Capturing the digital

Kickoff document November 2, 2011

opportunity

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Topics for todays discussion

Introductions

Context, scope, and objectives

Approach and getting started

Seed some early problem-solving questions

Introductions
Team members
KimberlyClark team

McKinsey
team

Ali Lohr
Jeff Jarrett
Anne Jenkins
David Clayton
Mary Goggans
Scott De Groot
Jim Schuh
Todd Meerdink
Elane Stock (Executive Sponsor)
Clive Sirkin (Advisory)
David Osborn (Advisory)

Becca Coggins (lead partner)

David Edelman (global content expert)
Duncan Miller (lead partner, international markets)
Rob Yanker (global advisor)
Alex Hooper (engagement manager)
Betsy Holmberg (consultant)
Khalilah Cooper (consultant)

Context: online is growing fast and the time is ripe for us to turbocharge
our global efforts

Online is maturing rapidly as a channel for marketing and distribution in KCs

categories
CPG eCommerce has grown over 20% per year globally for the last 5 years
In Korea, online purchasing represents more than half of all purchases sold
A similar challenge threatens in the U.S. as online purchase of diapers
ratchets up and K-C continues to lag P&G in both sales and eCommerce
capability

K-C has begun efforts to date but we are far from fair share or advantaged
positions
CMO launched digital marketing team
Consumer engagement sites to drive awareness and loyalty
Regional activity (e.g. added e-tailer sales resources in U.S.)
However, some of our current organizational processes (e.g., alignment
towards key customers) may be preventing us from capturing fair share

Conditions for success are in place to turbo-charge global efforts the Board
is excited and GSLT leaders are on board
4

Objectives of the effort and the impact at stake

How we define success for this effort

Impact-at-stake is >$500mm

Reach fair share in critical

markets

Fair share in US

Develop digital as an offensive

weapon

Get on the growth

curve in China

Develop a global framework to

extend our eCommerce potential
to new markets

Build the
Channel in Brazil

Build capabilities required to

deliver on eCommerce goals

Fair share in next

10 biggest markets

Total

300

50

10

140

500

Scope of the effort

In-scope

Out of scope

BCC

Digital marketing strategy

eCommerce (within the structure

that has been already developed)

Individual strategies for nonprioritized markets (playbooks,

instead)

Changes to KC processes that are

working well (e.g., IMP)

The lines may blur between

two (e.g., digital couponing)

The approach consists of 4 phases across ~16 weeks

Go/no go business plan elements

Holiday breaks

High-level proposed workplan

Nov
01.

Dec
07.

14.

21.

28.

Jan
05.

12.

19.

26.

02.

Feb
09.

16.

23.

30.

Mar
06.

13.

20.

27.

Finalize market
archetypes &
prioritization
~4 weeks
2

Develop lead market strategies with business plans and

support initial launches
~12 weeks

Lead market #1 strategy and business

2a plan (e.g., US)
~6-8 weeks
Lead market #2 strategy and
2b business plan (e.g., Brazil)
~6 weeks
Lead market #3 strategy and
2c business plan (e.g., China)
~6 weeks

2d

Develop operational
plans and launch
~4-6 weeks
Develop integrated
financial model for
cascading perf.
mgmt.
Build detailed
operational plans
to implement
Launch quick wins

3 Design new org.

support structure
~4 weeks

Support lead
market quick
wins

Develop global
glide path with
market scans
~2-3 weeks
7

The first and second phases yield market strategies for the lead markets
DETAILED WORKPLANS
IN APPENDIX

Finalize market archetypes &

prioritization (~4 weeks)

Use market data to develop fast forward

view of key BCC markets (market dynamics,
channel structure, KC presence)
Identify current and desired KC strategic
posture in each market (leveraging portfolio
designations, executive interviews)

Develop lead market strategies for each

market (~12 weeks)

