The authors argue that strategy can be defined and created using a simple framework that entails answering five questions - the same five questions, no matter the type, size or context of the organization.

Many managers feel doomed to trade off the futile rigor of ordinary strategic planning for the hit-or-miss creativity of the alternatives. In fact, the two can be reconciled to produce novel but realistic strategies. The key is to recognize that conventional strategic planning, for all its analysis, is not actually scientific--it lacks the careful generation and testing of hypotheses that are at the heart of the scientific method. The authors outline a strategy-making process that combines rigor and creativity. A team begins by formulating options, or possibilities, and asks what must be true for each to succeed. Once it has listed all the conditions, it assesses their likelihood and thereby identifies the barriers to each choice. The team then tests the key barrier conditions to see which hold true. From here, choosing a strategy is simple: The group need only review the test results and choose the possibility with the fewest serious barriers. This is the path P&G took in the late 1990s, when it was looking to become a major global player in skin care. After testing the barrier conditions for several possibilities, it opted for a bold strategy that might never have surfaced in the traditional process: reinventing Olay as a prestigelike product also sold to mass consumers. The new Olay succeeded beyond expectations--showing what can happen when teams shift from asking "What is the right answer" and focus instead on figuring out "What are the right questions?"

Choosing a new CEO is the most important job of a company's board of directors. No other decision has such a profound impact on a firm's strategy and performance. Yet the topic of succession often gets shoved aside by concerns that seem more pressing. No one pays attention until the CEO's departure is imminent-and by then it's too late to adequately vet and train a replacement. A.G. Lafley, in contrast, began pushing the directors at P&G to begin the search for his successor as soon as he took office as CEO. From then on, the first board meeting of the year was devoted to that issue. In this article, Lafley describes the rigorous processes P&G established to ensure that it would always have a slate of strong internal CEO candidates. Among other things, P&G set up many opportunities for direct, in-depth interaction between the board and candidates; established clear leadership criteria and continually measured people against them; and developed various scenarios the company might face and identified who could best steer the firm in each situation. Lafley himself took responsibility for seeing that the company developed as many potential CEOs as it could. He became P&G's head leadership coach, responsible for training its top 500 executives. P&G's disciplined approach paid off by producing not only a first-rate successor but a contingent of senior executives who've led the company to tremendous growth.

Lafley, the former CEO of Procter & Gamble, is regarded as one of the most successful chief executives in recent history. But like everyone else, he's had his share of mistakes. Politicians and winning sports teams draw their biggest lessons from their toughest losses, he says, and the same has been true for him. The company learned more from its failed new brands and products than from its successes. Among Lafley's favorite examples is the color-safe low-temperature bleach that P&G test launched in the 1980s under the brand name Vibrant. It chose Portland, Maine, as the test market, hoping to escape notice from Clorox, which was headquartered in Oakland, California. But Clorox got wind of the plan in time to distribute free gallons of Clorox to every household in Portland, making all P&G's advertising dollars, sampling, and couponing irrelevant. "Game, set, match to Clorox," Lafley says. But the good technology behind Vibrant remained, and when, a few years later, Clorox tried to enter the laundry detergent business, P&G modified that technology to create Tide with Bleach, which grew into a business worth more than half a billion dollars. Lafley also talks about systematically analyzing 30 years' worth of failed acquisitions to uncover five root causes: no winning strategic reason for the acquisition; integrating poorly or too slowly; expecting synergies that didn't materialize; incompatible cultures; company leaders who "couldn't play together in the same sandbox." That analysis led to changes that informed P&G's highly successful acquisition of Gillette in 2005.

