Collaboration and Innovation at Procter & Gamble Case Study
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Collaboration and Innovation at Procter & Gamble CASE STUDY
Look in your medicine cabinet. No matter where you live in the world, odds are that youll find many Procter & Gamble products that you use every day. P&G is the largest manufacturer of consumer products in the world, and one of the top 10 largest companies in the world by market capitalization. The company is known for its successful brands, as well as its ability to develop new brands and maintain its brands popularity with unique business innovations. Popular P&G brands include Pampers, Tide, Bounty, Folgers, Pringles, Charmin, Swiffer, Crest, and many more. The company has approximately 140,000 employees in more than 80 countries, and its leading competitor is Britain-based Unilever. Founded in 1837 and headquartered in Cincinnati, Ohio, P&G has been a mainstay in the American business landscape for well over 150 years. In 2009, it had $79 billion in revenue and earned a $13.2 billion profit.
P&Gs business operations are divided into three main units: Beauty Care, Household Care, and Health and Well-Being, each of which are further subdivided into more specific units. In each of these divisions, P&G has three main focuses as a business. It needs to maintain the popularity of its existing brands, via advertising and marketing; it must extend its brands to related products by developing new products under those brands; and it must innovate and create new brands entirely from scratch. Because so much of P&Gs business is built around brand
creation and management, its critical that the company facilitate collaboration between researchers, marketers, and managers. And because P&G is such a big company, and makes such a wide array of products, achieving these goals is a daunting task.
P&G spends 3.4 percent of revenue on innovation, which is more than twice the industry average of 1.6 percent. Its research and development teams consist of 8,000 scientists spread across 30 sites globally. Though the company has an 80 percent “hit” rate on ideas that lead to products, making truly innovative and groundbreaking new products is very difficult in an extremely competitive field like consumer products. Whats more, the creativity of bigger companies like P&G has been on the decline, with the top consumer goods companies accounting for only 5 percent of patents filed on home care products in the early 2000s.
Finding better ways to innovate and develop new ideas is critical in a marketplace like consumer goods, and for any company as large as P&G, finding methods of collaboration that are effective across the enterprise can be difficult. Thats why P&G has been active in implementing information systems that foster effective collaboration and innovation. The social networking and collaborative tools popularized by Web 2.0 have been especially attractive to P&G management, starting at the top with former CEO A.G. Lafley. Lafley was succeeded by Robert McDonald in 2010, but has been a major force in revitalizing the company.
When Lafley became P&Gs CEO in 2000, he immediately asserted that by the end of the decade, the company would generate half of its new product ideas using sources from outside the company, both as a way to develop groundbreaking innovations more quickly and to reduce research and development costs. At the time, Lafleys proclamation was considered to be visionary, but in the past 10 years, P&G has made good on his promise.
The first order of business for P&G was to develop alternatives to business practices that were not sufficiently collaborative. The biggest culprit, says Joe Schueller, Innovation Manager for P&Gs Global Business Services division, was perhaps an unlikely one: e-mail. Though its ostensibly a tool for communication, e-mail is not a sufficiently collaborative way to share information; senders control the flow of information, but may fail to send mail to colleagues who most need to see it, and colleagues that dont need to see certain e-mails will receive mailings long after theyve lost interest. Blogs and other collaborative tools, on the other hand, are open to anyone interested in their content, and attract comments from interested users.
However, getting P&G employees to actually use these newer products in place of e-mail has been a struggle for Schueller. Employees have resisted the changes, insisting that newer collaborative tools represent more work on top of e-mail, as opposed to a better alternative. People are accustomed to e-mail, and theres significant organizational inertia against switching to a new way of doing things. Some P&G processes for sharing knowledge were notoriously inefficient. For instance, some researchers used to write up their experiments using Microsoft Office applications, then print them out and glue them page by page into notebooks. P&G was determined to implement more efficient and collaborative methods of communication to supplant some of these outdated processes.
To that end, P&G launched a total overhaul of its collaboration systems, led by a suite of Microsoft products. The sendees provided include unified communications (which integrates sendees for voice transmission, data transmission, instant messaging, e-mail, and electronic conferencing), Microsoft Live Communications Server functionality, Web conferencing with Live Meeting, and content management with SharePoint. According to P&G, over 80,000 employees use instant messaging, and 20,000 use Microsoft Outlook, which provides tools for e-mail, calendaring, task management, contact management, note taking, and Web browsing. Outlook works with Microsoft Office SharePoint Server