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Vitality in business: executing a

new strategy at Unilever


W. Steve Smith

W. Steve Smith is Chairman, Background


Quest Worldwide,
Unilever is a global business of e40 billion turnover, spread fairly equally among the
Godalming, UK
Americas, Europe and Asia/Africa. It serves 160 million consumers each day with a wide
range of home, personal care and food products. Unilever’s breadth of consumer service
is unique, covering 14 distinct categories with 400 brands, including well-known global
market leaders such as Lipton, Knorr, Dove, Omo and Lux. The 180,000 employees are
dispersed across 100 countries, in turn supporting further employment within these
countries and a further 50 countries through distributors. The 5,000 Unilever Indonesia
employees, as an example, generate the full time equivalent of 300,000 jobs in distribution
and retail, making an important contribution to the local economy.

Strategy before 2005


Originating in 1930 with the merger of two pioneering European companies – Lever
Brothers and Van den Berghs – Unilever rapidly expanded worldwide, building strong
management teams in developed and developing countries and often achieving market
leadership. During the global expansion, supply lines were secured through vertical
operations such as specialty chemicals for washing products, fragrances for deodorants
and perfumes, plantations for tea products.

The style of the organization was collegial – more cohesive than a federation but strongly
decentralized with the power focused at country level. Country teams created their own
brands, ran their own marketing campaigns and manufactured their own products. A
chairman in the 1960s described Unilever as ‘‘several fleets of ships of many different
sizes doing different things all over the place.’’

The glue that held together Unilever’s vast empire was the rotation of leaders. A successful
Unilever manager would typically learn the basics, be tested as a product and brand
manager, then move around the world through marketing and commercial posts before
moving up to general management. Along the way, he or she would work with a large
number of colleagues going through similar transfers, building a substantial and effective
global network.

By the year 2000, global competition forced Unilever to re-focus on its core competence –
marketing and producing fast-moving consumer goods. The five-year strategy starting in
2000 was called ‘‘Path to Growth’’ and was aimed at accelerating the evolution from a
diverse, fragmented group of local operating companies to a business with regional
competitive strength. The vertical chemical, fragrance and plantations operations were
This article was written in
collaboration with Patrick sold and many smaller businesses sold – some 87 in 2002 alone. They were replaced by
Cescau, Chief Executive strategic acquisitions such as American BestFoods (a e20 billion business), Slim Fast and
of Unilever since 2004.
Ben & Jerry’s ice cream.

DOI 10.1108/02756660910972631 VOL. 30 NO. 4 2009, pp. 31-41, Q Emerald Group Publishing Limited, ISSN 0275-6668 j JOURNAL OF BUSINESS STRATEGY j PAGE 31
‘‘ The style of the organization was collegial – more cohesive
than a federation but strongly decentralized with the power
focused at country level. Country teams created their own
brands, ran their own marketing campaigns and
manufactured their own products. ’’

The traditional power of the local country chairman was tempered with stronger regional
teams. Lever Europe, for example, progressively integrated 17 country operations,
retaining the local market intimacy while rationalizing marketing expertise and supply
chains across the region. Path to Growth also drove a dramatic reduction in the number of
brands with 1900 cut to 400. But it was not enough. Despite meeting most of the set
milestones, Path to Growth failed to deliver on its title – growth by 2004 had stagnated.

The time for change


In 2005, Unilever announced a profit warning as the declining market shares hit the
bottom line. Global, regional and local competitors specializing in the different categories
had disrupted the long-established competence of Unilever to manage the dynamics of a
giant multinational. Analysts saw Unilever as a lumbering giant with a solid image – less
aggressive than competitors such as Proctor & Gamble, not as innovative as Reckitt
Benckiser. Management took a hard look at the way the business was managed and
sought a fresh approach.

The first change broke with the Unilever heritage. Since the 1930 merger, an Anglo-Dutch
management balance had always been maintained, with co-chairmen at the top and
British and Dutch ex-pats influencing the local country Boards. For the first time, a single
CEO was appointed – Patrick Cescau, a French national. This did not mean that
‘‘command and control’’ would replace the consensus essential for such a complex group
but it did allow for a fresh approach and a new mandate.