Conduct grounding interviews (KC and external

experts) and kick-offs in lead markets

Build detailed market fact base: Category and

channel, Consumer (rapid surveys), Customer,
Competitor/substitutes, KC

Identify key strategic ecommerce themes;

identify and size potential opportunities

Conduct collaborative ideation sessions to

generate and prioritize specific opportunities

Develop detailed business case (including

investment required) and operational plan

Create market roadmap and operational plans

Cluster markets into like groups by analyzing

key facts (e.g., digital dynamos)
Conduct working sessions to refine
archetypes
Prioritize markets based on market dynamics,
KC strategic positioning and priority
Finalize market prioritization and sequencing

Launch quick wins

8

The team will then focus on capabilities required and the global glide path
4

Design organization support

structure to deliver on strategy
(~4 weeks)

Develop global glide path with market

scans (~2-3 weeks)

Profile example ecommerce

organization models

Refine archetypes and market prioritization

with market learning, investment scale

Map current organizational structure

Build/adapt playbooks to be applied across

markets within an archetype

Analyze current and required

ecommerce capabilities (where to invest
to get to distinctiveness)

Create 3-5 year global roadmap,

considering major milestones by market and
within the organization

Develop global and market-level

ecommerce scorecards and targets

Prioritize where to invest and how (inhouse vs. outsource, etc.)

Conduct working sessions to analyze

options and key design elements

Create roadmap to build out

organization and capabilities
9

How it comes to life in a week

Initial analysis: Market
dynamics

Team members conduct

analysis & interviews on
each workstream
Much of this happens
individually

Team problemsolving: Defining

archetypes

We share early drafts and

emerging hypotheses
.debating and refining
the ideas together
Expect this to be messy
sometimes

Stakeholder
workshop: Aligning
on archetypes and
lead markets

After refining with input

from the team, we share
with broader set of
stakeholders to get input
and alignment
Refine and finalize with
their input
10

Getting off to a fast start what will happen in the next week
Understand
starting point
and ingoing
perspectives

Build global
fact base

Finalize
program
approach and
structure

Roll up our
sleeves and dig
in!

PRELIMINARY

Conduct executive and SME interviews to understand strategic and market

priorities (conducted jointly between KC and McK)
Interview global ecommerce experts (McK and external)
Conduct working team kick-off interviews (~60 minutes, this week)
Gather and synthesize existing consumer/customer research, whitepapers etc

Gather market-level data (financial, customer, consumer, plans etc)

Conduct market/archetype expert interviews to understand ecommerce trends
and dynamics (KC, McK, external)
Build global database of market insights across all relevant markets
Identify research/insight gaps and design plan to fill them

Finalize approach and detailed workplan

Define clear roles and workstream accountability for each team member
Calendar major milestones (e.g., market kick-offs, Steercos)
Hard-wire weekly working sessions

Launch weekly working sessions

Leverage fact-base to develop fast forward view of each market
Cluster markets into like archetypes
Debate and refine strawman market archetypes

11

How we will work together meetings and dates

Once a week, 90 minute

problem solving session with

full working team

Ad hoc meetings with

Key dates
Interviews with executives
and SMEs

11/2 11/11

subject-matter experts

Meetings to review progress

will be scheduled separately

Team dinner (in Dallas)

TBD (probably
11/8)

Steering committee 1

Week 3 (week
of 11/14)

Steering committee 2

Week 8 (week
of 12/19)

Steering committee 3

Week 12 (week
of 1/16)

In-person, VC when possible

12

How we will work together team roles

Core team members will have clear

ownership/accountability in an area of interest as well as
collective ownership of the teams overall goals

Team members will be doing real work for many of us

that means 10-20 hours per week or more!

