The Game-Changer

How You Can Drive Revenue and Profit Growth With Innovation by AG Lafley & Ram Charan

Chapter One:

How and Why Innovation At P&G Changed Its Game

What We Had To Do

Put the consumer at center of everything we do Opened up Made sustainable organic growth the priority Organized around innovation to drive sustained organic growth Began thinking of innovation in new ways

What We Had To Do

Put the consumer at center of everything we do
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―consumer is boss‖ standard Spend more time with consumers
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In stores In their homes Consumer testing centers When they buy When they use

Delight our consumers at two moments of truth
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Opened up

Seek out innovation from all sources, inside and outside the company Innovation is all about connections; everyone involved
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Connect & develop More Connections, more ideas, more solutions

Goal set that half of new product and technology innovations come from outside P&G

development and promotion of outstanding business and innovation leaders Allocation of resources …to outstanding innovation .What We Had To Do  Made sustainable organic growth the priority     Innovation enables expansion into new categories Allows us to reframe mature business & transform them into platforms for profitable growth Creates bridges into adjacent segments Emphasis on organic growth   Less risky than acquired growth More highly valued by investors  Organized around innovation to drive sustained organic growth       Innovation as a strategy Regular business strategy that focuses on innovation Regular innovation reviews for every global business unit Careful selection and use of the right metrics Evaluating.

supply chains etc. services but to include business models. Not just disruptive. but also incremental Learned how to pinpoint the risks Developed tools and the know-how to manage them  Innovation is risky   .What We Had To Do  Began thinking of innovation in new ways   Run innovation like we run a factory Broadened way we thought about innovation   Not just products.

Brand are guarantees of consistent quality.‖  Growing the core  Laser-sharp focus on current consumers. too fast and nothing was being done well.‖ Key to winning medium and long term Strategy of differentiation Brands are promises of something different and better in terms of performance. find pricing “sweet spot” ―…better value for consumers.How We Did It…First Things First 1. Improve our execution ―we were trying to do too much. gave retailers a fair profit. and value. and margin performance. quality and value. performance. 3. and would drive P&G to improved market share. Pricing  Too high. Innovation     . and distributors 2. net sales. wholesalers. current retailers.

Critical Questions on Innovation     How could we put innovation at the center of everything we do? How could we turn innovation into a more consistent. more decisive. and more sustainable competitive advantage? How could we manage the risks associated with our allin and full-on commitment to innovation? Could we identify and take advantage of the opportunities innovation might offer us? .

Drivers for Customer-Centric Game Changing Innovation Inspiring Leadership Courageous & Connected Culture Motivating Purpose & Values Consistent & Reliable Systems Customer-Centric INNOVATION Game-Changing Stretching Goals Enabling Structures Unique Core Strengths Choiceful Strategies .

driven by leaders who see it as game changer . Values unite  Stretching Goals   A few critical goals creates clarity in focusing on strategies that win and align everyone’s energy Stretching but achievable.Drivers for Customer-Centric Game Changing Innovation  Motivating Purpose & Values   Companies centered on innovation are inspiring places to work and the people who work there are turned on by a higher purpose Purpose inspires. yet cannot be reached w/o sustained innovation.

Drivers for Customer-Centric Game Changing Innovation  Choiceful Strategies    Choices that result in wining with consumers and customers and against competition Focus on four core businesses. enhancing and deploying our unique core strengths Effectively leverage global learning Immersive research living. ten leading brands Enabled where not to play (exited most food & beverage)  Unique Core Strengths    Focus on how to win by building on. shopping and being part of consumers’ lives .

and measures .Drivers for Customer-Centric Game Changing Innovation  Enabling Structures    Unique core strengths require design of organizational structure that supports innovation at the center Era of open corporation (end of internally focused. vertical integrated organization) Need to be comfortable designing structures and processes that bring in and commercialize outside ideas  Consistent & Reliable Systems    Innovation is creative but not chaotic Systematic way of moving from concept to commercialization Has well-defined success criteria. milestones.

immersing in finding insights about consumer needs In time they develop confidence. and inspire them to new heights Leaders are instigators Passionate about knowing about consumers. how to deal with risk and inherent risk in innovation .Drivers for Customer-Centric Game Changing Innovation  Courageous & Connected Culture    Culture is what people do day in and day out without being told No fear of innovation = know-how to manage risk Employees are more connected to:    Consumers whose lives committed to improving Customers and suppliers who are important innovation partners Each other based on open-learning culture ―that applies and reapplies with pride‖  Inspiring Leadership     Link all the drivers together. energize people.

