Turning The Tide Around – Learning From P&G
As I finish the last load of laundry today, I couldn’t help but stare at that large yellow and orange bull’s-eye that we’ve all grown accustomed to – Tide. Helping families for more than 50 years, Procter & Gamble’s (P&Gs) Tide is one of the largest brand in the household care and fabric industry.
So how did P&G turn the tide around with their laundry detergent to where revenues have nearly doubled from $12 billion to almost $24 billion?
It all starts with innovation and growth. As Robert A. McDonald, retired chairman, CEO, and President of P&G wisely stated, “we know from our history that while promotions may win quarters, innovation wins decades.” With this in mind, P&G dedicates nearly $2 billion annually on R&D activities and at least another $400 million each year in consumer research for new innovative opportunities.
In addition, P&G created an exceptional team of leaders consisting of veterans, such as John Leikhim and David Goulait, who developed a new-growth factory based on disruptive-innovation and a strong organizational culture that consisted of:
- Internal structures built for continuous growth with dedicated teams that conduct market research; innovate on technologies; create business plans; test assumptions on projects.
- Developing process manuals highlighting step-by-step guidelines for creating new opportunities; identifying requirements for success; monitoring progress; making decisions, etc.
- Ensuring that factory and core business activities are aligned with the mission and vision of the company.
- Creating powerful relationships, including partnerships, that assists with growth and innovation.
- Tracking progress of all projects to confirm that organizational goals and objectives were achieved.
- Sharpened focus with portfolio mindset that foster disruptive innovations.
For alignment purposes, let me explain a bit about disruptive innovation. The term was coined by Clayton Christensen, a Harvard Business professor, who describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up the market, thus eventually displacing established competitors. In gist, it means to start small and grow carefully. Built on this philosophy, P&G conducted market research through “transaction learning experiments (TLEs)” which essentially allows the firm to produce a minimal amount to sell in an effort to allow consumers to vote with their wallets prior to mass production. By starting small and growing carefully, the company test markets with minimal risk and investment before fully committing to any long-term product.
To ensure success, P&G incorporates a portfolio mindset, along with a variety of other master-planning tools that matches the pace of innovation to the company’s overall business needs. This in turn, allows the company to nurture the best projects while eliminating the worse-performing ones. Remember, a portfolio approach has several benefits associated with it. Not only will different projects be resourced and managed differently but also measured with criteria’s that will aid with determining the best “return on investment (ROI) and equity” for projects.
What you’ll find more interesting is that P&G has also transferred this philosophy to their new-growth teams as well because the firm believes that smaller teams are not bogged down, thus being more equipped to focus on the most-promising projects. Consisting of a few seasoned members, the firm’s new-growth team is small, nimble, and can quickly adapt to the dynamic business environment. In fact, the company even went as far as creating a “Disruptive Innovation College” in 2007 that teaches people how to successfully complete a variety of new projects from start to end in an effort to groom the next generation of innovators to new markets.
As an advocate for education, I’ve always believed in cross-pollination. While most companies only train, and transfer knowledge from within, successful organizations understand that innovation could also be learned elsewhere. For example, the company swapped approximately two dozen employees with Google in 2008 for a few weeks. Reason being is that P&G wanted greater exposure to online models and Google wanted to learn how to build brands, thus creating a win-win situation for all stakeholders. By understanding that outside talent could be advantageous for the firm’s core business, they strategically brought in one of the best companies involved with creating effective online models to learn from.
Remember, individual creativity is unpredictable and uncontrollable but collective creativity can be managed. Although P&G’s new-growth business model may not work for every product launch, it’s still a methodical approach that’ll surely bring many more successful innovations to the market. Therefore, I would highly recommend taking a similar approach with your business, especially if you have adequate resources and need help turning the tide around. Doing so would provide your business with innovative growth and success for years to come similar to P&G.
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