procter and gamble case study strategic management

P&G’S STRATEGY

The team has been growing and creating value prior to, during, and following the pandemic through a strategy that drives growth and value creation through five integrated choices: a portfolio of daily-use products where performance drives brand choice; superiority across product, package, brand communication, retail execution, and value; productivity; constructive disruption of the entire value chain; and a highly efficient and effective organization structure.

The model is dynamic and sustainable. It adapts to the changing needs of consumers, customers and society and is focused on growing markets—creating versus taking business—the most sustainable and typically most profitable way to grow. We believe the best path forward is to double down on this integrated set of strategies that are driving our results.

INTEGRATED GROWTH STRATEGY

Our strategic choices are the foundation for balanced top- and bottom-line growth

PORTFOLIO performance drives brand choice

SUPERIORITY to win with consumers

PRODUCTIVITY to fuel investments

CONSTRUCTIVE DISRUPTION across our business

ORGANIZATION empowered, agile, accountable

VARIOUS STATEMENTS IN THIS ANNUAL REPORT, including estimates, projections, objectives and expected results, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are generally identified by the words “believe,” “expect,” “anticipate,” “intend,” “opportunity,” “plan,” “project,” “will,” “should,” “could,” “would,” “likely” and similar expressions. Forward-looking statements are based on current assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements, including the risks and uncertainties discussed in Item 1A – Risk Factors of the  Form 10-K included in this Annual Report.  Such forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise publicly any forward-looking statements, except as required by law.

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Procter & Gamble’s Lean Innovation Transformation

Can a new leader guide an established company, like P&G, through disruptive transformation from within?

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When Kathy Fish became Procter & Gamble’s Chief Research, Development & Innovation Officer in 2014, she was concerned that the world’s leading consumer packaged goods company had lost its capability to produce a steady stream of disruptive innovations. In addition, intensifying competition from direct-to-consumer companies convinced Fish that P&G needed to renew its value proposition to make all aspects of the consumer experience “irresistibly superior.” But making this change would require wholesale transformation from within. Can Fish bring lean innovation to scale at Procter & Gamble?

Harvard Business School assistant professor Emily Truelove discusses the challenges of bringing this established company back to an innovative mindset in her case, “ Kathy Fish at Procter & Gamble: Navigating Industry Disruption by Disrupting from Within. ”

HBR Presents is a network of podcasts curated by HBR editors, bringing you the best business ideas from the leading minds in management. The views and opinions expressed are solely those of the authors and do not necessarily reflect the official policy or position of Harvard Business Review or its affiliates.

BRIAN KENNY: Always, Ariel, Bounty, Charmin, Crest, Dawn, Downy, Fairy, Febreeze, Gain, Gillette, Head & Shoulders, Olay, Oral-B, Pampers, Pantene, SK-II, Tide and Vicks. What is this, you might ask? This is a list of the brands in the Procter and Gamble family that generated over a billion dollars in revenue in 2019. They are the superstars of a portfolio that includes 66 active brands in the home goods and personal hygiene categories. Founded by brothers-in-law David Procter and William Gamble in 1837, P&G has been a dominant force in consumer brands since landing its first contract to provide soap and candles to the union forces in the civil war. Along the way, they shaped the fields of consumer marketing and brand building through advertising and mass media. Simply put, P&G is the firm to beat. And that’s what worries them. Today on Cold Call , we welcome professor Emily Truelove to discuss her case entitled, “Kathy Fish at Proctor & Gamble, Navigating Industry Disruption By Disrupting From Within.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Presents Network.

Emily Truelove studies the changing nature of work inside established organizations, experiencing the digital transformation of their industries. A very timely topic. Emily, thanks for joining me today.

EMILY TRUELOVE: Thanks so much for having me, Brian.

BRIAN KENNY: It’s great to have you here. You and I are in the studio together in Klarman Hall. I don’t get to say that very often. It’s been a long time since we’ve been able to be in the studio together, but I see this as clear signs of progress of a post pandemic world.

EMILY TRUELOVE: Very exciting.

BRIAN KENNY: Very exciting, and we are fully protected and socially distanced and all those other caveats. This is a great case to talk about. P&G has reached into our homes and our hearts and our wallets so much. I think people will really like to hear about this mature established firm that is still sweating the details and trying to find ways to innovate and remain competitive in their space. Let me ask you to start just by telling us how you would start this class, what’s the cold call?

EMILY TRUELOVE: I open the class with the question, why is it so hard for P&G to innovate? And I point out to students that they have this incredible R and D budget, as you’ve pointed out, Brian, there’s this massive track record of success in terms of breakthrough innovations and defining whole new categories. And yet, as we see in the case, when Kathy Fish is entering her role, there are really big challenges related to innovation, particularly breakthrough innovations. And what I find is that students pretty quickly can generate a long list. So there are cultural factors. People are afraid of taking risks. There are issues related to systems and processes like funding and performance management and how these don’t necessarily incentivize breakthrough innovation. And students also often point out shifting competition. There are new direct to consumer competitors that are much savvier with digital technologies. And so what we quickly see in discussing this case is that there’s a long list of issues that they interrelate with one another. And it’s really hard to figure out what is the root cause of why innovation is tough for P&G today. And I think that’s a great way to open for students because that’s often the place that leaders find themselves in. Kathy Fish, the case protagonist, she said to us, “Everybody was convinced that the innovation machine was broken at P&G, but it was not so clear what the real problem was or how to fix it.” And I think that’s a common challenge leaders face.

BRIAN KENNY: Yeah. And I’ll bet people who are listening to the show today who work in large organizations, probably bump up against this a lot, this feeling that we’re stuck in our ways and we can’t change. And so the case really dives into that. So I’m looking forward to talking about some of those issues that surface in the case. I mentioned in introducing you, that you study organizational behavior and organizations that are going through transformations, and that’s a very sort of a buzz word we hear these days, the digital transformation. I’m wondering how did you choose this case to write about and how does it relate to the kinds of things that you think about as a scholar?

EMILY TRUELOVE: I was immediately attracted to the opportunity to write a case at P&G, particularly after meeting Kathy Fish. And we’ll go much more into her background. I know later in the podcast, but to the extent that this is this iconic American company, over a hundred years of history, this incredible history of innovation, and yet they were finding themselves in a position where historic strengths were actually liabilities. Was very fascinating to me. And I think is completely common for incumbent firms to experience when their industry is being transformed, particularly by digital technologies. And so my interest in understanding how leaders can lead change in this situation, and also how work changes for employees on the ground in terms of new mindsets they need, new capabilities they need. The minute I learned about this case opportunity, I knew I wanted to go to Cincinnati and visit to understand what was happening and to capture because I think there’s a lot to learn.