We will use 1-on-1 conversations this week in order to

clarify workstreams and ownership

Activities over the next 4 months will ebb and flow

Week 1-3: Joint participation from relevant team

members for problem-solving of archetypes and market
selection, assistance in acquiring data where possible

Week 4-12: Some will focus in-market, others on

overarching strategy

Week 12+: TBD

13

How we will work together team norms

We will manage lifestyle by working as a virtual team whenever possible, but commit to
making our schedules flexible when in-person meetings are an option

We will not develop strategy by committee each person we invite to participate should
bring a unique perspective or talent to the table. We will develop an input/update
process to ensure the rest of the organization buys into our proposal

We all own the problem collectively, but each of us will have our own responsibilities
Projects with strategy consulting support proceed at breakneck speed - we commit to
raise any barriers to our progress early (there is no prize for solving it on our own!)

This is a working group we should all be comfortable sharing unfinished work, early
hypotheses, new ideas, and challenging the status quo

We will strive to put our personal interests aside. A great e-Commerce effort will mean

significant opportunity for all of us, so we commit to wearing our one-KC hat throughout
this effort

We will make this a fun environment we will be respectful of each other, decisive,
practical, and we will push for organizational impact even in the face of political
resistance

14

Next week, we will discuss and refine our hypotheses on market

archetypes
ILLUSTRATIVE

What are the most critical dimensions to consider in building

archetypes (e.g., market economics, eCommerce maturity,
channel structure, primary ecommerce model, K-C positioning)?

What dimensions are MOST important in defining the

archetypes?

What leading indicators of market dynamics in 2015 are most

important?

What is the right number of archetypes to get specific but

manage complexity?

Considering the need to BOTH ring the register in the near-term

and build learning in new markets, what is the best set of lead
markets?

15

We will bring initial analysis of market dynamics to debate

potential archetypes
Potential pilot
market

Market prioritization map

K-C categories
Online
size, 2015
($ M)
USA
South Korea
Italy
Australia

PRELIMINARY TO BE
REFINED WITH YOU

Most
attractive

Least attractive

Market dynamics

CAGR,
08-10
(%)

Mix online,
2010
(%)

KC BCC
Share
(%)

BPC online Internet

(% of total
penetration,
BPC)1
2010 (%)

GDP/capita
2010 ($
thousands)

1,132
308
109
29

66
17
38
89

11
32
7
3

39
65
20
70

6
8
1
1

70
77
51
66

47
21
34
55

141
59
52
8
24

10
18
10
18
5

3
3
3
6
4

N/A
17
18
24
14

5
7
6
3
1

64
67
78
58
>99

43
43
36
46
47

9
7
6

13
3
32

0
2
2

N/A
7
6

3
2
2

90
75
93

40
44
49

China
Russia

894
73

63
52

5
2

8
26

3
2

22
40

4
11

Brazil
Argentina
Mexico
Poland
Chile

42
21
10
9
7

20
NA
NA
37
69

1
1
0
1
2

24
37
70
14
31

1
1
1
7
1

17
24
18
45
25

11
9
9
12
12

Japan
France
United Kingdom
Ireland
Netherlands
Germany
Belgium
Sweden

Note: Spain, Finland, Switzerland, Belarus, Uruguay and Taiwan were excluded due to a forecasted 2015 online mkt size of less than $5 mm
1 Beauty and personal care sales through internet retailers as a percentage of all BPC sales

SOURCE: Euromonitor; Pyramid Research; team analysis

16

Defining archetypes and lead markets define market structure and

strategic importance
Market
economics

eCommerce
maturity

BCC channel
landscape

KC position
and intent

Size BCC market (2011, 2015)

GDP/capita (2011, 2015)
PC spend/capita (2011, 2015)
Internet penetration (2011, 2015)
Structural drivers maturity level
Broadband penetration
Infrastructure for last mile
eCommerce % total
% of BPC sales online
BCC % to ecommerce
PC/Grocery % to ecommerce
Momentum (past/future growth)
Channel mix
Online/offline/other
B2C vs. C2C
Pure-play vs. brick-and-mortar
Role in portfolio (share/margin/cash)
Size/share
Growth (past/projected)
Customer fragmentation
Offense / defense

What other
factors are
critical to
consider?

