Case Study Procter & Gamble
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Case Study
Procter &
Gamble
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Case Study
Procter & Gamble
A Legacy of Innovation Innovation became a driving force at Procter & Gamble
in 2000, when then-CEO A.G. Lafley introduced the
Founded in 1837, Procter & Gamble had one goal: “to
Connect + Develop program. Suddenly, the company
make everyday life a little better.”1 So how did a family-
was open to ideas and partnerships from anywhere—
owned soap and candle company evolve into one of the
even competitors. The shift revolutionized the
world’s biggest consumer goods companies? By solving
company’s strategy and its bottom line. Today, more
customer pain points, constantly reinventing its business
than 35 percent of its new products have elements that
model, and pursuing breakthrough technologies.
originated from outside P&G, up from about 15 percent
in 2000.2
The company has also applied simplification to its
innovation strategy to focus on its most successful
categories. In 2014, it started trimming away more than
100 of its less lucrative brands so it could dedicate its
energy to its top performers.3
With annual sales of $65 billion, P&G has a portfolio
of billion-dollar brands.4 It employs about 105,000
people, and has a market cap that’s larger than the
GDP of many countries.5;6 Read on for insights, future
challenges, and how you can apply P&G’s innovative
practices to your own organization.
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Case Study
Procter & Gamble
The Four Innovation Capabilities
futurethink’s Innovation Case Studies are designed to provide insights on today’s leading innovators. Information about
each of the companies we feature covers the four key innovation capabilities: Strategy, Ideas, Process, and Climate.
Set a foundation that defines innovation objectives and mobilizes your efforts.
The notion of “serendipitous innovation” is dangerously outdated. The secret to success lies
in crafting an action-oriented strategy. It means setting a vision for your company to follow and
viewing innovation as an expected result, not a lucky one. Innovation should be handled like any
business initiative: with an eye on growth, results, and profit.
Think differently to develop original ideas that drive business value.
In today’s economy, the ability to continually fuel innovation is what separates winning
organizations from the rest. Idea generation should be managed, purposeful, and clearly linked to
business objectives. Leading innovators succeed by balancing out-of-the-box thinking with sound
management principles.
Create a streamlined and flexible approach to shepherd innovative ideas to market.
The reality in every organization is that money is limited. To make sure you’re spending effectively,
you must have a streamlined process for innovation. A good process will help to consistently
identify your best projects and enable you to move them forward more efficiently.
Build a thriving work environment that drives innovation across your organization.
We live in a world where the new replaces the old very quickly. Only organizations that keep pace
with the shifting marketplace will be able to stay ahead. So how do the best companies adapt?
They cultivate a climate in which employees are encouraged to innovate in a continuous and
consistent manner. The companies that stay ahead have made innovation part of their DNA.
Futurethink analysts develop case studies by drawing from a mix of extensive research, organizational and customer
interviews, and firsthand interactions with the organization. Many thanks to the individuals who contributed to this
case study and deepened our understanding of P&G’s innovation process.
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Case Study
Procter & Gamble
Ideas Welcome Here. Anyone with an Internet
connection can submit an idea to P&G. The company
is looking for “the next game-changing product,
technology, business model, or method that can improve
the lives of the world’s consumers” that meets one or
more of the following criteria:
• My innovation addresses a big, unmet consumer
need;
• My innovation offers a superior solution to those
currently in use;
• My innovation offers significantly better value to
External Innovation P&G’s consumers;
Just as the Internet was enabling the world to be • My innovation has protectable intellectual property such
more connected, innovation models began to change. as a patent;
Around 2000, the concept of open innovation started • I have a game-changing technology or approach.10
to spread to corporate R&D practices. P&G was one of
the first companies to explore using external sources for
innovation.7
While P&G is known for introducing the world’s first
fluoride toothpaste and the first synthetic detergent, by
2001, its traditional methods weren’t working anymore.7
P&G’s former CEO Lafley is credited with championing
the open-innovation program that transformed the
company’s pipeline. A 30-year veteran of P&G, Lafley
had vast knowledge of the company’s divisions,
products, and people. He realized that P&G employed
about 7,500 people in R&D—a small number compared
to the 1.5 million scientists around the world who held
expertise relevant to P&G.8 The site receives about 20 submissions every weekday,
Connect + Develop. P&G’s open-innovation program or more than 4,000 each year.11 Once submitted,
brings the outside in, and the inside out.9 To open both the ideas are evaluated within about eight weeks,
minds and doors, P&G set a goal that 50 percent of its typically on the basis of a technical review.12 To protect
innovation would contain a significant component of submitters and P&G from legal disputes, ideas without
external collaboration.9 The company is still chasing that proper patents or protections are typically declined.12
goal, but partners continue to pour into the pipeline: The likelihood of an idea being accepted is boosted if
from universities and government entities to NGOs, it provides a solution to one of P&G’s Current Needs.