BRIAN KENNY: Yeah, there sure is. And a lot of those issues surface in the case. Maybe you can just start for people who aren’t familiar with P&G. I had some fun with that intro. I just barely scratched the surface of their product portfolio. Tell us a little bit about P&G and their history of innovation.

EMILY TRUELOVE: You covered a lot of the big brands and I think one of the incredible things about P&G is that there’s just a parade of brand names that you can cycle through.

BRIAN KENNY: It’s crazy.

EMILY TRUELOVE: When talking about the innovations of this company, it’s quite a formidable history. And as people have pointed out when I’ve taught this case, students who are 50 years old in executive education will say, “Oh, my grandmother used this brand. I remember when I was young.” And so just the history of the company is really pretty incredible. I think though, one of the challenges for P&G particularly what we capture when the case opens, is just the shifting environment. And again, as I said earlier, how these strengths were becoming liabilities. P&G has this massive R and D budget. It has this incredible scale. It’s clearly excelled at mass media advertising and has these incredible relationships with retailers like Target and Walmart. And internally the innovation processes were actually quite slow, which was okay back in the day, but not so much anymore. So the processes were very much about, “Okay, R and D is going to cook something in the lab.” That’s their language. “We’re going to cook this idea in the lab. Maybe we’ll rely on consumer focus groups, but pretty much it’s us in our lab. And then we’re going to hand something over a couple of years later, to people in marketing who are going to hand it over to sales.” And you can get this impression of it’s very sequential. It’s very siloed and it’s really quite slow, which again was okay back in the day. What they started to really struggle with though, is that the industry was changing much faster. They were facing newer competitors where that approach to innovation simply couldn’t cut it.

BRIAN KENNY: So who are those competitors? Who are they worried about?

EMILY TRUELOVE: One of the interesting things happening in this industry is that really the notion of value starts to shift, pretty much at the time of when we’re starting the case. And it shifts from a focus on competing on products to competing on experiences. And I think giving an example from the razor business, which is one that P&G gave us when we were writing the case, helps to really crystallize this. So for many decades, P&G had dominated in the razor business by having basically a technically superior razor. And they would change it in incremental ways, but it basically worked and people would buy it again and again. And that business was really rocked by Dollar Shave Club, one of these direct to consumer companies that came on the scene. And ultimately, I think in 2016 was purchased by Unilever, one of P&G’s competitors, for a billion dollars. What was interesting about what Dollar Shave Club did though, is that they had this subscription model where they said, one of the big pain points of razors is that you run out and you have to run to the store then at night or in the morning when you don’t want to have to. And so we’re going to have a subscription model such that the purchase experience is really frictionless, and we’re going to collect data on people so that we can give them personalized products. So you have kind of pre-shave and aftershave products related to your razor, which is also customized for you. They were also really great at using social media to advertise their brand again, to collect more data from consumers. And so fundamentally P&G had this industry where they had really kind of dominated, and yet they’re facing this competitor that’s playing a different game. Again, they’re competing more on the experience. And that is broadly the big shift that P&G was grappling with when we were writing the case. Competitors being these direct to consumer companies, which were much smaller, much more focused, very agile, very adept at using social media adept to doing small batches, at creating holistic experiences, et cetera. And that marked a huge change because historically P&G was really competing with other big CPG companies like themselves. So this was a whole new game for them.

BRIAN KENNY: Yeah. We’ve done a couple of episodes on direct to consumer companies. They are in sort of a very interesting phenomenon that we’re seeing quite a bit more of these days. The protagonist in the case you mentioned before, is Kathy Fish. Tell us a little bit about Kathy, what’s her background and what is she being asked to do here?

EMILY TRUELOVE: Kathy Fish joined Proctor and Gamble way back in 1979. And she joined as a chemical engineer and made her way through the ranks, basically over the course of four decades, she visited one of our executive education classes here at HBS last week and mentioned that she almost came to HBS, but decided not to. She was going to stay in R and D, but keep a business focus as much as she could. And she really rose up the ranks working in many of the different business units, which are category based at P&G. Ultimately, she made it into the role, in 2014, of being Chief Technology Officer at the company and her final role then, which we see in the case in 2017, she becomes the Chief Research Development and Innovation Officer at P&G.

BRIAN KENNY: Okay. Well, I guess she did all right, even though she didn’t come to HBS.

EMILY TRUELOVE: She did okay.

BRIAN KENNY: So tell us a little bit about the company itself. You mentioned its size. I mean, how big is it and what’s it like to be part of the P&G community? What’s the culture like?

EMILY TRUELOVE: P&G has something like a hundred thousand employees. It’s a relatively large organization. It’s Cincinnati based. Some people come and go, but many stay for years as Kathy, and many of her peers on the leadership team, had. And in a lot of ways, it’s quite a healthy culture and people have a lot of pride in all of these amazing brands they’ve produced and tended over time. I do think though, when it came to fostering a culture of innovation, there were some challenges that P&G was facing. One of these was just a basic fear of failure, and this is something that came up again and again, from people inside the company we talked to, and this largely sprang from the fact that the people who would get promoted were typically those who are really great at execution and operating. Therefore it was really scary to be somebody who is trying out something really new. And if you can picture that there is this very heavyweight approach to innovation. If that’s your process where you have many years riding behind a product launch, millions and millions of dollars, it’s very scary if you fail and it’s very public. And so there was kind of a general sense of, I don’t want to fail, which was a huge impediment to innovation at the company. A couple other things that I think are relevant to the case, around the time of the recession, they struggled financially and also had an activist investor. And so there were a number of things happening in the environment for P&G that created quite a short-term focus and people became really heads down, therefore, not so much thinking about the future and where are our categories heading? What are new categories we could be inventing? The final thing I’ll mention about the culture of P&G that I think is relevant for this case is that it’s very much a decentralized organization where power is with the BU leaderships. And there’s a number of different BUs based on categories-

BRIAN KENNY: Business units there.