17

Appendix

18

We will deliver four primary end-products

Market archetypes and prioritization

Data-driven description of core market archetypes and associated markets
for each
Suggested prioritization & sequencing within and across archetypes
Codified methodology to refresh archetypes and market typing

Playbooks for focus markets and archetypes, including

Market overview diagnostics to identify opportunities
Business case for each opportunity
Operational plan and scorecards for implementation
Codified approach, templates and best fit strategic option for each archetype

Capability and organization blueprint

Capability blueprint: current state and focus areas for investment
Recommended structure for new organization to drive digital leadership;
interaction/support model with BUs
Role descriptions and decision-rights for both new organization and related
roles throughout business

Global digital glidepath

Market learning extrapolated across archetypes
Refined archetypes and sequencing
Starting list of opportunities and market insights for next 2-3 markets per
archetype
Multi-year road map to launch and track results
19

1 Preliminary workplan: Finalize market archetypes & prioritization

PRELIMINARY TO BE REFINED WITH YOU

Output
A KC category specific
fact base for each
market

Activity

Timing

Use market data to develop 2010 and 2015 view for overall online market and KC

Week 1

B Refined archetypes

Cluster markets into like groups, which will require similar go-to-market approaches in the

C Suggested lead market

in each priority/attractive
market and implied
investment sequence

categories in every major country globally, focused on

Overall country economic development level (e.g., GDP/capita)
Internet usage and eComm comfort (e.g., broadband penetration, primary usage point,
credit card penetration)
Online channel dynamics and evolution (B2C vs. C2C, multichannel vs. pureplay, etc.),
including cross-market models (e.g., Amazon globally) and market-specific dynamics
KC specific category development (size, growth, channel mix, B2C/C2C mix, etc.)
Develop point-of-view on overall KC global strategic priorities through interviewing/
workshops with KC executives

immediate (3yr) term, by analyzing each market against market fact base, such as:
Major macroeconomic criteria: Internet and eComm propensity (e.g., broadband
penetration, credit card usage online and offline) and overall economic development
(e.g., GDP/capita)
Level of digitization: Channel mix across categories and in KC categories
Develop forward-looking view on which underlying drivers predict a given markets
archetype
Refine archetypes through collaborative workshops with KC and further iteration
Overlay KC share and strategic priority to estimate full potential from reaching fairshare
online (as well as potential scenarios for additional offline growth), creating initial view of KC
priority for online investment
Use client working sessions to test and refine archetypes and selected markets

Week 2

Week 3/4

D Baseline grounding of
activity in priority
markets

Develop understanding of the current activity in priority markets through interviews to

Week 3/4

E Codified methodology
for future market refresh

Document detailed approach to archetype development and pilot market selection,

Week 4

understand strategy, competitive landscape, marketing and launch calendar, current online
initiatives (if any)
including: data sources, rationale and criteria for prioritization, etc

20

2 Preliminary workplan: Lead market strategy and business plan (1 of 2)

PRELIMINARY TO BE REFINED WITH YOU

Output
A Pilot market fact base
across five major
areas:
Category and
channel
Consumer
Customer
Competitor/
substitutes
KC

