How Procter and Gamble Survived Through

Innovation – A Case Study

Innovation at Procter and Gamble – A Case Study
Procter and Gamble has capitalized on innovation and creativity to lead the
consumer and household product industry. This paper will explore some strengths
and weaknesses, as well as opportunities and threats that Procter and Gamble had
utilized to sustain its success and competitiveness. This case study will also explore
some characteristics of innovative organizations and why they have chosen to be
innovative.

William Procter, a candle maker, and James Gamble, a soap maker, formed this
global and Fortune 500 Corporation in 1837 (corporate profile). Procter and Gamble
(P&G) is headquartered in Cincinnati, Ohio. These two entrepreneurs and inventors were
immigrants from England and Ireland respectively; who have chosen for some reason to
settle in the Cincinnati area. The company manufactures a wide variety of consumer
goods including beauty, household, health and wellness products. According to
CNNMoney.com “in the early parts of 2007, P&G was the 25th largest U.S Company by
revenue, 18thlargest by profit, and 10th in Fortune’s Most Admired Companies
list”. “Touching Lives, Improving Life” is the corporate motto which is exemplified in
their 138,000 employees and loyal customers worldwide. The worldwide demand for
P&G’s products and services has forced management to focus on global marketing and
innovation. This worldwide marketing and innovation success was achieved by making
sure that what they produce is of highest quality and most importantly is what customers
need. P&G is very adaptable to changing customer demands by carefully and clearly
defining its innovative strategies; however, it almost lost its market dominance to
competition in the mid 80’s had it not been its aggressive play-to-win strategy. “Senior
P&G management admitted that they had not had a breakthrough innovation since 1985,
and the company’s continued market dominance in the years ahead was in question” The
play-to-win innovation strategy had helped P&G to regain its industry leadership as
stated by (Davila et al.,) in the company’s case study:

