What will happen to Innovation at P&G ?

What will happen to Innovation at P&G ?Remember when A.G. Lafley was the King Of Innovation? What has happened to P&G since Lafley retired in 2010?

P&G promoted Mr. MacDonald to CEO from within the company. Didn’t Mr. Lafley create a culture of innovation there? Wasn’t the company’s growth supposed to come from innovation?

A story in the Wall Street Journal on June 20, 2012 stated, “Former employees also say Mr. McDonald’s effort to speed up the process of bringing new products to market has collided with a deliberative culture infamous for its bureaucratic management layers, stringent consumer case studies and iconic one-page memos.”

The previous quote doesn’t strike me as an innovative culture. In fact, it sounds exactly the opposite.

In the same WSJ story the CEO was quoted as saying, “Mr. McDonald pointedly said the company hadn’t produced many new winners: “We haven’t created a new category or a meaningful new brand in some time.” ” What? I thought P&G was supposed to be an innovation machine, churning out lots of new things.

A quick look at P&G’s website indicates their strategic intent is to touch and improve the lives of more consumers, in more parts of the world, more completely. One can only wonder how this is being interpreted inside the company. It would be interesting to know how much internal effort is focused on operational efficiency and doing things right, versus doing the right thing and focusing attention on achieving the company’s strategic intent.

The world has been going through an extremely difficult financial downturn. Did the folks at P&G pull up the drawbridge on the castle and forget about innovation? Or are consumer goods companies so saturated with products they are finding it hard to be truly inventive or bring new relevance to customers?

P&G is a large and complex organization. Looking from the outside, one will never fully know all of the obstacles and barriers the leaders of this organization are facing. However, a couple of things strike a casual outside observer.

First, just because the leader of the organization said they were going to launch innovations doesn’t mean it will happen. One needs both C-level commitment AND a change in internal culture and structure. It looks like the internals of the company are not delivering on the vision of innovation.

A business leader can’t just state they want innovation, the entire organization must be oriented to supporting this objective. It is critically important for the people inside of the company to be in a mindset to change their markets in order to achieve growth.

Second, in order to deliver innovations over time, a systemic and iterative set of processes must be in place. These processes have to be strong enough to overcome internal inertia. Every organization has its own, unique day-to-day focus, and this focus will treat innovation like a disease without total commitment to finding ways to deliver new customer value. The organization will kill an innovation’s incubation and growth for many different reasons if not led with a purpose.

It will be very interesting to see if a company that staked its future success on innovation will actually be able to make it happen.

image credit: pg.com

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You Can't Prove the Future - You Can Only Create ItRoy Luebke is an innovation expert focused on discovering new, customer-driven opportunity areas to help define the future of a company. He is inspired by knowledge and learning, and applying structured tools and methods at the crossroads of strategy and innovation to achieve business growth.

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3 Responses to What will happen to Innovation at P&G ?

  1. Roy,
    You raise many good questions. P&G did they ever really shed the past or were just driven by a choosen few, many who have also quietly slipped away with early retirement packages or a need to move on to something else.

    The change at the top, where a very data driven, operational guy takes over, alters the balance. P&G needed to embrace innovation many years back and Mr Lafrey was correct in focusing on that, it pulled P&G out of its poor performances and enabled it to perform at sector average or above. It absorbed a number of take overs to keep momentum going but this has also been slowly strangled as those executives also retired or drifted away.

    No innovation is not central to them, making the ‘hard’ numbers of external ideas to market has driven them to take over ,nearly fully baked concepts, proven in the market place and their value has been in global reach and synergies- perhaps not enough to propel them above others. Too much is developed outside the organization and the inside is slowly morphing from its own internal lack of dynamism.

    P&G is clearly a ‘watch this space’

    • Roy Luebke says:

      Thanks for your comment, Paul. There is ample evidence in the business literature that shows most mergers fail to deliver increased value to the acquiring company. Much of the value of a merger goes directly to shareholders of the selling firm immediately at purchase. Due to integration and cultural issues, most mergers then fail to deliver the increased economic value the merger was supposed to garner.

      Given that P&G and Mr. Lafley positioned both the company and Mr. Lafley personally as thought leaders regarding innovation, they seem to be falling short on delivering on the vision.

      This just seems like a good example of what is truly facing business leaders as they realize the world is quickly changing and they need to adapt to these changes just as quickly. India and China possess about 3 billion people, almost 50% of the world’s population. That will be the economic engine of global business growth for the next 50 years. P&G is probably trying to frame this in an antiquated corporate structure and it is not working effectively. The US economy grew on the rebuilding of Europe and Asia after World War II. That era is clearly ended. The next era is the growing dominance of Asia. Time will tell if P&G can understand and capitalize on that fact.

  2. Roy,

    Where I do think P&G do have a present edge is in their devolving policy into Asia. The growing center in Singapore has a global group located there. My worry looking out the window in Singapore, often daily, is not what is truly making up Asia for CPG. As you rightly say, they are attempting to get closer to markets but still so heavily caught up in the web of P&G culture and structures to really ‘unleash’ much. They lumber more than achieve nimbleness it seems. Although they have a real clout in the retail trade but mainly as they offer high margin brands but can this compete in downward trading conditions. They need some more radical thinking to realize what potential they have available to them. Not easy but do-able

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