EMILY TRUELOVE: Business units, yes, Fabric care, haircare, feminine care. And as a result, Kathy Fish being in this very senior role, she was actually the most senior woman at Procter and Gamble. But even as somebody on the leadership team, she was not in a position to really tell BU leaders what to do, which is an important piece of this case.

BRIAN KENNY: And probably, similar to the experience that a lot of people have had if they’ve worked in large companies, there are these solitary business units, and they’ve got presidents in charge of them and they kind of run those in a siloed fashion. So I think we see that play out a lot. Interesting. And presents huge challenges in terms of how you break those silos down and get them thinking about an enterprise wide solution to something. So, Kathy has this notion of “irresistible superiority,” which I just like the sound of that.

EMILY TRUELOVE: Why do you laugh?

BRIAN KENNY: What does that mean? What does that mean?

EMILY TRUELOVE: So, Kathy developed this notion of “irresistible superiority” and what it means is creating a product experience that is so good, people find it so good that they find it really difficult to switch to a competitor. And she talks about how this is not just about again, having a technically superior product, it’s really about the whole experience. The packaging, the purchase experience, the marketing, how all of these things integrate together. And Kathy developed the notion, early on into her role as the Chief Technology Officer where she wanted to figure out what is behind our billion-dollar brands. Like what are these brands doing where people have found them to be irresistibly superior? And that’s where she was kind of looking at these factors of, it’s not just the product, it’s this emotional connection. And she strove to figure out how can we actually make sure that maybe not all of our innovations, but that most of our innovations are brought up to that bar.

BRIAN KENNY: And that probably makes them think very differently about their process from concept to delivery of a product. How does that affect the way that they come at their science and their packaging and all those other things?

EMILY TRUELOVE: Yeah, exactly. So once Kathy started socializing this idea with others on the senior team, everyone was like, “Great. We would love to do irresistibly superior innovations and products.” But people also quickly realized we’re not really set up to do this because to the extent that a huge piece of it is having this holistic, personalized experience, that’s not something we’re going to do when we have people inside the organization, working in silos. And when we have them working in a slow way that’s behind the times. And in particularly, we’re not going to have it by cooking things in a lab. We actually need to have much more engagement with consumers and adapt our products accordingly.

BRIAN KENNY: So this concept of GrowthWorks then is one of the central themes in the case. Can you talk like, what is growth works and how did they start to operationalize that within the firm itself?

EMILY TRUELOVE: The big philosophy behind it, or I should say the underlying philosophy is one quite similar to lean innovation or lean startup. And the basic idea with lean is you want constant, rapid, cheap experimentation, and you want to make sure that people are kind of falling in love with problems as opposed to solutions. That’s something that the philosophy talks about. Having people constantly test their assumptions, transact with real customers, having a metered approach to funding where you’re not putting huge amounts of money behind something before if it’s going to work, but distributing it over time. And so the general idea is we want experimentation to be happening all the time and for it to be de-risked. And for it to be something that the culture embraces, therefore, it’s clear to see why this would be appealing to the leadership of P&G. This is kind of where they needed to go. However, as I also mentioned, Kathy was coming from a place where she couldn’t mandate that those in the business units start working in a new way, given the nature of her position. So the idea with growth works was we’re going to try to create this enabling capability where we help people to work in a new way, but they can basically volunteer to take part in it or not. We’re not going to force it on them. And so from the get-go Kathy, I should say, she worked very closely with the CMO of P&G, Mark Pritchard. And from the start they had this idea of, we want GrowthWorks to be business unit led, but corporately supported. And they developed an 18-person team of volunteers from across the company who said, “Okay, we’re going to try to help people in the business units start working in these new ways.” And to your question of how they really operationalized it, what did this look like on the ground? One of the cornerstones was to have multifunctional teams that were very small and that were completely dedicated to a particular problem. So these were limited to three people. They called the members of these teams, founders. They would sic themselves on a particular problem that they knew consumers wanted to have solved, and they would run experiments and really just completely own this space. So the multifunctional dedicated team was a really important piece and was quite different from how people had actually been working before. Another piece of it was to have growth boards. So within each of the business units basically have a set of leaders from the business unit who would help to coach these teams along, who would give them funding in this metered way. And then throughout, there were a lot of different sponsors in the organization, including the CEO, David Taylor, who was very supportive throughout.

BRIAN KENNY: It all sounds really good. It all sounds really scary. And I’m wondering a couple of things. One is, how committed was the organization really to this it’s great that the CEO is putting a shoulder behind it, but how does the CFO feel about it? And are they creating the space that these teams would need to actually achieve something? And at the same time who within the organization would have the nerve, I guess, to sort of take this risk in a risk averse culture and say, “Yeah, I’m going to be one of these founders and I’m going to try and make this thing happen at the risk potentially of losing whatever stature I might’ve had within the firm to begin with.”

EMILY TRUELOVE: Right. A couple answers to that. One thing is in the summer of 2016, right around when GrowthWorks was launched, the CEO had taken the senior team on an innovation tourism trip to Silicon Valley. Those in the senior team had actually gotten really energized around the idea of, “Okay, we can really work in these much leaner ways and it’s going to really improve our innovation capability.” And so I do think the groundwork in some ways had been laid for people to understand there is a case for change here. The other thing is it’s true, it was a big risk to ask people to take on these new ways of working. And indeed, along the way as GrowthWorks started launching pilots, they started to learn some of the challenges that were arising that they hadn’t even anticipated. So I can give you a couple of examples of it, because I think that the way that the GrowthWorks team handled these challenges is really pretty interesting. So to give an example, even among people who were pretty excited about, “Okay, I’d like to be one of these founders, I’d like to do this newer kind of work. I’d like to work in a new way.” They struggled because they were concerned about their careers. I think to the point you were making, Brian, this seemed like a risk. Why would you want to be on one of these teams when this has been a place where innovation is kind of seen as a risky area. One of the things that the GrowthWorks team did was say, “Okay, look, why don’t we start a whole new career track where it’s going to be just as prestigious as other ones, except you’re going to have a different set of metrics that you’re dealing with. So for example, instead of rewarding you on short-term performance, we’re actually going to measure how much have you learned by conducting an experiment. And if you’ve learned a lot, even if it failed, we’re going to see that as positive performance.” And so like all these different problems kept coming up as they were trying to actually have teams pilot this new way of working, and they would try to throw solutions at those problems. Another one that came up is even after people’s career concerns were somewhat assuaged, they realized that people down below in the organization were pretty much loving working in new ways, and yet the leadership of business units actually didn’t really have the… even if they had the willingness, they didn’t necessarily have the capability to coach these teams. So, one of the things that they did was bring in a consulting firm called Bionic, who they helped to use to really coach business leaders and get them into a place where they could actually serve as helpful sponsors for projects.