Management had planned to create a more nimble organization and to increase the
speed and quality of innovation. They also focused on improving the speed of
commercialization of new products. In addition, they wanted to move the company’s
focus to higher growth, higher margin businesses such as health care and personal care.
 Another innovative play-to-win strategy that P&G management had adopted was the
acquisition of its domestic and foreign competitors. P&G acquired a number of other
companies that helped diversified its product line and increased profits significantly. In
order to foster this aggressive strategy, management had integrated and reorganized all
the manufacturing processes of the companies they acquired. Manufacturing processes of
companies like Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks,
Noxell, Shulton’s Old Spice, and many others. “Innovation must be encouraged, carefully
implemented within an organization at all times” (Hesselbein, Goldsmith, & Somerville,
2002, p. 82).
The pre-dominant leadership or management style in P&G is that of participatory,
delegating, and empowerment. Management has decentralized decision making process
in such a manner that middle level management most at times do not have to wait for
headquarters approval and funding; in order to embark on certain key innovative
projects. Because of the empowerment given to mid and senior level management within
this multinational corporation, it is much easier for management to customize products
and customer services internally. It is abundantly clear that, the success of this giant
corporation can be closely tied to its management and leadership style. “He restored
focus on leading brands and reminder everyone in P&G that the measure of success was
not innovation per se, but the consumer” (Davila et al., p.74). This is a clear customer
focus leadership style of a CEO who was brought in within the corporation to strengthen
employee morale and to refocus employees’ attention to providing the needs and wants of
customers in this ever changing global market.
P&G has demonstrated that its success depends on its customers, people, and
innovation. Each and every employee is brought together by the company’s common
culture, values, and goals. The company recognizes its diversity as a unique characteristic
and strength and it’s been able to maximize the talents and creativity from these people.
P&G has also demonstrated that it is not just in business to maximize shareholders wealth
but it’s also a social responsible company. This is illustrated in its summer camp program
that is open to community youth. “We developed our Summer Camp program as a way
to seek out the best and brightest. But, it's also a way for us to give these candidates a
head start, not only on their schooling, but also their careers.” (P&G Management Camp
Program)
 Characteristics of Innovative Organization
“By describing the landscape of unmet customer needs and analyzing where new
offering have worked before, you can chart a path that will produce successful
innovations time after time” (Anthony, Eyring, & Gibson p.104). Understanding
customer needs and building lasting relationships are important in helping an
organization innovate. Businesses innovate through unmet customer needs. Customers
express their needs that have not been met and organizations innovate to meet those
needs. This is why P&G is still leading the domestic product industry because, it listens
to customers unmet needs and innovates aggressively to meet those needs. For instance,
when babies were wearing cloth diapers, they were very leaky and labor intensive to
wash; at that time, mothers needed an innovative product on the market to help fix the
labor intensive part of washing the cloth diapers as well as the leakage. P&G answered
this innovative call by introducing a revolutionary product called “Pampers” into the
market.
Pampers helped simplified the diapering process by resolving the leakage and the
labor intensive washing. Innovation means change and to change you must know why
you are changing, that is to say you must understand the pros and cons of the change
process. In addition, you must understand the characteristics of innovation or change and
its implication organization wide. According to Kinicki (2007);
Why are organizations going through change? Simple. Globalization. International
competition. The spread of information technology. All of these factors have escalated
competition and the need to change in order to maintain competitive advantage.
Organizations have to be faster, more responsive, and produce higher quality. All told,
there is more pressure than ever, on everyone, to be able to change (p.1)
The aforementioned are the primary features of change and P&G management has
recognized that. Sometimes, what employees do not understand is the impact of change
on their professional and family lives; and it is the responsibility of management to
communicate this impact to employees both positive and negative; but mostly,
management overemphasizes on the positives and pays little attention on the negative
impact. Kinicki mentioned further:
Managerial changes viewed as good and necessary can be seen by employees as
intimidating and even terrifying. But when companies don't take this into account,
and force changes that employees aren't prepared to handle, those companies risk
alienating their workers, losing money and, in the end, seeing those great strategic
changes fall flat.
 This is a communication strategy that P&G has been successful in implementing
corporate wide. The company ensures that the length and breath of all its units understand
the impact of any change mostly at the professional level. Management ensures that
everyone involved is interested in the change process. The more employees are interested
in the change process the greater the success of the change or innovation. The most
important element here is motivation. Management must let employees see a win-win
situation in the change process. Another case in point here was the mismanagement of the