It was clear that with the intense competition on all fronts, fewer ‘‘battles’’ could be joined
and strategic choices had to be tightly defined. Fewer choices allowed more resources
from research to advertising to be dedicated to brand development. Yet Path to Growth
had shown that portfolio shaping, brand focus and operational efficiencies would not be
sufficient to trigger the reversal needed. Something more fundamental was required.

Digging deeper, an underlying weakness was unearthed – execution. Path to Growth was
the right strategy for the time but it had not been executed well enough. This time, the
strategy still had to be compelling but it would need close attention to the execution
process. This proved to be a complex issue with three essential goals: a new mentality to
challenge and unite simultaneously the ‘‘broad church’’ of the Unilever population; a
streamlined organization structure to deploy a new strategy; and a robust strategy
execution process to ensure the strategy was successfully delivered and sustained.

The vitality concept


The new mentality emerged from a market opportunity and need. To meet the trends for
healthy eating and lifestyle in the developed world, consumer goods were radically
modified to reduce cholesterol, salt and fat. In the developing world, innovative solutions
were needed to address the more fundamental health and affordability needs. Meeting
these needs and the strong movement for sustainability led Unilever to create a new
concept – Vitality. This emerged initially as a brand promise of healthy products for
consumers but then evolved as a challenge to the way Unilever worked – vitality in the
business and vitality in the people working in the business. Vitality became Unilever’s new
mission which directly addressed the need for a new mentality in the business (Figure 1).

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Figure 1 The new logo and mission

One Unilever
The second component of weak execution was the organization. Despite regional
rationalization, it was still fragmented. By now, the structure was built around two divisions
– foods, and home and personal care (HPC). This had successfully brought together
previously separate teams such as ice cream, margarine and sauces in foods and
household cleaners and body soaps in HPC. But this in turn created two distinct camps in
each country with duplicative support services and overlapping, sometimes conflicting,
service to big retail customers.

The bold step was taken to reverse this separation and create a ‘‘One Unilever’’
organization in each region and in each country. A detailed operating framework was
drawn up to define the roles, responsibilities and dependencies in detail.

The strategy execution process


The third weakness was the process of execution. Unilever employed bright, confident,
articulate, people of many nationalities. As a result, everyone had a view and the
developed ability to express it well. Coupled with a complex structure, this led to what was
often characterized as over-intellectual, over-presentational and under-actioned
management. A robust execution process was needed to cut through this style and shift
the bias towards disciplined action.
Over the last decade, several leaders in different parts of the business had experimented with
ways of dealing with this. Gradually they shaped a methodology that spread across the group as
its effectiveness became evident. In fact, this was a bundle of methodologies that was known as
strategy into action (SIA). It had first been successfully applied in the Unilever Australia
Personal Care business in the late 1990s, spread across to the then-separate Unilever Foods
business and up into the Asia region. It then migrated to the Latin America region that passed it
on to North America. Independently, HPC in Europe had adopted it directly from the originating
business in Australia. The result was that many, but by no means all, Unilever business units
had a form of SIA, often adapted to suit their own needs.

This body of experience within the group presented the CEO with an opportunity to apply a
common execution process across the entire business – something which could not have
been contemplated previously. Patrick Cescau announced at the time:

Many of us, myself included, have already seen SIA working in parts of Unilever. SIA is a
critical planning tool which will bring clarity and alignment. It will help us manage our resources
so that we win in the marketplace and grow our brands to meet the needs of consumers and
customers. I am confident that the rigor and structure of the process will be an important
contributor to restoring our competitiveness.

Strategy into action became the new strategy execution process for Unilever and was
developed for full corporate application before the new strategy was finalized (Box 1)
(Figure 2).

