Procter and Gamble Company Essay
Procter and Gamble Company
Procter and Gamble was formed by James Gamble & William Procter in 1837 by a candle manufacturer Procter and a soap manufacturer Gamble. This consumer product company started with a vision to grow to a $33 billion company and by 1879 it started selling its products directly to the consumers, by 1890 it has gained its legal corporation and ever since it has doubled it sales every ten years. P&G growth was driven by innovation not optimization. Radical innovation served as their backbone to success with other factors such as geographic expansion, product line extensions and acquisitions contributing to its growth. Some of its famous and successful acquisitions were, Duncan Hines, Clorox, charmin Paper mills, Folgers Coffee, NorwichEaton,
Vicks (NyQuil), Noxell and Max Factor. It also recieves the credit for developing innovative and advanced technology based products during 1940’s such as Tide, Crest,Pampers, Bounce etc.By the end of 1980’s P&G had its operations in 58 countries,its reputation was built with its new product development strategies; they produced varied range of consumer products such that these products should meet “basic consumer needs” and create “superior total value” creating a brand image for the company. As noted in Kevin Kelly’s quote “Wealth in new regime flows directly from innovation and not optimization”, i.e. wealth is not gained by perfecting the known, but imperfecting the unknown.
P&G successfully used this strategy to earn its reputation as one of the largest company in Cincinnati in 1895 and in 1995 earned the National Medal of technology, the highest given award in United states. P&G was also known for its strong ethics, values and recruiting the best and brightest. R&D was a major focus of P&G. In 1995 P&G spent 1.3billion on R&D,and emphasis was laid on combination of multiple R&D competencies and there were a lot of cross fertilization of technology. They also had an attractive work culture, employee compensation and had a structure in place which assured employees of growing within the organization with its up through the rank approach which fostered innovation.
In the process of growing, P&G moved out of their old tradition of new product development and concentrated completely on the global expansion and development of existing products. With structured product sectors in place, P&G had some difficulty fitting some new product idea into any of the available category which led to the rejection on various novel ideas. In 1993, the company started the Strengthening Global Effectiveness (SGE) with the goal of increasing profits through cost reduction which was achieved by reengineering and reformation of distribution and manufacturing. This led to a successful increase in profits from 10% to 17% in a year. In the same year, CEO John Pepper said that their was an urge for developments of new brands in order to fulfill the companies longtime goals of increasing their sales.
Mark Collar, Vice President and General Manager of New Business Development and a part of SGE said that a breakthrough is required to manage and accelerate the company’s innovation process. In addition, the concept of cross fertilization was fading out gradually so their was a requirement of a new innovation team that can incorporate the old traditions followed by the company during the 1960’s. Therefore this lead to the formation of Innovation Leadership Team (ILT) in 1993. The top seven officers of the company were a part of this team: John Pepper(Chairman and CEO); Durk Jager(President and COO); Wolfgang Berndt(Executive VP North America); Gordon Brunner(Senior VP Research and Development); Gary Martin(Senior VP Information Services and Product Supply) and Eric Nelson(Senior VP and CFO); Robert Wehling (Senior VP Advertising and Market Research).
The ILT’s responsibility is to investigate the portfolio of the projects under development and projects on shelf, select valuable projects that add value to the firm. Soon Corporate Innovation Fund(CIF) was established for the funding the research on new products developments. The employees can report projects irrespective of their sector and obtain approval at very fast pace on appropriate projects.