Activity

B 3-5 major opportunity

areas for KC

Timing

Week
Category and channel: Create analytical profile of size, share and growth of the
category, by channel, price tier, customer, etc identifying market headwinds and
3-6
tailwinds, and KC position in each pocket of the market use POS data
Consumer: Conduct rapid consumer research (quant and qual 1-2wk total) to
understand the consumer decision journey, consumer preferences/behaviors, unmet
needs/painpoints, etc.
Customer: Profile major pure-play and multichannel players in each market, as well
as horizontal players (e.g., ShopKick, Groupon), to identify (a) where they are
investing, (b) what they are expecting from suppliers, (c) how they are intending to
use the online channel, etc. Use retailer annual reports, press search, customer
interviews, GLG, expert interviews, etc.
Competitor/substitutes: Profile top competitors in each market to understand (a)
where they are investing, (b) how they are treating the online channel, (c) overall
priority of the market, etc; further profile major substitutes (e.g., cloth diapers) and
surrounding trends in each market -- Use CPG annual reports, press search, GLG,
expert interviews, etc
KC: Profile major KC priorities in each market, across all topic areas (e.g., new
product introduction, channel prioritization, new consumer group) use internal KC
materials and interviews
Use collaborative ideation sessions, starting with the fact base and a set of
hypotheses, to generate and develop 3-5 opportunities (e.g., unmet consumer or
customer needs, rapidly growing consumer demand, new evolving behaviors and
channels, etc), in the market and points of KC differentiation by:
Generating rapid number of ideas, based on market fact base
Clustering ideas into major themes (likely 15-20 themes)
Collectively voting on top 3-5 opportunity areas

Week
6-7

21

2 Preliminary workplan: Lead market strategy and business plan (2 of 2)

PRELIMINARY TO BE REFINED WITH YOU

Output

Activity

Timing

C Prioritized 1-3
opportunity areas

Further define each selected theme to create holistic opportunity area

Rapidly size, assess time to impact and establish major criteria of what it would take
for KC to win for each opportunity to narrow to 1-3 major opportunity areas to be
invested against in the next 3 years, with a bias towards overall size of the
opportunity (considering impact across all channels) balanced with need for some
quick wins

Week 7

D Playbook and
sequence for major
opportunity areas

Develop detailed business case for each priority opportunity area, including:
Clear articulation of the opportunity/where KC will invest, unmet need or
market/consumer opportunity it addresses, how KC is uniquely qualified to
capture the opportunity
Financial view of the opportunity (i.e., investment required, ROI, high-level CF)
over time
Set of actions that need to be accomplished to capture opportunity
Initial content required to start implementation (e.g., specific ideas and pitch
packs to approach Amazon)
Roadmap and major milestones of activity
Metrics, targets and scorecards for performance tracking
Develop communications strategy for quick wins
Create high level roadmap for each opportunity and across opportunities, with an
eye towards
Establishing quick wins
Investing early for longer term (3yr) growth

Week
8-10

Launch and monitor performance of quick wins in each major market

Week
10+

E Quick wins

22

3 Preliminary workplan: Design new organization and support structure

PRELIMINARY TO BE REFINED WITH YOU

Output

Activity

Timing

A Profile range of organization and process models

to support global digital
business

Develop case studies and example models of organization capabilities required support global
ecommerce/multichannel businesses (for like businesses and CPG specifically) with detail of
Major groups and interactions among COEs and BUs, and high level decision rights in each
group
Capabilities (processes, people, structure, training)
Major roles and rough FTE count
Job descriptions of key individuals/capabilities (e.g., CRM)
Range of performance management
Other major enablers (e.g., data warehouse, etc)

Week 9

B Major decision points and

potential resolutions for KC

Identify major decision points for organization (e.g., level of centralization v. localization for CRM team) Week 9
and tee up major pros/cons of each option
Use client workshops to create optimal model for KC

C End state of capabilities

required for KC
D Single organization
structure for KC

Diagnose existing capabilities (processes, people, training)

Understand requirements to deliver on the strategy and key opportunity areas
Prioritize where to invest and how (in-house vs. outsource, etc.)

