Impact Story

How Can You Build a Growth Factory?

Due to its sheer size, Procter & Gamble faces an

especially steep growth challenge. With a stated
annual growth goal of between 4% and 6%, the
world's largest consumer products company needs
to boost sales on the scale of its Tide brand each
and every year. P&G called on Innosight to help
meet this challenge by turning innovation from a
serendipitous activity into a systematic discipline.
While P&G is widely recognized for its marketing
might, its legacy as an innovator is equally rich. Over
its 175-year history, the Cincinnati firm has consistently
created new categories of consumer goods -- from the
first disposable diaper (Pampers) to the first toothpaste
with fluoride (Crest) to the first synthetic laundry
detergent (Tide).

The problem of growth

But in March of 2000, a slight decline in P&G's sales and
an earnings warning sent its stock price tumbling. By
June, P&G named a new CEO, A.G. Lafley, who brought
in fresh thinking about corporate strategy and
welcomed new perspectives on innovation. When an
internal analysis revealed that only 15% of innovation
projects were meeting success targets, senior
executives began searching for ways to turn around
this key metric.
During this time, a number of top P&G leaders were
exploring ideas in The Innovator's Dilemma, the
groundbreaking book by Innosight co-founder Clay
Christensen. And not long after, P&G began collaborating
with an Innosight team to build innovation capabilities

that would spawn new brands and business models.

The idea was to institute a process that was analogous
to a factory -- making innovation systematic, repeatable
and reliable.

Innovation assembly lines

Via its new Connect & Develop program, P&G stepped
up the sourcing of raw materials -- in the form of
product ideas from outside the company. "It didn't
matter where the ideas came from," says Nathan
Estruth, vice president of P&G FutureWorks. "We had to
systematize a process to find them, to partner, to bring
them in, and to turn raw ideas into innovations in our
growth factory."
A key part of improving its innovation success rate was
setting up "innovation assembly lines" by seeking
growth from four major categories of innovation:
1. Sustaining innovations to improve on existing
products (i.e Gillette Fusion)
2. Disruptive innovations that bring high-end
services to mass markets (i.e Crest White Strips)
3. Transformative innovations based on
performance breakthroughs (i.e Olay Pro-X)
4. Ommercial innovations to enhance the consumer
experience (i.e BrandSaver events)

Small bets labs

Innosight's "emergent strategy" approach of testing
and refining market approaches was applied to a
string of new product ideas.
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Impact Story

For instance, P&G had tapped into university research

for a potentially transformative innovation: a probiotic
supplement to improve digestive health. But there was
a large degree of uncertainty as to whether the new
dietary product, called Align, was a worthwhile
opportunity.
Instead of committing to a national retail launch, P&G
created a website and promoted Align in just three
mid-sized metro areas. "We placed a small bet," says
Bruce Brown, P&G's Chief Technology Officer. "And
that was one of the smartest things we did in terms of
rapidly progressing the Align brand."
P&G also conducted a small-scale market trial for the
concept of attaching the venerable Tide brand to a
new consumer experience. Deploying "jobs to be
done" research, P&G found that there was high
dissatisfaction with existing dry cleaners and potential
room for a national brand.
Tide Dry Cleaners was initially launched in just two or
three locations. That allowed P&G to refine the
customer value proposition and the operating plan
before it began to scale to more locations.

Innovation transformation
All in all, thousands of P&Gers applied its improved
innovation framework to scores of new projects and
products. "Innosight has been a close partner in P&G's
innovation transformation," said A.G. Lafley, who retired
in 2010 but returned as CEO in May 2013.

The result is that P&G has dramatically improved its

innovation success rate, moving from about 15% to
over 50%, meaning about half of its new product efforts
are meeting benchmarks for success. That has helped
boost overall corporate performance. Over the decade,
P&G's revenue more than doubled, and profits
quintupled.
The commitment to the growth factory principles has
continued through management changes, including
the return of CEO A.G. Lafley in 2013. So it's about more
than just hitting financial numbers. "There is a c
onfidence inside P&G," says Estruth, "that the
systematic approach enabled by Innosight will
continue to drive our growth factory, and help us
meet our goals for many years to come."

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Our Thought Leadership

Starting with Clay Christensens seminal book The
Innovators Dilemma, weve pioneered a wide range
of influential ideas and new approaches to business
challenges.
Scan here to learn more and download our
complimentary Harvard Business Review articles.

P&G's growth factory initiative was detailed in a June

2010 article in the Harvard Business Review by Scott
Anthony and Bruce Brown.

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