Procter & Gamble innovation culture

In the last couple of weeks, I’ve been thinking a lot about how to best define innovation : I googled a lot but also took time to discuss with friends, family members or colleagues.
And it was quite interesting to note how diverse are the definitions for breakthrough innovations but  in general, some companies are immediately identified as truly innovative : Apple, General Electrics, 3M, Nike, Disney, MacDonalds ,etc   . 
But there's one company constantly coming back as a reference and it's Procter& Gamble . 
Of course everybody knows P&G most famous brands : Dash, Tide, Gillette, Mr Clean, Pampers, Oral B or Crest but what interessed me the most it's their impressive innovation success rate : between 50% and 60% of their new products launches are successful , which is for a 70 billion company a quite impressive result . The second aspect that I found interesting is that , like Panasonic, P&G has to deal with many different categories targeting many different consumers across many different geographies .

I.From research and Development to Connect and Develop

For P&G , before 2000 and AG Lafley becoming company CEO, Research and Development has always been an internal matter : For generations, in fact, P&G created most of its phenomenal growth by innovating from within—building global research facilities and hiring and holding on to the best talent in the world. That worked well for a $25 billion company but more difficult to achieve with a $70 billion company. At that time, the financial results were also dramatic, R&D investment were under pressure  and the new appointed CEO decided to externalize P&G sources of innovation but also better integrate the innovation process within the organization.

II.Consumer is boss

Consumer is Boss: Almost everybody would link that famous AG Lafley statement with P&G innovation culture but the question is: Is that always been the case or did P&G at a certain point of time re- adapt it’s model to continue growing and achieve their financial targets.

The reality is that for a long time, though, P&G did not really see consumers as active participants in innovation.

III.Innovation through acquisition : Gillette integration

In 2006, P&G acquired the Gillette company and became the largest consumer company in the world surpassing Unilever. Article about Gillette acquisition

For P&G , this is definitely in line with AG Lafley objective to innovate through external connections and/or acquisitions.
With Gillette integration , P&G definitely completed it’s brands product portfolio . Although P&G primary target group was women , the acquisition of Gillette opened a new world of opportunities with one of the most important male brands portfolio in the world .

What I like in that ? :
This acquisition is I think a good example about how a company could extend it’s consumer reach by acquiring new brands touching different consumers or also by developing new subrands to touch different consumers .

IV.From Consumer to Shopper focus: Store Back concept

As a 4th dimension , I decided to describe the most recent evolution in the way P&G is looking at Consumer communication .
We all know that with the evolution of technology, mass media is becoming less and less important and that there’s a clear need to find new ways to better approach the consumers and that's why see the continuous
development of digital marketing , social medias, etc  
But the P&G very simple statement is that at the end 100% of the final shopping decisions are taken in store and that so far, this in store communication has been neglected as much more attention was given to TV commercials and other mass media investments . As an answer to this increasing importance of in store communication, P&G developed the “store back” concept .

See AG Lafley former CEO interesting interview about Innovations

How P&G is categorizing it's innovations

P&G categorizes it's innovations in different groups : Commercial innovations (leveraging existing benefits but with new levels of trial : Olympics or Old Spice campaign) , Sustainable innovations(involving important product improvements enhancing product benefits: example: Tide Acti Lift, Chamin Extra soft ) , transformational sustaining innovations (These innovations are big breakthroughs on existing brands that reset competitive advantage in a category, resulting in significant share increases, sustainable competitive advantage, and typically category growth : examples: Pampers Dry Max ) and disruptive market innovations(creating a new market   or a new segment hence really driving incremental sales: example: Swiffer,Crest white strips, Febreze )

Interesting article about becoming great innovation leaders

-Source : Strategy and Business Autumn 2008