Week 8-10

Create single view of digital/eComm org for KC, including:

Major groups and interactions among COEs and BUs, and high level decision rights in each
group
Major roles and rough FTE count
Job descriptions of key individuals/capabilities (e.g., CRM)
Performance management and how shared between COEs and BUs
Other major enablers (e.g., data warehouse, etc)

Week 10

E Gap from current to

proposed end state

Map current KC online/multichannel org (officially and unofficial/based on activities) and size gaps to
proposed structure, with focus on required:
FTEs and cost
Major talent and capabilities

Week 11

F Potential investment and

roadmap to full org

Create high level roadmap of organization build-out, based on major market investment and
opportunity roll-out

Week 12

23

4 Preliminary workplan: Develop global glide path with market scans

PRELIMINARY TO BE REFINED WITH YOU

Output

Activity

Timing

A Playbooks adapted
for cross-archetypes
roll-out

Generalize playbooks to be applied across markets within an archetype,

Week
13

B Re-prioritization
of markets, with
an eye towards
additional lead
markets (wave II)

Revisit market prioritization, considering major investment KC will be making

C Multiyear roadmap

Create 3-5yr global roadmap, considering major milestones by market and

grouping opportunities into buckets of:

Applicable across markets
Applicable with heavy market adaptation
Market specific opportunities only

and capabilities KC will be developing in each archetype, to:

Refresh archetypes, moving countries between groups considering any
new learnings in each market
Create second wave of prioritized markets, considering how to maximize
return of existing investments and prioritizing near term growth

within the organization

D Scorecard and
metrics for success

Support roadmap and milestones with major metric targets (e.g., share by

channel and market, mix of sales between online and offline channels etc.)

Week
14-15

Week
15
Week
15

24

What working with us is really like

Research consumers in
context to understand
unmet needs

Collide multiple lenses

together in crossfunctional workshops

Collide business trends and

Follow shoppers to
analytics with consumer
understand behavior and
insights to identify white
unmet needs
space

Collaborate with
frontlines and end users
to design solutions

Visualize & quickly

build prototype
concepts

We benchmark funding vs. peers to highlight opportunities

for negotiation on a vendor scorecard

$ Millions

Run in-store pilots and

track customer behavior

Funding*

Gross profit

YoY change
Percent
$ Millions

Gross profit
Retailers
w/o VF
share
Percent of
of funding
Percent of total sales

Vendor
Percent of
purchases

YOY
change
Percent

Cash terms

Damages
Percent of
actuals

Peer Company A

1,350

77

7.1

3.0

57

20

26

2.0% @ 19 days

Peer Company B

1,200

10

64

8.7

(2.0)

41

25

30

2.0% @ 26 days

70

Peer Company C

437

62

17.6

10.0

35

19

33

1.5% @ 25 days

100

Peer Company D

377

11

46

14.7

35.0

29

17

29

0.0% @ 30 days

Peer Company E

247

17

9.4

(16.0)

52

25

32

0.0% @ 15 days

100

Peer Company F

234

18

9.7

28.0

32

22

30

2.0% @ 34 days

48

Peer Company G

222

18

9.0

18.0

43

17

2.0% @ 18 days

100

Peer Company H

213

24

14.2

23.0

43

19

31

1.0% @ 16 days

100

Peer Company I

201

13

6.7

14.0

17

31

35

0.0% @ 27 days

100

Peer Company J

189

14

36

21.0

5.0

44

10

29

0.0% @ 15 days

100

Closely monitor pilot

results & iteratively
refine prototypes
Weighted average**

10.3

43.5

24

32

Retailer benchmark**

12.7

45

31

38

* Only includes demand funds; excludes supply funds, payment terms and any marketing funds
** Branded vendors only
SOURCE: McKinsey proprietary vendor benchmarking database, team analysis

Welcome any and

all ideas

Co-create, dont
work in silos

Work on-site
(Corporate and
Parks), get
involved

Rapid-fire tests with

consumers

Above benchm ark

Payment and Supply Funds

Gross profit
w/ VF
Percent
of sales

DISGUISED EXAMPLE

Below benchm ark

Sales

Identify global
innovations & emerging
technologies

72

Model economics to turn

ideas into real, viable
businesses
-

2.0% @ 30 days

100

McKinsey & Company | 12

Build capabilities
& tools to repeat
process

Rollout at the frontline

through training and
tools
25