Committing to the strategy


The new strategy had to embrace not only sharper portfolio and brand choices, focused
innovation, productivity and cash generation but also the organizational, behavioral and
cultural changes needed to convert it into reality. The content was shaped and tested

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The strategy into action methodology
The SIA approach was based on the principle of Japanese hoshin kanri, or policy deployment, modified
for application in all national cultures and blended with other best practice techniques. The essence of
the approach was to cascade down the Unilever Strategic Plan in a way that maintained the integrity of
Unilever’s strategic ambition while engaging leadership teams at each level. Each leadership team was
afforded the scope and challenge to create and express its own contribution to the strategic plan within
a common framework and in collaborative alignment with other teams.

The scale and complexity of the Unilever organization determined that ‘‘rules’’ and guidelines had
to be set. There was to be only one mission and one set of leadership standards throughout the
organization and each team had to work through what that meant in day-to-day management.
Going further, there was no scope to change or amend the strategic goals. Rather, each team
had the challenge of creating its own strategic actions to contribute to these goals. It was
anticipated that this would be fiercely opposed across the business but it was considered
essential to narrow the choices down to the few that would be competitively effective.

Figure 2 The strategy into action model: a full cycle from strategy creation to
performance review

through consultation with leaders across the business. Through these discussions, the
extent of the challenge to how Unilever was managed became apparent and there was
some concern that it would be resisted or undermined. Unilever history had been built on
the power of local country leadership teams and although this had evolved in recent years
to a matrix of regional, big country and category teams, the new strategy demanded a
global focus first, followed by tight alignment throughout the organization and a consistent
approach to execution. Good dialogue provided the means for the resistance to be
lowered at senior levels.

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A strategic framework (Figure 3) was based on many discussions with senior leaders and
mixed-level working groups to develop and test content ideas. The framework emphasized
the mission, standards of leadership (values) and five pillars of strategic goals. The pillars
expressed the ‘‘must win battles’’ (MWBs) for Unilever – the critical areas that would make
a competitive difference.

Within each MWB pillar, three strategic goals stated explicitly what had to be achieved,
with each goal positioned by metrics and clear targets.

Although months of work went into shaping the strategy, the entire strategic content was
displayed on one page. Senior leaders worked in pairs to do the fine crafting needed to
express strategic goals in succinct, unambiguous statements and link them with precise
metrics. The one-page strategic plan became the key document to describe, communicate
and review the new strategy (Figure 4).

Figure 3 The must win battles

Figure 4 The one-page strategic plan framework

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‘‘ Strategy into action became the new strategy execution
process for Unilever and was developed for full corporate
application before the new strategy was finalized. ’’

Aligning behind the strategic plan


A structured process was devised to ensure all leaders and all business units aligned
around this strategic plan. Considerable stakeholder consultation preceded a key
workshop for the top leadership team – the Unilever Executive (UEx). Despite the potential
loss of local autonomy, the prior involvement of all the regional, category and functional
executives enabled them to commit enthusiastically to this explicit strategic plan.

A comprehensive alignment stage followed, where regional and category teams thrashed
out the content in greater detail, working on the strategic choices and the tradeoffs. In
parallel, functional teams responded to the regional and category priorities and shaped
their contribution in terms of expertise and capability.

This stage tested the conversion of ‘‘what’’ to ‘‘how’’ and proved to be a thorough reality
check and rehearsal of inter-dependence. The revised strategic plan was then brought
back to UEx for final approval. A key element of the one-page format was initiated at this
stage – the strategic actions for each leadership team to commit to personally and visibly,
starting with the executive group, UEx.

Strategy into action – deployment


Much iteration was needed to hone the strategic choices in a collective way. Large events
were designed to bring teams together to thrash out further strategic choices and devise
inter-dependent strategic actions. This proved to be an energizing experience and the
level of participation was high (Figure 5).

The early concern that executives in the regions and categories would react against the
given strategic goals proved unfounded. Regional and category executives relished the
fact that firm strategic choices had been made (and they had been involved in those
choices) and that their role was now to relate the chosen goals to their situation and
convert them for execution. Previously, they felt they had to juggle too many options, too
many agendas and too many styles of reporting within the matrix.