individuals, start-ups, and even competitors. The site lists solutions sought by P&G across categories,
P&G runs the external program through including beauty, household, and even innovations in
PGConnectDevelop.com, which serves as a portal for the manufacturing, retail, and business operations.13 Each
people inside the company to exchange ideas with all listing includes a brief that details the specific need
those outside its walls. On the portal, potential partners including constraints and benefits.
can submit ideas, review P&G’s specific needs, and
browse assets that P&G is offering to license.
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Case Study
Procter & Gamble
Partnering with Competitors. P&G researchers Internal Innovation
working on next-gen diapers discovered a plastic film
From state-of-the-art innovation incubators to
technology, which was developed and test-marketed
staggering investments in consumer research, P&G has
for use in plastic wrap. P&G wasn’t ready to dive into
established multiple innovation resources.
the plastic-wrap category however, so it formed a joint
venture with one of its biggest competitors in cleaning LEAP. To develop talent internally, P&G established
products: Clorox, which produces the leading plastic a cross-disciplinary team called LEAP, comprising its
wrap, Glad. The joint venture resulted in Glad Press’n best minds from marketing, research and development,
Seal wrap, and led to other collaborations like the Glad technologists, and industrial design.17 The goal for this
ForceFlex garbage bags.14 By contributing strengths to team is to develop categories and brands that drive new
the partnership that their competitor lacked (IP, brand business for P&G.17
equity, R&D capabilities), both organizations benefit.
Consumer-Centric Research. P&G invests around
$2 billion each year in research across its portfolio.18
Through various research partners and innovation
consultants, it conducts over 20,000 studies involving
more than 5 million consumers in nearly 100
countries.19
The Clay Street Project. An off-site experiment in
downtown Cincinnati, this space is P&G’s design
thinking incubators. Employees can spend a week to
three months in this environment to revitalize brands,
Government Improved. P&G partnered with Oak create new categories, and inspire culture change.20
Ridge National Laboratory, a lab funded by the U.S. “At Procter & Gamble, we have a lot of consumer
Government’s Department of Energy, to improve the knowledge,” said Karen Hershenson, Studio Leader
quality of products such as Pampers diapers, Head of the Clay Street Project. “What we try to do with our
& Shoulders shampoo, and Tide laundry detergent. teams is move them into understanding and caring
Through access to the super computer, Titan, P&G is about [the consumer]—not just studying her habits.”21
able to run computer models, which greatly reduces the
number of experiments involved in product design and Retail Innovation Center. On the ninth and tenth floors
speeds up the timeline to market.15 of P&G’s Cincinnati headquarters, the “I” Center aims
to tell P&G’s story to the customers who come through
Collaborating with NASA. As of 2010, P&G products its doors. There are video case studies of disrupters
have been launched into space with the goal of like Uber and Airbnb; shelves of both P&G’s and
improving shelf life and product quality.16 “We make a competitors’ products; and rooms that show P&G items
lot of products, and we’re always learning more about in their intended habitats (such as a baby’s room with a
the physics behind what makes the product stable,” diaper table in a suburban home and a laundry setup in
said P&G Principal Scientist Matt Lynch.16 “The work an apartment).22 A huge screen allows users to click on
we do in space makes it easier to decode complicated stories showing how P&G deploys new technologies and
physics, ultimately resulting in a better consumer marketing strategies. The goal: convince consumers
experience.”16 that P&G is modern, fresh, and ready to compete in this
new and uncertain world.22
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Case Study
Procter & Gamble
Innovation Across Categories
Through its classic brands and its newer, more
disruptive product lines, P&G is on a quest to transform
how we clean our floors, moisturize our skin, and
buy razor blades. Below are its guiding principles for
innovating in today’s connected culture and examples of
successful outcomes.
• Observe, Don’t Ask. Instead of focus groups, get out
there and observe your customers in the real world.