HBR asked top management thinkers to share what they were resolved to accomplish in 2011. Here are their answers: Joseph E. Stiglitz will be crafting a new postcrisis paradigm for macroeconomics whereby rational individuals interact with imperfect and asymmetric information. Herminia Ibarra will be looking for hard evidence of how "soft" leadership creates value. Eric Schmidt will be planning to scale mobile technology by developing fast networks and providing low-cost smartphones in the poorest parts of the world. Michael Porter will be using modern cost accounting to uncover-and lower-the real costs of health care. Vijay Govindarajan will be trying to prototype a $300 house to replace the world's poorest slums, provide healthy living, and foster education. Dan Ariely will be investigating consumers' distaste for genetically modified salmon, synthetic pharmaceuticals, and other products that aren't "natural." Laura D. Tyson will be promoting the establishment of a national infrastructure investment bank. Esther Duflo will be striving to increase full immunization in poor areas of India. Clay Shirky will be studying how to design internet platforms that foster civility. Klaus Schwab will be undertaking to create a Risk Response Network through which decision makers around the world can pool knowledge about the risks they face. Jack Ma will be working to instill a strong set of values in his 19,000 young employees and to help clean up China's environment. Thomas H. Davenport will be researching big judgment calls that turned out well and how organizations arrived at them. A.G. Lafley will be proselytizing to make company boards take leadership succession seriously. Eleven additional contributors to the Agenda, along with special audio and video features, can be found at hbr.org/2011-agenda.

CEO pay has become a lightning rod for criticism and debate, but CEOs themselves have been largely absent from the conversation, says Procter & Gamble's former CEO. It's time to stand up for responsible compensation leadership and get rid of indefensible and inappropriate amounts and forms of compensation. The author's proposals include establishing simpler and clearer guidelines, eliminating post-employment provisions not based on performance, and creating a CEO-led coalition for responsible compensation. If CEOs don't take corrective action, he says, Congress surely will, and not necessarily in a form that will benefit anybody.

Peter Drucker's extensive writings, including more than 30 HBR essays, are landmarks of the managerial profession. They've influenced the practice and teaching of management for decades and no doubt line thousands of bookshelves. But does anyone read his works? More important, ought they? More important still, what will they gain if they do? In this 1980 article, Kantrow maintains that Drucker's real contribution to the discipline of management lies not so much in the cash value of his ideas but in the rigorous activity of mind by which they are formulated. One can learn far more deeply from watching Drucker think, says Kantrow, than from studying the content of his thought. Using specific passages from many of Drucker's books, the author demonstrates how Drucker's broadly contextual, logical, holistic play of thought enacts a kind of ongoing drama of perspective and how, combined with his fair-minded approach and commonsense flow of reasoning, Drucker so effectively convinces the reader. Kantrow also classifies Drucker's works into four groups - social and political thought, business and management analyses, views of what might logically develop in the future, and how-to primers on business tasks - and offers a guide for how to choose the best book for you. Accompanying Kantrow's article are essays by five leaders who write about Peter Drucker's influence on them: A.G. Lafley, of Procter & Gamble; Frances Hesselbein, of the Leader to Leader Institute; Oscar Motomura, of the Amana-Key Group; Peter Paschek, of Delta Management Consultants; and Zhang Ruimin, of Haier.

The author combines his nine years' experience as the CEO of Procter & Gamble with the last writings of the management scholar Peter Drucker to answer the question "What is the work of the CEO?" The chief executive, Lafley says, is held singularly accountable for the performance and results of the company-according not just to its own goals but also to those of diverse and often competing external stakeholders. In other words, he or she is responsible for linking the outside to the inside-a job that consists of four fundamental tasks. Defining the meaningful outside. At P&G this means emphasizing that the consumer is boss. The company has also worked to change what had been win-lose negotiations into win-win partnerships with retail customers and suppliers. Deciding what business you are in (or not in). After a thorough analysis of its strengths, current competitive position, and structural conditions, P&G chose to grow from its core-laundry products, baby diapers, feminine care, and hair care-and also to focus more on low-income consumers and developing markets, where sales have grown from 21% to 31% of the total since 2000. The company has exited food and beverages and is selling its pharmaceutical business. Where to compete and where not to compete remain ongoing questions. Balancing present and future. P&G defines realistic growth targets and uses a flexible budgeting process with complementary short-term, midterm, and long-term goals. Shaping values and standards. The CEO must interpret the organization's values in the context of change and competition and define the standards that will guide decisions. Trust at P&G had come to mean that employees could rely on the company for lifetime jobs. Lafley redefined it as consumers' trust in the company's brands and shareholders' trust in its value as a long-term investment.