change process in the United States Department of Agriculture, Forest Service. Forest
Service management didn’t recognize the importance of communicating their re-
organization plan to employees ahead of time; and this had resulted in a loss of great
talents and good teams; because, some of them felt intimidated, terrified, and alienated.
Change must be carefully managed to ensure success.
It is impossible to address all the characteristics of innovation in this paper however;
the salient features will thoroughly be discussed. Organizational culture must be nurtured
to accept change at all levels. The nurturing of the organizational culture relies on the
fundamental responsibility of management to plan, direct, motivate, and control the day
to day operations of the organization. Innovative cultures must be built and supported by
management.
To begin with, anything that gives a corporation a competitive advantage over the
other is a characteristic of innovation. Most companies are described as first movers into
some specific industries and once they get in, they make it very difficult for others to get
in due to a specified or unspecified characteristic of innovation. This could be innovation
in technology, innovation in financial management (capital acquisition), innovation in
customer service and what have you. One main innovation characteristic of P&G is to
move innovation to commercialization faster than any other competitor in the
industry. “Defining the innovation strategy and the resulting portfolio characteristics
(play-to-win or play-not-to-loose and the associated mix of incremental, semi-radical, and
radical innovations) are the first major responsibility of a company’s leadership” (Davila
et al., p.85).
Secondly, anything that creates a situation that people had to deal with is a
characteristic of innovation. When innovation is implemented, it changes people’s
attitude toward the new process. It makes people think and act different from the way
they used to. It creates different vision and mission that people have to focus on; and this
gives rise to altering behaviors and attitudes. All this is because of innovation. Whenever
P&G introduces a new product line, it alters situations and behaviors. Anything that
creates a problem or resolves a problem is a characteristic of innovation. When Lesterine
mouth wash was introduced into the market, it solved the problem of bad breath but than
people had to deal with the burning sensation.
Keeley (2006) has found that:
Innovations can have both positive and negative implications. A few years ago,
people were discussing the “revenge of technology”. Now there are a few people
that are warning us about the “pursuit of technology”. Whatever the pundits say, the
future is probably going to happen anyway. So here is my initial list of characteristics of
innovations that might change the world: Anything that provides a service or solves a
problem in a significantly better way, anything that changes how society works or plays,
anything that eliminates a major problem (or cost) for people and or organizations. (p.1)
The reason why leadership hype is critical for innovation, creativity and change in
an organization is that; at P&G innovation or change occurs from top down. This sends a
clear message to everyone that if the entire leadership has changed to accommodate
innovation, it’s about time for them to change also (employees). Management makes
employees creative and innovative by hyping innovation and making it a priority. To
encourage creativity and innovation within an organization, leadership must hype it;
institute a reward system to compensate creative employees and link innovation and
creativity to the broader mission and vision of the organization.
P&G Strength, Weaknesses, Opportunities, and Threats (SWOT) Analysis
One strategic management tool that P&G uses to stay ahead of its competition is the
effective and efficient utilization of SWOT analysis. This involves specifying the goals
and objectives of the business as well as identifying the internal and external factors that
are favorable and unfavorable in achieving the goals and objectives. These analyses are
based on the company’s case study as well as the industry trend. Because of the
segmentation and size of the company, P&G faces a lot of domestic and foreign
regulatory threats and distribution systems where foreign competition tries to imitate
P&G’s brand names for the seek of misleading consumers for self profit. This threat of
foreign brand imitation is due to weak foreign business laws and regulations.
P&G’s strength includes: strong financial position both in the domestic and foreign
markets. The company was the 25th largest U. S company by revenue in the early part of
2007, and the 18th largest by profit. This is why the company is one of the most admired
companies in the United States. Also, the company has the ability and capability to push
innovation to commercialization faster than any other competitor in the industry; even
though it faces competition from Johnson & Johnson, Kimberly Clark, and Unilever, it’s
been able to move products and services from the innovation phrase to commercialization
faster; P&G has effective and efficient manufacturing processes which include total
quality management as well as just in time inventory systems; this has enabled the
company to save on inventory costs; and this cost saving is generously passed on to
consumers in a form of high quality and lower prices of goods and services.
Another unique strength of P&G is its pool of skilled labor. In a Congressional
briefing luncheon hosted by the Athena Alliance and the Congressional Economic
Leadership Institute held at the Rayburn House Office Building in Washington DC in
June 2006; P&G’s Corporate Director of Innovation Capability mentioned, “P&G has
9,000 R&D associates including 1,100 PhDs.” This clearly explains the tremendous
success of the company. The company’s pool of highly skilled employees in the industry
has given it the edge to lead in the innovation of over 40 product categories for which it
holds more than 27,000 patents. The Director of Corporate Innovation Capability added