To reach 20,000 managers across hundreds of business units in a coordinated way, a


booklet was produced and issued to all managers explaining the practice of Strategy into
Action. To support the line managers, SIA Champions were selected from all business
units around the world and trained as facilitators to support the workshops and events
used to deploy both the strategic content and the SIA process. The finance and human
resources functions were made jointly responsible for the management and integrity of the
SIA process, although ‘‘ownership’’ of both the strategic content and the local application
of the process always remained with the line manager.

Within five months, all business units had created their own strategic plan in the same
format as the UEx one and with aligned goals from corporate center through regions,
categories and functions to local country operating companies. As a result, the CEO had
line-of-sight by ‘‘Must Win Battle’’ and by specific strategic goals from the center down
through, for example, Africa/Asia Region to the South East Asia country cluster to the
operating companies of Vietnam and Thailand. Inversely, the leadership teams in Thailand
and Vietnam could see how their strategic ambitions would provide direct input to the
whole corporation (Figure 6).

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Figure 5 SIA alignment process

Figure 6 Line-of-sight and contribution

Strategy into action – delivery and review


The strategic plans quickly became the means of business communication within and across
the business, formally and informally. Each leadership team now had to deliver the first year of
their plan. Planning tables had been devised to focus attention on execution details – the
specific actions, the leader responsible, the targets, milestones and activities to

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be managed. Where needed, projects were set up in a similarly disciplined way, with
explicit project charters to provide visibility and method to improvement programs.

Progress was reported monthly and indicated by traffic lights and variance reports. Metrics
had been completely revised to match the Strategy into Action methodology. Only the 20
corporate key performance indicators (KPIs) were monitored and reported up, where
before units tracked widely different sets and one division had collated 192 metrics on a
balanced scorecard.
At the end of the year, full reviews of both outcome and process were made and a further year’s
delivery begun. Adhering to the timing discipline, this had already been fully planned and
aligned ready for focused execution. Two annual cycles have followed since the new strategy
and new strategy execution process was introduced for 2006 and a further cycle (2009) has
begun. Each year has seen a refinement of the strategic content and the process.

An important development has been the gradual integration of key business processes
into the strategy execution process. These include all the financial planning, budgeting
and target-setting (previously involving many man-years of preparation and negotiation),
risk assessment and performance management. All executives now have substantial
remuneration stakes in achieving their strategic plans.

Another critical development was the deepening of the process to reach ultimately all
180,000 employees. Now all employees have a detailed understanding of the Unilever
strategic ambition and have individual work plans built around their contribution towards
that ambition.

The behavioral shift


The structural changes accomplished what most corporations have been expected to
achieve in the current climate: a de-layered structure, a simplified organization and faster
decision-making. Yet the critical shift goes beyond these important steps. Now the
expertise in consumer insights for all markets and all categories is brought together under
one global team management. This team is responsible across all geographies for
consumer impact: excellent brand mixes, research and development, innovation,
advertising, resource allocation and the nurturing of world class marketing capabilities
across the globe. This is a deliberately global business model. Paradoxically, regional go-
to-market teams address the needs of retailers and their shoppers, market by market. This
means country leaders, once noted for their marketing and general management skills,
are now required to be the ‘‘chief customer officers’’ in their markets, focusing 80 percent
of their time on the retail channels, their customers, as opposed to 80 percent of their time
previously on the end-user consumers.

The leadership style has also evolved. Executives had self-criticized their tendency to
over-intellectualize, to prefer debate rather than action and to value marketing
sophistication over customer intimacy. Also the collegial culture was felt to be not hard-
edged enough for today’s competitive environment. The forthright and determined way
that UEx introduced and explained the new strategy demonstrated the desired shift to an
action-biased, ‘‘get things done’’ style. This has been readily adopted throughout the
company, with a marked reduction in detailed preparation for meetings and supporting
analytical reports. The strategic plan is used as the key document for most meetings and
this has dramatically narrowed the information needs, enabled speedier agreement and
encouraged immediate action.
A surprising positive outcome was the marked improvement in collaboration that began during
the first strategy rollout and which has become more evident with each subsequent annual
deployment. The forecasting and budgeting process used to involve an elaborate and hugely
time-consuming sequence of negotiations to produce an agreed annual plan. Now leadership
teams are thoroughly familiar with the strategic goals and related strategic actions and the need
for negotiation has gone. The annual plan is itself now redundant, as an eight quarter rolling
plan provides a more immediate forecast. The operating framework,

