Monday, March 14, 2011

Innovation at P&G: Advantage through Process Focus

P&G’s ex-CEO, Lafley, believes that “The heart of a company’s business model should be game-changing innovation”. With that belief, Lafley started to build a sustainable culture of innovation at P&G and establish innovation as a process that was superior to its competition. A process that is scalable, repeatable, sustainable, and hence superior to its competitors. The result: P&G’s continuous success as a profitable and growing business. This is the gist of an article on “P&G’s Innovation Culture” by strategy+business magazine.

Rather than treating innovation as the job for those working in the company's R&D, Lafley treated innovation as a process that can be repeated and scaled. By focusing on the process, P&G increased its success-rate in introducing new brands and products from 15-20% in 2000 to the current rate of success that is almost a three-fold increase to 50-60%! Lafley discusses how P&G had never treated innovation as a “scalable” in the past because they “had not integrated these innovation programs with our business strategy, planning, or budgeting process well enough”. And how he went about creating a culture where everyone became involved in innovation, quoting again, “even when you’re operating, you’re always innovating — you’re making the cycles shorter, or developing new commercial ideas, or working on new business models. And all innovation is connected to the business strategy”.
That is the core concept behind creating advantages through capabilities, designing processes that are superior, because they provide one of the four basic tenets of advantage: time, cost, efficiency, or quality. In case of P&G, the process of innovation provides them more throughput (ability to introduce more number of new products and brands than its competition) and better time-to-market by shrinking the time it takes to introduce new products to the market.
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© Vivek Sehgal, 2011, All Rights Reserved.

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