BRIAN KENNY: The idea of killing projects surfaces here. And we know that people who create projects get vested in them and they feel passionate about them and it’s hard to kill something, but it was pretty important to the overall success of what P&G was trying to do.

EMILY TRUELOVE: Absolutely. So a lot of talk there during our visits about the importance of killing projects. And historically, that was just something that wasn’t done again, part of this because there’s a sense of, “Well, it’s going to be horrible for this person’s career if we kill this project.” And what they came to realize over time is, first of all, if you don’t kill projects, you have a problem in that you’re spending your money and your time and attention in places where they could be much better spent elsewhere making progress on something. And again, the other thing is, what kind of culture does it create? It creates one where a project that is killed is seen as this career ending thing. And so part of the idea with GrowthWorks with this whole notion of we need to embrace experimentation and do it rapidly and do it cheaply is, we’re going to de-risk this enough that if something is killed, it’s not a big deal, you just move on to the next thing. I think another piece that was really interesting is they very much emphasized, we want these founder teams to fall in love with problems, not solutions, such that if your particular solution you developed to a problem doesn’t work, you just go back to that problem that you think is great and try to develop another solution. And so it very much helped with this issue of killing projects and making it feel… Of course, the idea isn’t that you want to be killing projects, you want them to be successful. But the idea is let’s try to actually normalize having projects not work out and just quickly move on to the next one.

BRIAN KENNY: So it’s not the project, it’s the problem that you’re really focused on.

EMILY TRUELOVE: Yeah, trying to keep people focused on the problem not their solutions. Yeah.

BRIAN KENNY: So what were some of the pilots that came out of this? Describe a couple of them.

EMILY TRUELOVE: In terms of some of the projects that came out of growth works, it’s interesting because some were, quite low tech and others were quite high tech. In terms of a low tech one, there was a team that did something called forever roll, where they developed a roll of toilet paper that was so big that you basically never needed to buy another one, or you didn’t have to buy one very frequently, which it’s interesting because this was happening pretty much in the months before the pandemic started. It turns out that’s actually a useful innovation. So that’s one kind of thing that came out of this. And again, from really looking at consumer insights. Some really interesting other higher tech products, too, there are some skincare products that use AI technology. You can take a selfie of yourself and get your skin age in case you want to know that I think there’s questions about it, people want to know that, but you got your skin age and it customizes for you, here’s different products you might use. You can imagine their social media integrations with this, product recommendations. A real robust set of projects came out of this and pretty quickly there were 130 different projects in the GrowthWorks portfolio. And these are across a range of business units and they were at different stages of development, some in validation, some were actually incubating in testing in the market.

BRIAN KENNY: The case talks about some key questions that business unit leaders need to be asking or thinking about when they’re looking at these opportunities. Can you describe what those are?

EMILY TRUELOVE: Yeah. So in concert with Bionic those on the GrowthWorks team, were really working towards coaching leaders. How can we actually help them to really coach these teams with their innovations? And there were four questions that they were really instructed to ask. So the first is, what did you learn in conducting an experiment? Second of all, how do you know? Third, what do you need to learn next? And finally, how can I help? And I think what’s really interesting about these questions is shifting it from a performance focus to much more of a learning and development focus, and very much positioning the leaders in a place not of, “I’m going to tell you what to do because I’m not the one who’s talking to consumers and who’s actually running the experiments, but I’m just going to figure out how can I enable you to actually get this work done.”

BRIAN KENNY: Yeah. And I think those questions actually could be used in a much broader way. I think managers just generally speaking, those are great questions to ask anybody who’s working on any kind of a project.

EMILY TRUELOVE: Absolutely. And I think one of the things that was really smart about how P&G utilized outside consulting help is that they very much had an approach of, “We want you to help us to build the capability internally.” So things like, what are the questions we need to ask, as opposed to just tell us what to do.” I think went a long way and helped to really embed this into the organization in a real way.

BRIAN KENNY:  And the case also describes as these pilots are moving to different phases, the teams start to encounter things that they probably had never had to think about before. And I saw this a little bit as an ode to central services everywhere because I think in a lot of places where you’ve got either scientists or you’ve got sort of thought leaders who are focusing on the solution, and then you’ve got other teams that are stepping in to support in different ways, that realization became really clear to these folks. Can you just describe that a little bit, too?

EMILY TRUELOVE: As teams started to move into the incubate phase, this is when they’re transacting with real customers, there were a whole new host of challenges that they encountered. So one of them is that P&G, I think we have a quote like this in the case, it is good at doing say 50,000 units of something and can do five units, but 5,000 is really tough. So one of the things they struggled with is, even if we now have the product, we have the experience, figuring out things like new supply chains, new ways of dealing with transactional marketing. This was very new for them. And interestingly at P&G, because it’s this massive company, for a lot of employees inside they just weren’t used to having to do a lot of little pieces of essentially starting up a business, which is what they were doing. And so many teams became very overwhelmed with, gosh, there’s so much stuff we took for granted. We now have to do. One of the things that the GrowthWorks team did that I think was very smart is they developed this centralized capability called The Garage. And the idea of The Garage was it’s this one-stop shop for capabilities that teams are going to use, regardless of which kind of business unit they’re in. Again, things like leaner supply chain, new ways of doing marketing. And Kathy Fish and Mark Pritchard funded this with their own budgets. And they said, “We’re going to pay for this capability. And if you’re running these experiments and you run into roadblocks, come to us, we’ll send over XYZ talent that you need or whatever capabilities. And if you really like it, you can keep those people. If you try it and like it, you can buy it.

BRIAN KENNY: This has been awesome conversation. I have two more questions for you before we wrap it up, the first would be, now that they’ve created this movement, people are getting excited about it. It’s a huge firm with a long history. How do you embed this in some ways? And how does this become the way that Proctor and Gamble operates on a going forward basis?