“Our research and development organization is fluent in a broad range of competencies
including chemistry, engineering, materials science, biological sciences, medicine, and
mathematics.”
Also, P&G has a track record of producing high quality products which is very
difficult to match or beat. Consumers want high quality products at reasonable and
affordable prices, and this is the main reason why P&G is the driver of the consumer
product industry worldwide. P&G’s innovative products and services have helped
consumers save a lot of money on dental hygiene and on other health care products.
Just about everyone wants a bright healthy smile, but not eveyone can spend $600 for
the dental visits needed to achieve whiter teeth. And unlike the stereotypical eureka
moment, a lone P&G scientist didn’t accidentally stumble onto the Crest White Strips
formula late one night at the lab. What we did do was work backward from the consumer
need for a convenient, affordable solution to whiter teeth. We brought together a diverse
team of experts across our technology centers who were at the leading edge of their fields
from our flexible films group, adhesive group, dental experts from our oral care
organization and bleaching experts from our laundry business. And through solution
focused R&D, we delivered Crest Whitestrips with a level of tooth whitening that
surpasses anything else available in the retail market, and consumers pay only $35. (P&G
Corporate Director of Innovation Capability).
Some weaknesses of P&G include: Lack of effective distribution system in some
segment as well as poor location in some foreign countries and high cost of inputs.
Another area of weakness is the employment of foreign based local management who
doesn’t have any international business experience. This makes collaboration with
headquarters a little difficult because of their inexperience in the global business arena.
 P&G’s opportunities inlcude: Well defined market niche, just in time manufacturing
technology, wide range of demography, and the removal of trade barriers in some foreign
countries. The removal of trade barriers in some foreign countries has enabled the
company to operate competitively without much government intervention. Trade barriers
historically has been known to be one of the biggest threats for most multinational
businesses because of hostal takeovers by some foreign governments, difficulty of entry,
corruption among government officials and bribery, and unhealthy business environment.
Threats include: New entry into the household product industry, use of substitute
products, increased trade barriers in some developing nations, unfavorable business laws
and political instability. Investors do not like uncertainty. They want to ensure that there
is democracy and stable government in whatever country they invest and most
importantly, they should be able to repatriate their profits without much restrictions. This
has been a threat to most businesses as well as P&G.
A series of innovation systems that are now common practices in corporations
across America including extensive market research, the brand-management system, and
employee profit-sharing programs, were first developed at P&G; however, two key
innovation systems will be discussed. These include the “AskMe Enterprise” and the
“Corporate Standards System.”
It is important to analyse and contrast these two key innovation systems within
P&G. I have decided to choose the AskMe Enterprise innovation system because
innovation begins with ideas or brainstorming sessions among the subject matter experts,
and AskMe Enterprise innovation system provides that capability.
In July of 2001, P&G acquired the second installment of AskMe Enterprise from
AskMe Corporation, one of the leading providers of enterprise knowledge sharing
solutions in order to increase and strenghten its innovation net. AskMe Enterprise is one
of the most important and the largest innovation systems in P&G. It is an intranet site
that facilitates greater employee collaboration and enables more consumer-driven
innovations. “AskMe Enterprise reaches 18,000 key knowledge workers in P&G as well
as in departments such as R&D, Engineering, Purchasing, Consumer and Market
Knowledge, and knowledge sharing.” (Qu, 2001).
According to Delphi Group study (as cited in Qu’s 2001) “Nearly 88% of a
company’s knowledge resides in the minds of its employees. But most companies lack an
efficient system that enables them to tap into that knowledge in ways that provide a
strong return on investment.” With AskMe Enterprise, employees can identify qualified
individuals with relevant expertise, submit questions or business problems to individuals
and receive solutions from colleagues in order to take appropriate and effective actions.
Solutions transferred via AskMe Enterprise are captured in a knowledgedatabase so other
employees can reuse them in the future. The most interesting aspect of this innovation
system is its inclusiveness. It takes into consideration all personality types within the
corporation (introverts and extroverts). Introverts and Extroverts can use the system
effectively without any feelings of intimidation or alienation.
The AskMe Enterprise system brings the best out of individuals, leadership, and
groups, because it challenges employees at all levels of the organization to be innovative
and think creatively within and outside the organization. The leadership stimulates the
minds of employees by putting them in the position of customers with real problems that
need immediate solution. That is why the success of every organization or system
depends on good leadership. Organizational culture is the personality of the organization
and how it learns. In implementing this innovation system, it is very important for the
leadership to have a better understanding of the culture and how to incorporate the system
with the culture. The culture at P&G is totally different from the culture at Johnson &
Johnson and so on. Different cultures learn at different pace at a time and the leadership
must not lose sight of this differences.
