The Untold Story - How P&G's Innovation Strategy Doubled Revenues | | MBA Case Study analysis

Summary

Procter & Gamble (P&G) revolutionized its innovation strategy in the early 2000s to overcome stagnating growth. By creating a 'New Growth Factory,' P&G integrated disruptive innovation, R&D investment, and consumer insights to foster breakthrough products like Olay Pro X and Tide. The company focused on a balanced innovation portfolio, starting small and scaling strategically. Key lessons for leaders include aligning innovation with core business, testing ideas through real-world experiments, and ensuring the right teams are in place. P&G’s success story offers valuable insights for businesses aiming to innovate and grow sustainably in a competitive market.

Takeaways

• 😀 Procter & Gamble (P&G) struggled with innovation in the early 2000s, with only 15% of new products meeting revenue and profit goals, prompting them to overhaul their approach.
• 😀 P&G developed a 'New Growth Factory' that combined creative thinking and speed, boosting the company’s innovation success and growth rates.
• 😀 P&G heavily invests in research and development (R&D), allocating nearly $2 billion annually, and another $400 million in consumer research to fuel innovation.
• 😀 Clayton Christensen's theory of disruptive innovation helped P&G structure a more effective innovation process, focusing on simpler, more convenient products.
• 😀 P&G has four main types of innovation: sustainable, commercial, transformational sustaining, and disruptive.
• 😀 Transformational sustaining innovations, such as Olay Pro X, reframe existing categories and bring significant benefits to products, even during a recession.
• 😀 Disruptive innovations, like Swiffer and Febreze, create entirely new markets and businesses, offering groundbreaking solutions to customers.
• 😀 In 2008, P&G streamlined its innovation efforts by focusing on fewer, larger projects and creating dedicated business creation groups to drive success.
• 😀 P&G’s approach includes testing innovations in real markets, such as Tide Dry Cleaners, which disrupted the dry cleaning industry with a new business model.
• 😀 Leaders at P&G learned five key lessons for fostering innovation: coordinate with the core business, use a portfolio approach, start small, create new tools for measuring success, and ensure the right people are in the right roles.

Q & A

What was the main problem P&G faced with its innovation efforts in the early 2000s?

In the early 2000s, only 15% of P&G's innovations met their revenue and profit targets, which signified a need for a better approach to innovation.

How did P&G address their innovation challenges by 2010?

By 2010, P&G had implemented a 'New Growth Factory' model, combining creativity with speed and reliability. This approach helped double Tide's revenues and led to successful new products and business models.

What is the 'New Growth Factory' concept P&G created?

The 'New Growth Factory' was a system developed by P&G to foster innovation. It combined creative strategies with structured processes, allowing for faster and more reliable product development.

What types of innovation did P&G focus on?

P&G focused on four types of innovation: sustaining innovations, commercial innovations, transformational sustaining innovations, and disruptive innovations.

What is the difference between sustaining and disruptive innovations at P&G?

Sustaining innovations improve existing products incrementally, while disruptive innovations introduce entirely new offerings and business opportunities, such as P&G's Swiffer and Febreze.

Can you give an example of transformational sustaining innovation at P&G?

An example of transformational sustaining innovation at P&G is the launch of Olay Pro X in 2009, which offered a clinically proven, affordable anti-aging product during a recession.

What role did consumer research and R&D play in P&G's innovation strategy?

P&G invested nearly 2 billion dollars annually in R&D and another 400 million dollars in foundational consumer research to drive innovation and ensure their products met consumer needs.

How did P&G approach innovation in emerging markets like India?

In India, P&G developed Tide Naturals, a product tailored to local preferences and washing habits, priced 30% lower than comparable products to make it affordable for a larger consumer base.

What lesson can leaders learn from P&G's innovation portfolio approach?

Leaders should manage a varied portfolio of innovations, from sustaining improvements to disruptive breakthroughs, to ensure a balance between short-term growth and long-term strategic success.

What are some of the key lessons for leaders based on P&G’s experience with innovation?

Key lessons for leaders include: coordinating new growth efforts with core business, using a portfolio approach, starting small and growing carefully, creating tools to gauge new businesses, and ensuring the right people are in place for the right work.