Answering Your Questions about P&G and Innovation
June’s Harvard Business Review features a story by Procter & Gamble Chief Technology Officer Bruce Brown and me on “How P&G Tripled Its Innovation Success Rate.” The article’s core message is that P&G achieved that result by approaching the creation of new growth businesses in a highly systematic way, building what Brown and I call the “new-growth factory.”
I hope that people find the article, which describes our journey and the lessons we learned, to be useful. I thought I would use today’s post to answer three of the most common questions that people have asked me about the article’s ideas.
Q: Our organization is smaller than P&G. What should we take from away the article?
A: P&G is one of the world’s largest organizations — its approximately $80 billion in revenues place it 26th on the recent Fortune 500 list of the United States’ largest companies.
But there are still two lessons smaller organizations should take from the article. First, some of the ways that P&G reduces risk on individual projects are generally good innovation practices for everyone. Note in particular the use of what P&G calls “transaction learning experiments.” P&G recognizes that new-to-the-world ideas are difficult to accurately forecast, so it seeks to “make a little and sell a little.” That approach allowed P&G to successfully launch Align, a product that was almost killed due to an initially low forecast.
Second, look at how P&G recognizes that any individual effort could fail and so creates a portfolio of innovation efforts. It even goes so far as to ask business leaders to think about what could make their business obsolete. The pace of change in today’s markets is relentless. If more than 90 percent of your company’s growth relies on doing more of what you are already doing, you should at least ask about the degree to which you are leaving yourself exposed.
Q: P&G seemed to start with a strong culture of innovation. What if I don’t have that foundation?
A: While many outsiders think of P&G primarily as a marketing machine, the company’s $2 billion annual investment in research and development demonstrates its serious commitment to innovation. It has been creating new products and brands for decades.
It’s hard to go from novice to expert overnight in any endeavor. Unfortunately, many companies starting their innovation journey make just this mistake by overreaching in their initial efforts. I always get worried when I see an “innovation newbie” with a large team, big budget, and pie-in-the-sky goals.
Observe how, even with its strong culture of innovation, P&G proceeded very cautiously with the construction of its new-growth factory. As the article notes, the first step was a simple two-day workshop with a handful of project teams.
Companies that are just getting their “innovation legs” can follow a parallel approach by gathering people already working on new-growth projects to engage in structured discussions. Another good starting point is to have one or two people do a simple scan to begin to identify threats and opportunities that seem to be at the industry’s periphery. A third idea is to work on basic language. Most companies lack a common definition of a word as straightforward as “innovation.” Developing a common definition, and determining the types of innovation that matter to the company, can bring great clarity to the work that follows.
Q: P&G is a product-based company. What if my business is service based?
Scott D. Anthony is managing director of Innosight Asia-Pacific.