Proctor & Gamble A.G.

Lafley
Previous ran Asia and beauty care operations
Roots in business slow-growing
Summer of 2000 things were grim volumes flattened and profit margins shrank on big
brands including Tide, Pampers and Crest. Stock fell 43%
Lafley focused on core brands
Commenced restructuring that involved 1.7 billion cost cuts
As a result Core volume is up an average 7% annually
Operating income is up an average 17%
Stock price nearly doubled
Brought rigour and creativity to innovation process difficult in notoriously rule-bound
culture
Raised its new product hit rate from 70% to 90%
He had made a few target acquisitions Clairol and Wella
Organic growth (growth from core business) is at the root of transformation
Organic growth valuable as it comes from core competencies. If you use it it gets
stronger (it is your muscle)
Pampers and crest lost no 1 position in US to Kimberly-Clark and Colgate as they
innovated more aggressively
Lafley says:
Consumer is boss
Reframing the brands (defining P&G brands more broadly)
Connect and develop (reaching outside for ideas)
360o innovation (differentiating products not just by formulation but also by design.
Lafleys model for innovating in a big stodgy company
(1) Crank up one-on-one consumer research
(2) Expand what each brand does
we want the driest diapers to helping moms with babys development
such rethinking and the spate of products that went with it have helped pampers
gain share against Kimberly Clarks Huggies for the first time in nearly a decade
Crest is another example
(3) Get employees from different divisions to exchange ideas
Post problems on internal web, communities of practice, business units borrow or
acquire talent from others to make products happen
(4) Reach outside for ideas
Working with other companies, form alliances with competitors (e.g. Clorox)

(5) Stop testing so much

There should be testing but the business is trend based and fashion based. You
need to be intuitive, instinctual and gut driven. Product launch time reduced from
3 years to 18 months.
(6) Give designers more power
P&G needs to market not just the product itself but the consumers experience of
the product how it looks, smells and feels.
(7) Cater to developing markets
Cost structure bloated couldnt sell at affordable prices. Have come up with
smarter, cheaper ways of making products through contract manufacturers.
Maintains quality and standards but at a lower price.
(8) Know what not to do
No fat bonuses for innovation or hire stars from outside.
He believes in promoting from within the company. Only recruits from outside at
mid-level and for specialised skills
Doesnt revamp pay schemes managers who fail to share ideas simply do not
get promoted.
Contends that family like culture is competitive advantage
Will not be easy to keep going tougher to do better
Just starting to turn Clairol around
Must fight its own history
Cycle of inconsistency terrific runs yielding to bad ones
This stokes his determination to keep his innovation machine running strong