EMILY TRUELOVE: Kathy convinced the CEO and then the board of directors, to have innovation metrics really put on the scorecards of the business unit leaders in a way that they had never been before. And what’s really interesting about what they did is they didn’t just add innovation metrics that were more medium and long term. They also added a set of more qualitative questions that Kathy said really yielded completely different conversations with these leaders. So some of the questions were things like, how are you doing on irresistible superiority? Were you worried you might be disrupted? What experiments are you running against those areas? And how do you think about yourself as a leader of innovation? In what ways do you need to improve? What are your strengths? And it really just kind of shifted their focus into a very different space. Clearly they’re still very focused on the short-term objectives that they need to meet as they should be, but this really kind of complemented their evaluation in a way that really has them thinking much more broadly and much more aligned with doing disruptive innovation.

BRIAN KENNY: Yeah. It makes great sense. So Emily, I guess my last question then would be, as you know, as our listeners are sort of taking all this in, what’s one thing that you would really like to have them take away from the case?

EMILY TRUELOVE: I think something really important to take away is this basic approach to leading change, and even just to leadership that Kathy Fish exhibited and her team too I should say, because she really was working with a team. But it’s very much this approach of, as a leader, my job is to enable others to do great work. And I think whether it is in this constant, “Okay, here’s a problem that comes up, how can I remove that barrier from someone that we see throughout the case?” Or even Kathy’s general approach of, “I’m not going to force people to do something, I’m going to try to actually pull them in this direction as opposed to push them.”

BRIAN KENNY: It’s a great case, Emily, thank you for joining us to discuss it.

EMILY TRUELOVE: Thank you.

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Procter and Gamble (P&G): Strategic Management

Introduction, organizational methods, strategic change management.

Bibliography

Procter and Gamble (P&G) is a global company, which operates in 160 countries around the world. Most products of P&G became universally recognized brands such as itsHead & Shoulders, Pantene, Tide, Ariel, etc. Today, P&G is dynamically evolving corporation operating within a rapidly evolving global environment. Marketing around the world allows P&G to reach global target audience and increase sales. Founded in 1837 by William Proctor and James Gamble, Proctor & Gamble (P&G), is one of the top U.S. makers and developers of household goods. P&G has branded many common popular household products from Charmin toilet paper. With products in more then twenty categories, there isn’t a household across the world that does not have at least one product made by P&G. P&G’s mission statement states, “We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers.” (P&G Home Page 2009) Their mission statement has contributed greatly to the success of their organization. P&G objectives and goals have been set to obtain their main purpose. By obtaining these goals they will be rewarded by increased consumer brand recognition and profits.

P&G believes that they attract the finest people to work for them. Per P&G’s website, As previously mentioned above P&G focuses on five main values for their employees. The first one is leadership, they believe that are all leaders in our area of responsibility, with a deep commitment to delivering leadership results. Also, as an organization they can develop the capability to deliver strategies and eliminate organizational barriers Ownership is the next trait looked for in an employee, P&G wants an employee who will treat the company assets as their own and acting in the best interest of the company. Next, there is integrity, P&G looks for those individuals who are straightforward with others and always trying to do the right thing, A passion for winning is something P&G is known for they take pride in their accomplishments and want employees who are always working to improve themselves and the company.

And finally, there is trust (Daft, 2003). Trust plays a key factor in everyday roles at the organization, a level of respect to colleagues, customers, and consumers at all times needs to be upheld (P&G Home Page 2009) P&G is focused on being successful in every niche of their everyday business. From their manufacturing plants to their corporate offices and consumers, P&G demonstrates and upholds the same level of quality service. Many of P&G’s principles and values seem to be redundant in their use, which has caused them to come across as being overpowered but also boring due to repetition. As a company, they have clarified in a great deal what they are looking for from applicants and what they expect you to uphold as an employee (Dobson and Starkey 2004).

P&G could present their long-term goals and objectives more clearly and openly for knowledge. However, based on their rankings and profits for the past couple of years, they seem to be heading in the right path. Also, in regards to their values and principles wanting a mutual respect for all individuals, this seems as if it would cause a problem in respect with communication between management and fellow employees. As a company, you would want employees to be respectful of one another, however, hold management to a higher level of respect.

The business world of the past few decades has been more focused on the largest multinational corporations and their effects upon the international markets as well as upon consumers. Motivated by the desire to become among the strongest competitors, several medium-size companies have developed strategic plans to increase their customer numbers, profits, and revenues as well as commercial and competitive position. Procter and Gamble have always been the American leader regarding the manufacturing and selling of consumer products, anything from personal hygiene products to detergents. However, on the international scale, Proctor and Gamble were only the second-best, being outrun by the Anglo-Dutch company Unilever. Influenced by the international trend started by corporations wishing to become the best in their domain, P&G developed a strategic plan to gain its international leader position (Dobson and Starkey 2004).

Their plan to expand regarded a merger with another American leader manufacturer and seller of consumer goods, but highly specialized in a complementary field, Gillette. In 2005, the two major companies merged into the world’s number one leader organization specialized in consumer products, therefore, dethroning Unilever. Procter and Gamble were generally specialized in family and women’s care products, whereas Gillette was specialized in men’s care products. By combining the knowledge and information acquired by P&G and Gillette, the newly formed company added to their line of internationally acknowledged products (such as Ariel or Pampers) another set of renowned products such as Gillette razors, Duracell batteries, Oral-B dental hygiene products, and Braun (Daft, 2003).

Globalization involves contracting workforce from abroad and the reasons for doing so are various, the most eloquent being highly specialized personnel and lower costs. However, criticized for increasing the unemployment rate in the country of the outsourcer, off-shoring is an international trade that has influenced numerous companies. Like with several other large corporations, the possibility to reduce costs and motivated P&G to launch the outsourcing process. Moreover, in the particular case where Procter and Gamble deliver products to 160 countries, the necessity to collaborate with the abroad workforce could not be neglected (Daft, 2003).

In this order of ideas, by 1999, P&G had already opened headquarters in 81 different states. To cope with the immense demand for P&G products all over the world, it becomes more efficient to produce some of the products in the countries they were being sold, instead of producing them within the United States then exporting them abroad. Moreover, in 2003, the website news.com announced that Procter and Gamble had sealed an outsourcing deal with Hewlett-Packard. Since most of the production, finance, and accounting processes had already been distributed worldwide to the 81 headquarters, P&G needed HP to “outsource transactional accounts payable in regions across the globe.” In other words, HP’s main objective was to maintain and improve the quality of P&G services across the globe through developing and sustaining a viable information network. It’s generally accepted that technology has drastically changed humanity’s existence by introducing new concepts, ideas, information, and gadgets to sustain a certain kind of lifestyle. Technology has also had major influences upon the domain of business and economics by resizing consumers’ demands and obliging companies to develop at a rapid pace (Drejer, 2002).