Corporate culture and learning are particularly important when managing an
organization wide change. Learning organizations turn weaknesses and threats into
strengths and opportunities by not getting frustrated and quiting when confronted with
difficult situations and challenges. This is how P&G learns and more importantly, builds
its culture to understand that quiting is not an option in the innovation process.
Several challenges and factors confront management when leading and managing
innovative change processes in a multicultural and diverse organization like P&G.
Dooley and O’Sullivan (2001) have found the following to be the fundamental challenges
of leading and managing innovative change process “ Poor alignment between goals and
actions, poor participation in idea generation and problem solving, poor planning and
control of action implementation, poor management and monitoring of overall process
and more importantly poor leadership of the innovation process.” (p. 179). This
reemphasizes on the importance of good leadership in every problem solving situation.
The diversity and multiculturalism of P&G needs leadership that will accept
responsibility and move change throughout the organization by stressing on the
importance of the change to individuals and groups; as well as the organization as a
whole.
When individuals and groups understand both the positive and negative impact of
change on their lives, and are involved on each step of the process, they will be more
willing to accept it and work diligently to ensure its success even when bad decisions are
bad by management in the innovation and change process. Individuals and groups may
work in the short run to turn the bad decision into a positive one provided they are
involved in each process and also understand the ramifications. Montegomery, 1996 (as
cited in Dooley & O’Sullivan 2001) “Change is a slow process where direct relationships
between specific actions and performance improvement can be difficult to establish.
Sometimes even the implementation of a bad solution can have positive effects for the
organization in the short term-term” (p.179).
The role of ethics and responsibilities in leading innovation and change in P&G
cannot be overemphasized. This is due to the fact that unethical decision making in the
innovation and change process may have a detrimental effect on innovation because, the
innovation output may be rejected by consumers and the general public. Consumers may
feel and sense unethical behaviors in the output of innovation and change and this may
lead to failure and waste of scarce resources. Therefore, management must take the
responsibility to ensure that innovation and change processes are guided by ethical and
moral principles.
In practicing and implementing innovative change processes organization wide,
certain fundamental principles must be adhered in order to ensure successful
implementation. First, innovation begins when groups and individuals convert problems
into ideas. “New ideas are born through questions, problems and obstacles. The process
of innovation is indebted to the trouble that comes about when we are surrounded by that
which is not solved, not smooth and not simple.” (Dominic, 2007). Second, innovation
needs a system. All organizations have innovation systems. Some are formal, designed by
the leadership, and some are informal, taking place outside established channels. A good
example of formal innovation system is AskMe Enterprise used by P&G for the
collaboration of subject matter experts within the organization. Third, passion is the fuel,
and pain is the hidden ingredient. Ideas do not propel themselves; passion makes them
go. This is why it is important for groups and teams to constantly work together and get
to know each other well. With this principle in mind, teams will bury their individual
differences when conflict arises and focus on the innovation issue at hand.
The final innovative principle is closely tied to the third principle. This is where
differences must be leveraged at all times. The differences that normally divide people
such as language, culture, race, gender and thinking and problem solving styles can be an
obstacle to innovation. This is why P&G has a sensitivity training system to train all its
leadership team and subject matter experts about cultural, language, and religious
differences with the organization and how each of this can derail the implementation of
innovation and change.
 The systems and innovative processes and theories are applied to individuals and
organizations as well as leadership in different ways. Organizations establish these
systems for individuals to utilize in brainstorming innovative ideas and solutions. When
the right decisions are made and implemented as a result of the brainstorming session, it
benefits the individuals, the leadership, and the organization because it may lead to
profits for the organization, promotions for the individuals and a sustained competition in
the industry. So, the application of a successful innovative change process may lead to a
win-win situation for all parties involved. Organizations must embrace change and
creativity in order to stay competitive in this ever changing global market arena. You
innovate, or be forced out of business. Management must encourage and motivate
employees to think creatively. To achieve this, the broader vision of the organization
must be tied to innovation and creativity systems within the organization; and a reward
system instituted to reward employees who think creatively. Appropriate measures must
also be instituted to deal with conflicts when or if they arise. Conflicts may be turned into
opportunities if properly managed. Speaking of innovation and change, I heard on a
nationally syndicated radio that an unidentified company is innovating to design a bullet
proof back pack for students at all levels in our educational system. This, the company
believes will help save lives in school shootings which is the order of the day in our
school system today. Innovation, innovation.
Manufacturing management case
study