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‘‘ A strategic framework was based on many discussions with
senior leaders and mixed-level working groups to develop
and test content ideas. ’’

once a source of much debate, is no longer mentioned; Unilever managers know what to
do and whom to involve.

Functions are much clearer about their roles, their contributions and the way they interact
with regions and categories. They are now thought of as capability areas. This has led to
substantial changes in their responsibilities and practices. Research and development, a
big player in Unilever’s differentiation, was once characterized by major stand-alone
laboratories where scientists worked in isolation from the businesses. Now all research is
dedicated to a particular category, with innovation centers established in the core
consumer locations to allow new ideas to flow quickly into the market.

The ‘‘One Unilever’’ structural change challenged the human resources, finance and IT
functions to consolidate expertise in each location. A further challenge separated the
strategic business support services from the transactional ones, many of which have been
subsequently outsourced. Hundreds of independent supply chains were brought under
global management enabling substantial benefits of global and regional procurement and
transfer of expertise.

As a visible symbol of the break with the past, the Unilever executive team, traditionally
dominated by Anglo-Dutch nationals, now comprises three executives from America, two
from India, two from France and one from Zimbabwe.

Strategic achievements
Over the three-year period, substantial strategic changes have been driven into the
business and significant business gains achieved. The original strategic plan had identified
and publicized these ambitions and they have been continuously monitored and reported.

The business portfolio has shifted considerably with disposals of businesses once
considered core but now not fulfilling the Vitality mission. An example is the frozen foods
category, including Birds Eye/Igloo, once the product heart of the foods business. In
addition, the prestige cosmetics business, several olive oil brands, Boursin cheese and
Lawry’s seasoning have gone. Another original Lever core, the US laundry business, will
have been sold by the end of 2008. Selective acquisitions have been made to strengthen
areas of the Vitality position, particularly in the developing markets, with a major ice cream
business in Russia, fruit drinks in Indonesia and soaps in West Africa.

The focus on big global brands has led to 75 percent of the revenues now coming from 12 ‘‘ e
billion þ ’’ brands. The renowned marketing expertise has not been lost in the new culture, with
18 awards at the 2008 Cannes advertising awards – more than any other company. The
emphasis on developing and emerging markets has led to 44 percent of revenue coming from
this segment, with many innovations to drive future growth. Innovation turnover is now over 30
percent, ensuring fresh offerings in every market. At the same time, the global brands are
worked hard with fast rollouts. The Clear shampoo brand was presented simultaneously and
identically in China, Brazil, Russia, Arabia and Turkey. Categories have been extended, e.g. the
Dove brand expanded from skin cream to hair care to fragrances.

Productivity is being transformed. A total of e800 million in cost reduction has been achieved
– well on track for the e1 billion targeted by 2010. Turnover per employee is up by 10
percent. Management productivity has particularly improved with 40 percent fewer
executives of VP level and above. Working capital has been progressively reduced – now

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down to 2.1 percent from a high of 8.8 percent. Operating margin has gone from 8.6 to 16
percent.

Most of all, the stagnating sales growth has been reversed. From zero growth, 15
continuous quarters of sales growth have followed the implementation of the new strategy.
Underlying sales growth is now 7.4 percent in a static market. Despite the economic
downturn which hit consumer businesses very hard in the third quarter of 2008, Unilever’s
sales growth continued upwards to 8.3 percent.

Obstacles overcome
Resistance to a centrally-deployed strategy was short-lived because of the care put into
prior consultation and the involvement of leaders in both the strategy creation and
deployment. However, some reluctance did occur from an unexpected source. Several
leadership teams that had independently pioneered the SIA process found that the new
format and priorities meant they had to redo all their considerable work on shaping and
communicating their strategic content. Before, the strategy started with them; now it
started one or several layers above. This issue went away once the leaders had gone
through the one-off task of transferring to the new process, as they could readily see the
benefit in alignment above as well as below.

