How Procter and Gamble Survived Through Innovation – A Case StudyInnovation 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.