From the economic perspective, P&G’s current position is marked by stable development and growth. It is one of the most important industry requirements, which is essential for the expansion of opportunities and plays an important role in making or breaking the competitive positioning. It allows P&G to receive input from those who are involved in this business, giving a “real world” perspective. This essential input often gives us insider accounts of a contemporary world which companies are not normally privileged to see. Strategic alliances include Clairol in 2001 and German haircare giant Wella in 2003. This brought P&G US$100 million includes Axion and Gama in France, Dinamo in Italy, Ajax in Sweden, and Dynamo in Denmark. P&G has several joint ventures in China, primarily domestic firms. P&G has also realized rapid expansion through capital injections. To protect themselves, local and international companies are constantly against international acquisitions policy. This year, P&G was claimed in anti-competitive action. This strategy helped to save about $25 million for P & G and maintained more close relations with national partners and customers. In recent years, P & G has shifted its global focus to core brands and price reduction measures. This strategy has helped P&G to maintain high-speed growth through optimization of its facilities and constant technological innovation. Changes to one area of the value chain have knock-on effects in other parts of the business (Dobson and Starkey 2004).

Mergers and acquisitions have a substantial impact on P & G market performance. The process of globalization and mergers has a major impact upon the future structure of the consumer goods retail industry, but many regulatory and ownership barriers remain in force worldwide. Organizational ‘type’ has been dramatically influenced by the rise of globalization, and in this changing environment, P is seeking to maximize its ‘global reach, in the belief that those that offer a global service and products will be in the strongest competitive position. The nature of competition can be characterized through the structure of competition namely the number and types of competitors and the action of competitors (Kotler and Armstrong 2005).

For P&G, outsourcing is as much an attempt to regain some sense of corporate focus, as it is a means to reduce costs. The market is so large that specialists have arisen at all stages of computer design, manufacture, operation, and maintenance. Many companies are choosing to outsource the set-up, operation, and maintenance of their computer systems and networks, accessing the equipment and expertise of a specialist provider. Also, globalization affects the business itself opening new opportunities for growth and expansion. P&G contracts out workforce from abroad to avoid cultural and national differences (Kotler and Armstrong 2005).

Strategic change is important for every company as it helps it to improve market position and respond effectively to new environmental conditions and competition. In P & G, the need for strategic change is caused by an economic crisis and a crucial need to introduce new and innovative technology into practice. The retail industry needs an effective change management strategy to save costs and time on implementation and void failure. Although plans for programs can be developed fully, the description of the change will be less prescriptive than those in project plans. The change management was introduced in production facilities: new methods of transfusions and absorption. These proposals for change stated the general objective as it was conceptualized at present, establish the criteria of both the final change and the decision-making process leading to it, recommended the types of sources to be used in gathering information, and put into place a date-specific procedure for activating the program. Many activities lend themselves to this kind of planning: for instance, employee benefits programs, public relations, and customer service. Change systems used this kind of improvement in matters about curriculum, safety, and staff development. In short, any undertaking that is intended to generate a continuing change –that is, it was not subject to completion– naturally took the form of this kind of proposal for change (Jouve, 2002).

The change will take place in production facilities and will be based on new technological improvements and the introduction of environmentally friendly technologies. The change model selected for implementation is Lewin’s change model. This model is the most appropriate one because it stipulated the main steps of change and meets the organizational objectives and structure of the pharmaceutical industry. This model will help P & G to solve problems and new environmental demands imposed on the pharmaceutical industry. To some extent, this model is simple and is easily applied by the company’s management team.

Also, it covers all important areas of change allowing the pharmaceutical industry to prepare the ground for change, introduce change, and level resistance to change. The complexity of the model does not often lead to better outcomes and results: a simple model allowed P & G to develop state-of-the-art solutions to its current problems and weaknesses. The intent is to follow some of Lewin’s approaches on (1) unfreezing and (2) refreezing. The industry staff is motivated to formulate what the differences were (unfreezing) and try to replace irrational assumptions with a more rational understanding of differences with the help of a trained facilitator (refreezing). When one initiates such training in an indigenous organization, it is across the board instead of with isolated groups within the organization (Jouve, 2002).

The main benefits of the proposed change approach are that it helps P & G management to prepare employees for change and overcome possible difficulties in communication and performance. In general, all employees are motivated and very enthusiastic about new changes and their positive impact on the company’s production. The four frames are not only sustained an organization of the company, the frames provide the capacity for growth and change. The strategic changes in P & G have the obligation both to ensure the adequacy of resources for achieving the stated purpose and to appropriate the resources within the system for optimal results. In P & G, resources are typically categorized as financial, physical, human, and intellectual, almost everything begins and ends with economics. Possible difficulties posed by the change are a lack of skills and knowledge among workers. So P & G while managers invest in physical capability–if for no other reasons than to qualify for a tax break or to remain competitive–are reluctant to reduce the bottom line by direct expenditure for acquiring or, even more crucial, developing human or intellectual capacity. And change systems, which live by probation and priority, seldom can fund the last few items in the financial plan. The average investment in human capacity is less than 1 percent of the total revenues.

The use and implementation of the Balanced Scorecard will help P&G to evaluate resources and make a complex analysis of current needs and demands. Most modern organizations, therefore, are seriously incapacitated; even the routine business operations are marginal. And, worse still, there is no capacity for expansion. Quite often the impetus comes to form misguided management practices. An overemphasis on efficiency, a term borrowed from manufacturing, not only prevents current effectiveness but also forecloses any hope of future development. In extreme instances, the depletion of capacity is equivalent to self-cannibalization (Levy and Merry, 1986).

Top-down and bottom-up designs will help P&G to develop the information processing and knowledge structure required by the change management. Focusing their activity on the latest innovations in the fields of care products as well as technological innovations, P&G realized the magnitude of the technological involvement in the business actions and made continuous efforts to sustain the development of technology and particularly information technology. For instance, when acquiring Gillette in 2005, P & G declared that the merger of the two leaders would dramatically change the industry, especially the manufacturers of IT. IT specialists expect P&G actions to influence other multination corporations and aid them to realize that “new tech initiatives contribute to product, service, and process innovation” driving them towards investing in the field of IT (Levy and Merry, 1986).