Drivers for Customer-Centric Game Changing Innovation Inspiring Leadership Courageous & Connected Culture Motivating Purpose & Values Consistent & Reliable Systems Customer-Centric INNOVATION Game-Changing Stretching Goals Enabling Structures Unique Core Strengths Choiceful Strategies .

Chapter Two: What P&G’s Innovation Transformation Means For Yo .

What P&G’s Innovation Transformation Means For You  P&G’s managerial breakthrough was to conceive of and implement innovation as an integrated process based on the idea of customer is boss Continual innovation process can change the landscape of the business P&G change form technology-push innovation model to a customer-pull one Other companies:       General Electric (under Immelt) Nokia HP (personal computer unit under Bradley) .

Innovation is the conversion of a new idea into revenues and profits.‖ --Jeff Immelt  Innovation is not complete until it shows up in the financial results  Real innovation can change the context (market space. ―Innovation without a customer is nonsense.What is real Innovation?  Differences between invention & innovation:   Invention is new idea that is often turned into a tangible outcome. customer space. competitive space. societal space)  Innovation enables you to be on the offensive  Commoditization drive down prices. differentiation from innovation carries an economic premium . it’s not even innovation.

helping leaders conceive previously unimagined strategic options Enables you to potential acquisitions through a different lens Provides an edge in being able to enter new markets faster & deeper Puts companies on the offensive .Why Innovation Matters     Key to shaping corporate life.

Innovation Leader Skill Set        Effective at evoking the skills of others to build an innovation culture Collaboration is essential Failure is a regular visitor Comfortable with uncertainty and have an open mind Receptive to ideas from very different disciplines Have organized innovation into disciplined process that is replicable Have tools and skills to pinpoint and manage the risks inherent in innovation .

Its sale is proof of utility and utility is success.Myths of Innovation  It’s all about new products  Functions. GE. logistics business models and processes can also benefit greatly through innovation   Toyota’s Global Production Systems Wal-Mart’s Inventory Management  Innovation is for geniuses Waiting for the ―eureka‖ moment will be fatal  True innovation matters for the present. not for centuries hence ―Anything that won’t sell. I don’t want to invent.‖ --Thomas Edison   Size matters  Innovation can happen in companies as large as P&G. DuPont or as small as Ram Charan’s fathers’ shoe store in India .

and learning Anyone can innovate. but practically no one can innovate alone  . profound thing – connect to share problems. opportunities.Innovation is a social process  When people do that simple.

To prosper. companies need to do four things:  Develop leaders of the future Improve productivity Execute strategy Create innovation    .

you need.  A strategy Ideas A process that moves these ideas to market    An organizational structure that supports innovation (and protects and rewards innovators) up and down the line. .To create an innovation culture.

Chapter Nine: Innovation Is A Team Sport .

description of product and category. etc) . introductions. demographics Outsiders Full-time staff for immersion (brand strategy.Total Immersion         Co-location Released from usual duties Discouraged from emailing colleagues Constantly accessible to each other Deeply concentrated Multiple disciplines.

Breakthroughs  Knowing the consumer Teamwork  .

Building an Innovation Team     Idea Generator – Push beyond plausible to create provocative ideas Project Manager – Ensure all pieces come together Executor – make things happen Team Leader – pragmatic dreamer The Key is intellectual diversity! .

Building an Innovation Team         Risk Diversity No ―like‖ thinkers Deadlines – can spur creativity and it is a business after all… 5-12 people on the team Communication Say No to bad ideas Team connectedness Interdisciplinary – ―T‖ Shape .

Changing Culture requires Changing Behavior    Clearly defined business and personal development expectations Change the consequences that follow success and failures – reward entrepreneurial behavior Start small and focus on four important elements: Courageous. Collaborative. Curious. Connected. . and Open.

Innovation Culture Elements and Interventions     Courageous Connective & collaborative Curious Open .

meaningful broadly applied measures Establish there’s no bad idea Test prototype. and iterate Consequence Interventions     Limited human and financial resources are sufficient to support in well-managed portfolio Capture learning from failed innovations and share with other teams Broadly reward and recognize teams who fail Assign talent from a failed innovation to a new high-profile innovation project .Innovation Culture Elements and Interventions: Courageous What it looks like    No fear Learn from failure Knows how to manage risk based on measures Expectation Interventions     Use innovation portfolio to manage risks Qualify few.

