched Pampers' market share drop from 100% in 1979 to 8% in 1985 as local competitors introduced similar products with major improvements.) And Jager concluded that P&G Japan had not adapted to the complex Japanese distribution system. (For instance, after realizing that its 3,000 wholesalers were providing little promotional support for its products, the company resorted to aggressive discounting that triggered several years of distributor disengagement and competitive price wars.)

Jager argued that without a major in-country product development capability, P&G could never respond to the demanding Japanese consumer and the tough, technology-driven local competitors. Envisioning a technology center that would support product development throughout Asia and even take a worldwide leadership role, he persuaded his superiors to grow P&G's 60-person research and development (R&D) team into an organization that could compete with competitor Kao's 2,000-strong R&D operation.

Over the next four years, radical change in market research, advertising, and distribution resulted in a 270% increase in sales that, in turn, reduced unit production costs by 62%. In 1988, with laundry detergents again profitable and Pampers and Whisper (the Japanese version of P&G's Always feminine napkin) achieving market leadership, Jager began to emphasize expansion. In particular, he promoted more product introductions and a bold expansion into the beauty products