The strategy followed by Procter and Gamble to support technology and technological innovations is that of making available within the company jobs in careers in technology. Moreover, Procter and Gamble organize Research and Technical Careers in Industry Conference where they inform the public about the latest technological innovations and their importance. The corporation also emphasizes the “science behind the brands” and encourages the audience to apply to the technical positions available within the corporation.

The case of P&G shows that successful and effective marketing depends upon efficient organizational methods and management tools that meet the needs of the time. The business strategy of P&G is “value pricing strategy” during which it boosted advertising and performance. The stronger each of these forces is, the more P&G is free in its ability to earn greater profits. This strategy is successful because the bargaining power of buyers had a strong influence upon the business. P&G, producing differentiated products, is brand loyal, and potential new entrants encounter resistance in trying to enter the industry. This strategy is also an important factor in increasing the costs for customers of switching the products of new competitors. The opportunity of this strategy is further growth and competitive position; Technological forces including support technology and technological innovations, which has changed the nature of business relations and interaction with customers. Technological change also affects production methods, requiring the implementation of new processes for companies to stay competitive.

Dobson, P., Starkey, K. 2004, The Strategic Management: Issues and Cases . Blackwell Publishing.

Daft, R. L. 2003, Organizational Theory and Design . 9th Edition. South-Western College Pub; 8 edition.

Drejer, A. 2002, Strategic Management and Core Competencies: Theory and  Application . Quorum Books.

Jouve, B. 2002. Innovation without Change? German Policy Studies , 2 (1), 1-4.

Kotler, Ph., Armstrong, G. 2005, Principles of Marketing . Prentice Hall; 11 th edition.

Levy, A., Merry, U. (1986). Organizational Transformation: Approaches, Strategies,  Theories . Praeger Publishers.

Proctor and Gambler Home Page. 2009. Web.

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How Procter & Gamble Went From Soap And Candles To Multinational Giant

Table of contents.

The Procter & Gamble Company (P&G), a small American family-owned business that began in 1837, is now a multi-billion-dollar company that’s regarded as the world’s largest consumer packaged goods company.

Very few brands in the world are as renowned and admired as Procter & Gamble, which operates in five main segments, including beauty, grooming, healthcare, fabric, and home care, and baby, feminine, and family care.

From living rooms, nurseries, and kitchens to bathrooms, laundry rooms, and utility rooms, P&G has made its way in millions of homes worldwide and is improving lives in small yet meaningful ways, one product at a time. No wonder it has endured and continued to grow exponentially.

P&G's market share and statistics:

• P&G market share of 8.74%
• Net sales of $80.2 billion in 2022
• Market cap of $331.45 BillionFeb 2023
• Products sold in more than 180 countries
• Over 65 individual brands trusted by 5 billion people
• Number of P&G's employees in 2022: 106,000

A global leader in the fast-moving consumer goods industry, P&G has always challenged norms and shaped the future.

Let’s now take a look at the exciting growth journey of P&G from an idea born in Cincinnati, Ohio, to a multi-national company that’s second to none in the world right now.

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Procter & Gamble Join Forces

William Procter, an emigrant from England, and James Gamble, an emigrant from Ireland, both were settled in Cincinnati, Ohio. While the former was a candlemaker, the latter was a soap maker. They married sisters, Olivia and Elizabeth Norris, becoming a family. But they were no ordinary family. They took their personal relationship and turned it into a professional one as well, thanks to the suggestion of their father-in-law, Alexander Norris, who highlighted that both their trades included the use of lye that was made from wood ashes as well as animal fat, which way readily available in the hog-butchering center of Cincinnati and maybe they should consider becoming partners. And just like that, Proctor and Gamble was established in 1837.

The Initial Years

Procter took charge of the store they set up on Main and Sixth Street, while Gamble oversaw the manufacturing operations just behind their outlet. Candles were the primary product of the company, which saw stiff competition from over a dozen other companies. 

The enterprising partners with a knack for business expanded their business throughout Hamilton and Butler counties. Making the most of the various transportation channels, including waterways and rail, Proctor and Gamble continued to grow by supplying its products to different regions by 1851.

This is when the famous moon-and-stars symbol was created as a trademark to help distinguish P&G's products from others. While the symbols were initially created to help identify the products at their shipping destinations, they became a symbol of quality to P&G's customers, who would only purchase if and only if the container had the moon-and-stars symbol.

Throughout the 1850s, Proctor & Gamble continued to grow. In the early half of the decade, operations were moved to a larger factory and a different location that provided the company better access to shipping routes, as well as warehouses. Plus, an office building was leased in downtown Cincinnati to give the company proper office space and corporate image. Proctor took control of sales and bookkeeping while Gamble continued to run the manufacturing arm of the business. Such was the growth that the company reached sales of $1 million by 1858-1859, with around 80 employees working full-time.

Thriving Even During The Civil War

A key raw material in Proctor & Gamble's products was rosin, which was procured from the south. In 1960, just before the American Civil War, the sons of Procter and Gamble traveled to New Orleans and purchased as much rosin as possible. This proved to be crucial as when wartime shortages disrupted competitors' supply chains, Procter and Gamble continued to prosper. The company even provided candles and soaps to the Union army. Not only did this prove to be lucrative for the company but it also widened the customer base and made the moon and stars a symbol that was revered.

While Procter and Gamble had managed to avoid being a victim of wartime scarcities skilfully, but with the course of time, its stock of raw material shrank. Taking matters into its own hands, the company began experimenting and exploring new ways of manufacturing. From producing stearic acid using tallow instead of lard stearic, which was expensive and short in supply, to substituting rosin with silicate of soda, the company found better ways of doing things. Such was the success of these innovative techniques and ingredients the company came up with that they were later even used in modern detergents and soaps.

Ivory Soap Catapulting Procter and Gamble To The Top

As soon as the war ended, Procter and Gamble invested in expanding to new markets as well as updating its facilities. At the same time, the company hired a chemist to work alongside James Gamble and develop new products, including a new soap. The idea was to develop a premium-quality soap inexpensively, and they did just that in 1878. The White soap, later renamed Ivory soap, soon made a name for itself and helped Procter and Gamble cement its position in the industry.

