The Growth Secret of Proctor and Gamble

October 27, 2021 0 By admin

If you wanted any example of the challenges of scaling an innovation program to make decent financial return, they do not come much better than Proctor and Gamble, the global consumer เว็บตรง products giant.

P&G have, as a company, adopted a Play-2-Win innovation strategy. Stated differently, their approach recognises the fact that most of their future success is dependent on how well they manage their innovation effort, as it has been throughout the long history of the company.

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The company competes in fast moving consumer goods across five major categories, and spends most of its effort to find unique, innovative propositions that will build huge global brands.

Most large organisation, in order to satisfy shareholders, need to generate between 4 and 6 percent annual growth of their organisations. For Proctor and Gamble, that is equivalent to innovation worth almost $4 billion a year. By 2000, Proctor and Gamble were realising that traditional innovation efforts, comprised of very capital intensive internal research and development, was never going to be able to keep up with this demand for growth.

It realised, in fact, that the investment needed to generate those kinds of returns was increasing faster than the investments were capable of returning. For example, P&G had 7500 researchers, and they found that adding more scientists was resulting in incrementally less productivity each time.

It is extremely typical that central innovation teams face this challenge. When the team is responsible for everything, scale issues almost always occur. You put more resources into the program in an attempt to get more results, but this strategy failed at P&G. They were unable, even with sustained investment, to outpace shareholders demands for growth.

How did P&G respond? They gave up their traditional and capital intensive R&D process, in favour of making it possible for anyone to innovate. Customers, partners and employees (scientists or not) were allowed to make new things for the company. With this decision they decided on an ambitious additional goal: to make sure that from then on, 50% of all new products would be sourced from outside the company.