For P&G, it’s about studying consumers in their Household Innovations. P&G knew it needed to
homes, doing everyday tasks.23 innovate its floor-cleaning category, so in 1994, it hired
Continuum Innovation. The consultancy conducted
• Expand the Brand. Think of the bigger picture. ethnographic research with target customers—in other
Pampers changed its mission statement from “we words, visited their homes and watched them clean their
want the driest diapers,” to “helping moms with floors.24 This research revealed that consumers were
baby’s development.”23 “cleaning their mops as much as they were cleaning
their floors.”25 P&G used this information to design a
new cleaning tool: a stick with a wet towel that could be
replaced after each use.25 A year after Swiffer’s release,
P&G had sold more than 11.1 million Swiffer starter
kits across the United States.26 Line extensions have
followed, and Swiffer generates about $500 million in
annual sales.26
“Discontinuous innovation” at P&G means putting a
focus on not just improving products but also coming up
with whole new categories. An example is Tide PODS,
• Leverage Expertise. Get employees talking to each which launched in 2012 and generated first-year sales
other. When Crest wanted to develop new flavors, it in America and Canada that surpassed $500 million.27
turned to colleagues who were aroma experts in the Unfortunately, P&G has
coffee and shampoos departments.23 faced ongoing safety
• Test Less. Reduce time to market and execute issues with the Pods.
better. Through partnerships and technology In 2012, it added a
processes, P&G has cut development time in half double-latch lid on the
without adversely affecting products.23 container to deter kids
• Focus on Experiences. Consider the user’s full from eating the packets,
experience with a product. Lafley emphasized the role which resemble hard candy. To stop the “Tide Pod
28
of designers at P&G, deeply involving them with every challenge,” a social media-fueled trend in which
aspect of development.23 teenagers eat the pods on camera, P&G worked with
various sites to remove videos of people biting into the
• Tailor Offerings to Developing Markets: What’s true detergent. It also released a 20-seond video of football
in one location shouldn’t be assumed in another. player Rob Gronkowski telling viewers to “use Tide Pods
P&G observes and talks to ordinary consumers in its for washing, not eating.28
markets to gain cultural understanding and regional
insights.23
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Case Study
Procter & Gamble
P&G is pioneering a 3-Step FiberSCIENCE Oral Innovations. With Crest Whitestrips, P&G created
approach to “clean, protect, and enhance” a brand new category in 2001: over-the-counter teeth-
the clothes that its consumers love.29 Fiber whitening systems.32 The peroxide-coated strips that
Scientists are focusing on not just cleaning adhere to teeth launched a new solution to yellowing
garments but improving the “multi- teeth, as well as a line of whitening toothpastes and
sensorial fabric properties that influence mouthwashes. With about $300 million in annual sales,
people’s perception of their clothes: the these products continue to dominate the market with a 70
look, the feel, and the scent.”29 percent share.32
Grooming Innovations. When Dollar Shave Club
and Harry’s disrupted the men’s razor market, P&G
responded with its own subscription service, Gillette
Shave Club.30 Gillette distinguished itself through blade
durability, whereas competitors try to persuade customers
to changing their blades weekly. In 2016, Gillette Shave
Club began offering an on-demand ordering service,
giving customers the ability to re-order via text. Called
“Gillette on Demand,” the service is attempting to out- Cause-Focused Innovation
innovate Dollar Shave Club, which was acquired for $1 P&G now considers sustainability at every stage of its
billion by P&G’s competitor Unilever in 2016.30 products’ life cycle, from manufacturing to delivery
and beyond.33 From its green accomplishments to its
ambitious goals, the organization is doing its part to
“It will come down ultimately to lessen the effects that its millions of products have on the
innovation that builds categories, environment.
