Creative ideas drive growth, and Procter & Gamble is exploiting that fact by developing new products through partnerships with inventors, small businesses and even competitors.
As brilliant ideas go, the Oral B Pulsonic toothbrush may not quite be up there with the wheel. But the electrically powered product – which employs patented “sonic technology” to scour stains from teeth and sells itself with the boast that it is “So slim it makes your bathroom seem bigger” – has made plenty of profit even so.
In fact, it’s been so successful that Procter & Gamble, the company that makes it, has set out to find more good ideas just like it. A whole lot more ideas. With revenues now close to $80 billion, Procter & Gamble has come a long way since William Procter and James Gamble set up their first factory in Cincinnati in 1837 with the simple aim of selling candles to American housewives.
Today, P&G is one of the world’s biggest corporations, and over the past decade a large part of its success has stemmed from a strategic decision in 2000 to turn away from developing only its own product ideas and towards creating partnerships with inventors, smaller companies and even competitors who have come up with winning concepts.
The Pulsonic toothbrush, to take just one example, is an idea that P&G freely concedes could have taken five years to bring to market had it elected to go it alone. Partnering with a large Japanese consumer electronics group cut out numerous processes and got the toothbrush on to shelves less than a year after the project was green-lighted.
You might think that a company the size of Procter & Gamble could come up with its own ideas, but the partnership model works. Among the products now issuing from P&G are Swiffer dusters, Tide Total Care, Clairol Perfect 10 and Olay Regenerist – all of them joint ventures of one sort or another.
And that’s not counting broader strategic partnerships that the company is forging with the likes of Alibaba, the Chinese web services giant, General Mills and even the US Government’s Los Alamos defence research laboratory – where they made the first atomic bomb.
In building partnerships of this sort, little is left to chance. A formal innovation programme known as Connect + Develop, set up in 2001 to develop new businesses, follows precise guidelines to ensure that the sort of disruptions common when businesses join forces are kept to a minimum.
Thus far, C + D has shepherded well over 100 new products into stores, and with sales of these products now hitting $1bn a year, Procter and Gamble has set itself the ambitious target of tripling revenues from such partnerships by 2015.
Connect + Develop’s chief problem seems to be deterring the hordes of impractical and optimistic would-be inventors beating a path to its door. The prospect of selling an idea to Procter & Gamble inspired 3,950 companies and individuals to make formal pitches to C + D in 2009 alone. Most were knocked back at the first hurdle as Connect + Develop turned itself into a sort of multinational Dragons’ Den.
That’s not to say there is no potential for disagreement once a new idea is accepted. Quite what sort of deal P&G strikes with its junior partners remains a matter of speculation, and it would be stretching credulity to suggest that they go 50:50. So far, no one is complaining and the balance in the new partnerships looks right.
Small companies such as Sederma – the boutique French skincare technology company behind the peptides used in Olay Regenerist – bring ideas and specialist know-how to the table. P&G chips in with investment, advertising, and, not incidentally, the backing of what may well rank as the world’s most powerful sales force.
According to P&G’s chief technology officer, Bruce Brown, the policy is one of “value creation, against just measuring the number of connections”. What his company plans to do now, he says, is to ask: “What are the biggest opportunities we want to address, and are we looking outside to make the right connections?”
And the signs are that Procter & Gamble is in this for the long haul. According to Bob MacDonald, its CEO, the corporation’s net will be cast as wide as possible. “We are interested in all types of high-quality, on-strategy business partners,” MacDonald told a dinner held in honour of the group’s top innovation partners this month, “from individual inventors or entrepreneurs to smaller companies and those listed in the Fortune 500 — even competitors.”
And with products such as Glad’s “ForceFlex” rubbish bags now appearing in shops, MacDonald is practising what he preaches: ForceFlex has been developed in partnership with Clorex, long one of P&G’s bitterest competitors.
There’s little doubt that – even looked at with a sceptical eye – P&G’s strategy makes all sorts of sense. The corporation operates in low-margin sectors where – as strategic planning maven Inder Sidhu points out – it runs “very competitive, entrenched position-kind of businesses, so even small, incremental changes can mean a lot”. Adds Sidhu: “There has to be that focus on sustaining innovation, but then they also tried every once in a while to come up with disruptive innovation, the Swiffer or those kinds of products.”
As proof that C + D is working, look no further than one of the latest products from the labs. Procter & Gamble turned its back on candle making in1920 but several years ago, alerted to the growing popularity of scented candles for air freshening, it married its Febreze fabric-scenting technology to the know-how of a traditional candle-maker to re-enter the candle market. Now Febreze Candles can be found in the same sorts of mom-and-pop stores that P&G used to supply nearly two centuries ago.
William Procter and James Gamble, it seems safe to say, would certainly approve.
From Stylus
Posts
No comments:
Post a Comment