Innovation Culture Elements and Interventions: Connected and Collaborative What it looks like    Works effectively and productively with others—inside and outside the company Works seamlessly across business. functions et al Uses personal and professional networks to seek out information ideas Expectation Interventions    Creates in-house communities to foster knowledge exchange Select team leaders who facilitate connections and expect collaboration Establish ways to employees to leverage their external networks Consequence Interventions    Include in performance evaluations Be prepared to change the leader and/or team members Continuity of team members builds trust .

shopper and customer immersion External connections and diverse experiences Consequence Interventions   Challenges the team’s thinking Keep asking ―Why? and Why not?‖ again . naïve Looks for obvious patterns Explores and likes to discover Looks for analogies and metaphors Asks ―Why? and Why not?‖ ―What’s Possible?‖ ―How does that work?‖ Uses ―Columbo‖ approach to solve. focuses on solutions Expectation Interventions     set an expectation of ongoing learning Brainstorming Consumer.Innovation Culture Elements and Interventions: Curious What it looks like       Remains childlike.

encourage ―apply and reapply with pride‖ Consequence Interventions    Reward and recognize those who seek out/commercialize innovation opportunities from outside Reward and recognize those who reapply others’ success to their business Include open-mindedness in performance evaluations .Innovation Culture Elements and Interventions: Open What it looks like     Open-minded to new ideas Open to learn to assumption that others’ ideas will make the product or service better Open to empathy to consumer/customer Open to suspend judgment Expectation Interventions    Institute an open architecture Establish and communicate clear goals Eliminate ―not invented here‖.

forward thinking – taking calculated risks Simple: Ongoing streamlining and simplification of structures and processes . and over analysis . and commercialization External: Externally focused to stay in touch with clusters.Emphasize Out of the Box IDEAS      Inclusive: Reaping benefits of diverse thinking and ideas needed to foster innovation Decisive: Eliminating organizational swirl. consumers. debate. development.faster innovation. qualification. suppliers – honest and objective Agile: Quickly reacting to changing conditions.

.Rules of brainstorming           Get a facilitator Be prepared Relax Ladders should follow Get everyone to contribute Keep track of ideas Think ahead Use props Outside the lines Follow the rules.

Questions for Leaders          What are you doing to encourage and eliminate fear of failure? How are you fostering a culture of curiosity and openness? How are you eliminating unnecessary bureaucracy? How are the team leaders and members chosen? What are you doing to encourage open communications within the innovation team? How well do you manager the development of an individual’s innovation skills? How do you enable individuals to reenter more traditional assignments in the most productive way? Do you use special approaches to enable teams to immerse themselves in customers? Do you use co-location to help business units build innovation? .

Chapter Ten: New Job of the Leader .

Developing Leaders of Innovation      Performance Evaluations Early Identification Job experiences Reward and recognition Clear sense of purpose / inspiring them .

Leaders need to be good at…     Drawing people out Synthesize ideas Facilitating debates getting the group to be decisive and action-oriented .

How innovation Leaders Dream  See the world as it can be not as it is View the external landscape in a new way Imagine possibilities that elude others   .

Responsibilities of an Innovation Leader Model the 4 C’s and O Integrate member tasks Balance IQ and EQ Provide Unique Value-added Roles Hone Critical Skills Inspire Deal with the killer issues Set the Vision Integrative Thinking Courage Role Model Behavior of innovation Culture .

People.Building the Pipeline  Performance Evaluation  Power of Minds. Agility      Start them from day one Personal Coaching Support systems and training Intentional assignments Reward and recognition .

Conclusion: How Jeff Immelt Made Innovation A Way Of Life At GE .

GE Case Study How Jeff Immelt Made Innovation A Way Of Life At GE             Put innovation and productivity on Your personal leadership agenda Give innovation a seat at the table Find and follow up on the best ideas Shift the focus to customers and the longer term Rethink Leadership Build capabilities you are lacking Architect the social process of innovation Create the resources you need to fund growth Open up to learn from others Reorganize or restructure to get close to customers Reinforce the culture you want Let Innovation spread .