and if we do our job better than Renewable Energy. P&G’s long-term goals are to achieve
100 percent renewable energy use in its plants; 100
others, we’ll get a little bit of percent renewable or recycled materials for all products
and packaging; and zero manufacturing- or consumer
share growth.” waste going to landfills.33 P&G also breaks it down into
— David Taylor, CEO of P&G31 smaller goals, such as aiming to reduce greenhouse gas
emissions by 30 percent by 2020.33 Since establishing
its goals in 2010, P&G has made considerable progress:
Beauty Innovations. The No. 1 product in America’s there are seventy zero-waste manufacturing sites, and
anti-aging category, Olay Regenerist is based on wound- energy consumption, water use, C02 emissions, and truck
healing technology from Sederma Laboratories in transportation are all down significantly.33
France.32 The collaboration enabled P&G to cut down its
timeline from lab to roll-out from three years to eighteen Environmentally Conscious Packaging. These include
months.32 goals such as “develop and market at least $50 billion
in cumulative sales of products that have an improved
environmental profile.”34 One such example is Oil of Olay’s
packaging, which has evolved from a bulky clamshell to a
trapped blister design, helping P&G to reduce millions of
pounds of packaging.35
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Case Study
Procter & Gamble
Clean Water. P&G scientists created Purifier of Water, Simplified Positioning. With this new approach,
which is a packet the size of a teabag that can purify ten P&G eliminated one-sixth of its Olay products.42 The
liters of water in thirty minutes.36 P&G has distributed the discontinued items included acne washes, facial scrubs,
product during emergencies for more than a decade, and skin treatments that didn’t fit with the brand’s
providing 9 billion liters of clean drinking water to antiaging message or weren’t selling well.42
people in need.36 P&G aims to provide 15 billion liters of
clean drinking water by 2020 to reduce illness caused Simplified Messaging. In 2016, P&G consolidated its
by contaminated water and save lives in developing marketing efforts to work only with five public relation
countries.36 In 2004, P&G partnered with World Vision to companies. By trimming away 40 percent of its
distribute over 600 million PUR packets to provide over agencies of record, P&G saved around $300 million the
6 billion liters of clean drinking water to communities in following year while creating a more focused marketing
need.36 message.43
Current Progress. P&G was recognized as an
Organizational Leader in the 2017 Climate Leadership
“There’s not a single person on
Awards.37 The award recognizes P&G’s active leadership the leadership team that says we
within industry to address climate change and reduce its
greenhouse gas emissions.37 To this end, the company’s need to maintain the status quo.”
2020 goal of reducing emissions by 20 percent was — David Taylor, CEO of P&G44
reached four years ahead of schedule.37 Its Tide
Purclean product is made of 65 percent renewables and
manufactured on sites with 100 percent renewable wind Simplified Manufacturing. Between 2011 and now,
electricity.37 Global Assets Recovery Purchases program P&G began closing or converting its North America
takes waste from around the world and turns it into manufacturing plants from single-category production
reusable materials for their products.38 Since the program sites to multiple-category plants.45 This consolidation
began in 2010, millions of tons of would-be trash has has now extended to other countries, allowing for greater
been diverted while saving the company billions of dollars standardization, speed, and simplification.45 Additionally,
in materials.38 it’s automating production at the plants to lower labor
costs. “Collaborative robots” are now packing cases of
Strategic Simplification product and wrapping; tests of self-driving fork lifts are
also underway.45
In 2014, P&G responded to investors looking for
stronger returns by reducing the number of brands in
its portfolio. Under Lafley’s leadership, weaker brands
were sold off so the company could focus on its core
categories.39 The brands that it kept—like Pampers
and Tide—generate 90 percent of its sales and over 95
percent of its profit.40 David Taylor, who has spent more
than thirty-five years at P&G, became CEO in 2015. He
subscribes to simplification, and had been part of the
team that shed forty-three of P&G’s beauty brands.41 He
believes in Lafley’s vision of a “new P&G” that will “win
consistently, be simpler to manage, and will grow sales
faster and more sustainably.”41
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Procter & Gamble
What’s Next for P&G? Future Challenges. Research indicates that many
Millennials prefer small and local, purpose-led brands
Despite its track record of innovation, P&G faces both
with “natural, organic and wellness vibes.”51 They
short- and long-term challenges. It hasn’t introduced
perceive such brands as “good,” but mass-marketed
a new hit brand worth over $1 billion in annual sales
brands quite the opposite.51 P&G’s competitors like
for more than a decade.46 There’s no shortage of
S.C. Johnson—with its acquisition of Method—have
incremental innovation—Febreze as a car freshener,
recognized this trend and responded by acquiring more
for example—but it needs a string of groundbreakers to
boutique brands.51 If P&G doesn’t respond now to these
regain its dominance. Market watchers hope that P&G’s
new consumer expectations, it will eventually lose its
spring 2018 purchase of Merck KGaA’s consumer
relevance.