Another potential problem was the inherent inertia in a large, complex business, preventing the
timely deployment of the strategy. A structured cascade down and across the business was
necessary to ensure engagement and alignment at each level but it could potentially mean that
Unilever people in Chile or Finland had to wait before they became involved. Careful timing and
the determined drive from the top minimized this problem in the first year, with categories and
functions starting their long range planning early in the previous year building up to a UEx
Strategic Plan in July, region/category priority agreements to September and a fast roll-out of
the agreed content to engage every leadership team by November. In subsequent years the
timetable relaxed a little, which led to the collective planning being late and somewhat rushed.
This will be corrected this year with a disciplined phasing to ensure that not only every
leadership team but every employee understands the overall plan and his own contributing
objectives before the start of next year.

An internal survey in 2007 confirmed that managers and employees appreciated the
alignment that had been achieved and the commonality of the process, language and
tools which created the alignment. They saw great value in this and universally wanted
SIA to be continued and reinforced. A total of 80 percent of survey respondents felt that
the strategy linked directly to employees’ work-plans and vice versa. The use of SIA for
consistent strategy execution was evident right across the organization – Unilever was
seen to be working to one agenda, using a standardized approach and common
management practices. However, one concern was raised about the nuances of
application. In some units, SIA was felt to be too mechanically applied. The process
design was to engage all members of each leadership team in the understanding,
planning, execution and review of the strategy. Yet in some locations, leaders confined this
process to a smaller team without engaging the whole team. In the current deployment
round, this issue is being addressed through coaching of leaders and further training of
SIA Champions to ensure the original intention is consistently maintained.

Evolving further
Strategy into Action is now well-embedded in Unilever. The SIA process is being refined
further, with particular emphasis on team engagement as this has proven to be one of the
key ingredients of its success. It is felt that strategy execution, once a Unilever weakness,
will be increasingly seen as a demonstrable Unilever competence. The capability of the
SIA process provides confidence that the organization can adapt quickly and smoothly to
changes in economic and market conditions. Patrick Cescau has stated frequently:
The rigour and structure of the SIA process is a vital contributor to our competitiveness.

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After three years of delivering the original strategic plan, a revision is being formulated this
year with fewer, more focused strategic goals yet retaining the clear direction already set.
The strategic vision for 2010 is now well in sight and UEx is confident that sales growth,
Keywords: margin improvement, cash generation and market leadership will continue as planned.
Management strategy, Reflecting on the three years that the strategy has been applied, Patrick Cescau noted:
Performance management
Vitality now has real meaning in the business and our strategy is deeply embedded. SIA has
created unprecedented alignment in Unilever, allowing us not only to drive good performances
to date but also to build a robust capability to sustain future competitiveness.

Further reading
Cescau, P. (2006), ‘‘Leadership and transforming an organisation’’, paper presented at CIES 50th
World Food Business Summit, Paris, June.

Kotter, J. (2007), ‘‘Leading change: why transformation efforts fail’’, Harvard Business Review, January.

Management Today (2006), ‘‘The colossal cares of Unilever revisited’’, Management Today, September.

Morgan, M., Levitt, R.E. and Malek, W. (2007), Executing Your Strategy, Harvard Business School
Press, Boston, MA.

Smith, S. (2008), Plan to Win, Quest Worldwide, Godalming.


Wiggens, J. (2008), ‘‘Cescau’s list of achievements’’, Financial Times, July.

About the author


W. Steve Smith is Executive Chairman of Quest Worldwide, a global management
consultancy. After an early career with Chrysler, he became a university lecturer at the
University of Aston in Birmingham and then a management consultant with PA Consulting.
He founded Quest Worldwide in 1988 to specialize in change management for blue chip
clients. W. Steve Smith can be contacted at: steves@quest-worldwide.com

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