CASE STUDIES

Manufacturing Case Study

Project Description

The manufacturing company is the global leader in the manufacture, marketing and
distribution of spices, seasonings and flavors to the entire food industry. Customers range
from retail outlets and food service providers to food processing businesses. The
manufacturing spice company has approximately 8,000 employees. The manufacturing
spice company’s Information Technology department needs help institutionalizing
project management. The manufacturing spice company decided to implement project
management procedures and a training program that would enable their staff to
institutionalize project management.

Company Challenge:

Challenge Number 1:

There was no standard methodology written down to help employees understand how to
manage projects and consistently report on their progress. Project Masters was hired to
help develop standard project management procedures to fill this need with a project
manager mentor.

Challenge Number 2:
Most of the work in the spice company’s IT department is project based but, these
projects include managing new initiatives. The current Project Managers each had their
own way of managing projects that was inconsistent. Project Masters was hired to
develop a Project Management training program, to be delivered by Project Masters'
instructors. Initially, the training was intended to reflect the “The Spice Company’s Way”
and use the PMBOK as a guide line in managing projects.

Challenges:

Project Masters addressed the following challenges:

• No formal methodology in managing IT projects

• No formal reporting methodology in reporting on the IT projects
• Differing inputs, opinions, needs from the various levels of the
organization as well as from the various locations
• No formal training program in project management

Solution(s) Provided:

Over a period of more than 8 years, Project Masters' consultants met with key spice
company’s IT personnel from all levels to develop the Project Management procedures as
well as the Project Management training program and help mentor one of their key
managers in project management.

Over the contract Project Masters tailored our courses to the spice company’s IT
Personnel, flavor scientists, marketing personnel and provided general project
management training. The courses we tailored and taught at The Spice Company’s were:

• Project Management Overview

• Planning the Project
• Monitoring and Controlling the Project
• Project Closeout
• Project Management Basics
 • Managing the Project’s Scope
• Managing the Project’s Time
• Team Management for a Project
• Managing the Project’s Risk
• Managing the Project’s Budget
• Managing the Project’s Quality
• MS Project

In order to help the spice company’s employee's advance in their knowledge in MS

Project we held two-hour lunch-n-learns. They could bring their challenging questions to
our MS Project expert for him to answer. This was very successful and helped their
project managers create more accurate project schedules.

Project Masters provided the manufacturing spice company with a Project Management
Mentor / Coach who would work with a key person to assist them in reaching their goals
and objectives concerning project management. The primary goal of the Mentor / Coach
is to assist the manufacturing spice company in acquiring the additional knowledge and
skills necessary for them to manage projects in a manner that meets the standards to be
developed.

Following, is a list of the key activities that the Mentor / Coach helped the key person at
the manufacturing spice company achieve:

1. Help conduct a thorough " Review of Ongoing Projects "

o Ascertain the current Status of all ongoing projects with
respect to Scope, Schedule, and Budget.
o Ascertain the current level and methods used for project
reporting.
o Ascertain the status of all project deliverables and
milestones.
2. Assist in the development of an efficient, formalized Project
Reporting System
 o Help implement a system that allows for efficient and
effective reporting on project timeframes.
o Help implement an "Issues Management" System.
o Help implement a system that facilitates escalation of
project issues and concerns
3. Provide Ongoing Training and Reinforcement with respect to
agreed-upon performance objectives.
4. Assist the manufacturing spice company with the development and
institutionalization of a standardized, tailored, Project Management
Process
5. Help develop a procedures manual for small, medium and large
projects.

Benefit:

Project Masters provided consulting services and training programs that enabled the spice
company to:

• Begin to modify behavior in the Project Management arena to

better meet the needs of its customers.
• Understand the Project Management model that is currently used
by the Project Management Institute.
• Have a standard way to do project management that was consistent
through all of IT and in several other departments.
• Have a clear requirement of how to handle small, medium and
large projects.
• Save large amounts of many on project by doing the pre-job
planning and evaluating risk before accepting a project.