health business will replace the revenue lost when
P&G’s joint partnership with Teva Industries expires in The concern that P&G isn’t identifying and preparing for
summer 2018.47 market shifts has been loudly made by activist investor
Nelson Peltz, who assumed a seat on P&G’s board in
Future Retail. Whereas
March 2018. Peltz has argued that P&G’s “suffocating
manufacturers have
bureaucracy” needs restructuring and that the company
historically fought over
should overhaul R&D, and “look to startups to bolster its
endcaps or front-of-
product portfolio.”52
store displays, there
will be a battle fought Future Supply Chains. Over the next five years, P&G will
in the digital space: invest $100 million to set up its first digital innovation
prominent placement center in Singapore.53 In the area of supply chain
on retailers’ websites management, the center will focus on transforming
and apps, as well as P&G’s supply chain end-to-end, enabling greater
high rankings in search-engine results.48 Shoppers will accuracy, visibility, and more efficient processes.53
likely have a standing weekly order, so securing a place Designed to test, reformulate, and launch products
on consumers’ digital shopping lists needs to become a faster, its pilot manufacturing plant can make small
top priority for P&G.48 batches of products for rapid, small-scale consumer
testing. It can also develop packaging quickly using the
The future of retail will be a combination of both online
latest 3-D printing technology.54
e-commerce and a brick-and-mortar retail presence.
With Amazon’s vast data insights, it knows which of its
customers buy P&G products, as well as how often, “The new Singapore Innovation
how much, and what they pay. By controlling the
relationship with the consumer, Amazon prevents P&G
Center unites P&G’s best-in-class
from knowing end users’ buying habits and could be R&D and consumer research
strategizing how to convert those consumers into buyers
of Amazon private label brands.49 capabilities to generate new
Additionally, if Amazon were to succeed in disrupting product formulations, advanced
Wal-Mart, the consequences could be fatal for P&G.
Walmart represents 15 percent of P&G’s annual sales
packaging and prototypes—
and its single largest revenue source.50 Alternatively, if uniquely designed to deliver
Walmart and P&G were to merge, they could collectively
weaken Amazon. superior value for consumers in
Asia and the rest of the world.”
— Kathleen Fish, Chief R&D Officer for P&G54
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Procter & Gamble
Future Globalization. As P&G
strengthens its position in
emerging markets like China,
it must consciously innovate
for consumers at all levels
of the economic pyramid.
According to a McKinsey
survey of 10,000 Chinese
shoppers, 50 percent of
respondents said they sought
“the best and most expensive
product,” especially in
categories of cosmetics and hair care.55 To gain deeper
insights, P&G’s innovation center in Singapore has
created rooms that replicate the typical home in various For P&G to continue delivering on its promise to “better”
Asian countries.56 the lives of its customers, it will need to make strategic
acquisitions while cutting costs. It must recruit the
Future Tech. The company is currently experimenting brightest scientific minds and rely even more heavily
with AR and VR glasses to develop better efficiencies on external partners for innovative ideas. Its survival is
for line workers.57 In robotics, P&G is exploring how to contingent on its ability to re-invent the way it’s done
fully automate its production line with robots to eliminate business for nearly 200 years.
the roles of humans that still bring raw materials to the
line and then take the finished products away.57 It’s also
testing the potential of using drones inside warehouses
and factories to check on physical inventory levels,
inspect cranes, and investigate anomalies in places that
are inconvenient or unsafe for humans.57
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Procter & Gamble
What Can You Learn from P&G?
Set a foundation that defines innovation objectives and mobilizes your efforts.
P&G is hyper-focused on making customers’ lives better. It uses both internal innovation practices
and open innovation to increase capabilities and expertise.
• What are the guiding principles that define innovation for your organization?
• In what ways could you incorporate open innovation principles into your organization?
Think differently to develop original ideas that drive business value.
P&G fuels internal innovation through consumer research, off-site incubators, and cross-
disciplinary teams.
• What innovation resources does your company provide to employees?
• In what ways could your organization expand or enhance platforms for ideation and innovation?
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Procter & Gamble
Create a streamlined and flexible approach to shepherd innovative ideas to market.
Connect + Develop provides a platform for open innovation across a range of P&G categories and
needs. Cross-pollinating its experience and resources with outside IP enables it to create innovative
products while shortening the timeline to market.
• Which outside expertise could you leverage to enhance your innovation efforts?
• What technology could you deploy to increase submissions to your idea pipeline?
Build a thriving work environment that drives innovation across your organization.
Innovation goals at P&G are ambitious and widely publicized. Teams with a particular need are
encouraged to leverage capabilities from across the organization. Employees constantly participate
in innovation training programs and bring tangible ideas and techniques back to their colleagues.
• How does your organization engage employees around innovation?
• How does leadership demonstrate its ongoing commitment to innovation?
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Procter & Gamble
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