At this crucial moment, Harley Proctor, William Procter's son, put forth the idea of advertising the product in newspapers and convinced the board of directors to leverage marketing. Back in the day, advertising was not at all common and even risky as it was believed that only disreputed manufacturers advertised. After extensive debate, a budget of $11,000 was allocated to advertising in 1882, and the slogan of "99% pure" bode well with the public given all the other ads has outlandish claims. While the company embraced advertising, it left no stone unturned in ensuring the excellence of the products and carefully analyzed as well as improved the products before launching them. This is said to be the beginning of Procter and Gamble's superior product development practices, which continue to this day.

Ivory was a huge success – there's no doubt about it. It, in combination with the company's newfound ability to spread its message using advertising, helped it grow in the 1880s. More people were hired, additional plants were set up, and new products were launched, including the yellow soap, which helped drive sales to $3 million by 1889. 

Key Takeaway 1: Grab Opportunities & Make Iterative Improvements

When their father-in-law highlighted that both Procter and Gamble should merge, rather than laughing out at the idea, both considered it seriously, and well, the rest is history.

While Procter handled sales, Gamble took over the manufacturing side of the business, and they began expanding to new regions, selling soaps and candles. From carving out a unique identity for themselves through moon and stars symbols to experimenting with the ingredients and coming up with innovative new products as well as embracing advertising, the company did it all in its quest to grow. Its product development process, advertising, and commitment to quality helped it achieve a competitive advantage and set it up for success.

Taking The Company To Unprecedented Heights

Yes, the company was growing rapidly, market sentiments were positive, and customers couldn’t get enough of the products. But it wasn’t all sunshine and rainbows. In the 1880s, labor unrest began adversely impacting companies all around the United States, and Procter & Gamble, too, suffered at the hands of it.

Doing Right By The Employees

The company understood the importance of averting labor problems and stopping them from escalating into a crisis. Procter’s grandson, William Cooper Procter, who has just joined the company in 1883, was put in charge of drafting P&G’s labor policies. In 1885, the proposal to give employees Saturday afternoon off was approved. A couple of years later, a profit-sharing plan was implemented to align the interests of the employees with the company's interests. Then in the subsequent year, employee bonuses were tied to their performances. All of these helped improve employee performance incrementally.

After The Procter & Gamble Company was incorporated in 1890 and William Alexander Procter was made the president, an employee stock-purchase program was implemented and linked to the profit-sharing plan, giving employees an even greater incentive to perform well and elevate the company as well as themselves. Down the line, a highly acknowledged sick-ness disability program and eight-hour workday were also announced to further ensure the well-being of employees.

All these steps made P&G a pioneer in employee benefit programs while ensuring higher productivity and performance of the company.

Onwards & Upwards

Expansion and diversification of the products portfolio was a continuous process that P&G stuck to through thick and thin. New products such as the P&G White Naphtha was launched in 1902, and it too proved to be a success and helped P&G solidify its position as the market leader in the cleaning industry. Moreover, P&G invested in building factories in different regions of the United States, including Kansas City, Missouri, and Port Ivory, New York, given that the demand was high, and it had to expand capacity to cater to it.

After years of experimentation with hydrogenation and extensive research, P&G launched Crisco, a first-of-its-kind shortening made solely from vegetable oil, in 1911. With that, P&G took a bold risk of delving into a different market altogether – that of food products. Courtesy of strong advertising, Crisco soon took off and became the go-to choice of shortening for consumers.

World War 1 did bring shortages of raw material and gave way to supply chain bottlenecks, but thanks to proactive management and stockpiling of resources needed, P&G remained shielded and went on its merry way to grow.

With the wide usage of light bulbs, the demand and, in turn, the sales of candles declined. However, the company never looked back and launched an array of products in the 1920s. Ivory Flakes, Chipso Soap, Camay, and Oxydol were some of the products the company came up with, and with these, the company had an extensive and diversified line of soap, toiletries, and food products.

While the Great Depression proved to be a menace for most companies, P&G remained immune to it. In the first half of the 1930s, synthetic soap products were launched. These were followed by a synthetic detergent, Dreft, and synthetic shampoo, Drene. All along, different forms of advertising were leveraged, including newspapers, radio, and television broadcasts, and a huge chunk of the overall budget was allocated to it in order to boost sales.

Changing The Way Business Is Done

P&G redefined the way business is done. The company invested heavily in research and development, hiring chemists to develop new products and economists to study consumer behavior.

Extensive market research was conducted in which P&G toured kitchens and laundry rooms around the U.S to see how the products are practically used and how improvements can be made. This was complemented by studies on consumer behavior to understand the pain points of customers and address their needs with new products.

In addition to this, P&G introduced brand management to the world in 1931. The company emphasized the concept of standalone brands that would compete not just against products of other companies but also with those of P&G itself. Since then, brand management has not remained a permanent fixture at P&G but also at other leading companies in the world.

Playing An Integral Role In World War 2

During challenging times of the Second World War, P&G stood with the government and did all in its capacity to help. P&G oversaw the construction and operation of ordnance plants, catered to government contracts for mortar shells, and supplied Glycerin, which was used in medicine and explosives. 

Key Takeaway 2: Don’t Be Afraid To Take Bold Risks & Make Big Bets

By giving employees a piece of the pie and taking care of their overall wellbeing, P&G quelled frustration and any plans to strike against the company.

Moreover, P&G continued to diversify its product portfolio, introducing new products such as P&G White Naphtha, Crisco, Ivory Flakes, Chipso Soap, Camay, and Oxydol, Dreft, and Drene while expanding its production capacity and harnessing the power of advertising. All of these, in conjugation with the company’s commitment to research and development and brand management, helped P&G prosper in good as well as bad times.

Innovative and bold steps such as introducing the profit-sharing plan, delving into the food market with Crisco, advertising on radio and television, and debuting brand management worked wonders for P&G.

Post-World War 2 To The End Of 20th Century

New products driving sales to $1 billion & beyond .

Just as World War 2 ended, P&G stepped on the gas to achieve growth. With the availability of raw materials and change in consumer sentiment for the better, P&G wasted no time in upping the ante.

In 1946, P&G introduced Tide, a miraculous synthetic detergent that redefined the way people washed clothes. The quality of the product was backed by a $21 million advertising budget, and the result was quite extraordinary. Tide became the number 1 laundry detergent in just 2 years after launching despite its high price. Over the years, P&G launched several laundry products, including Cheer in 1950, Dash in 1954, Downy in 1960, Bold in 1965, Ariel in 1967, and Era in 1972. Tide, however, remained the best laundry detergent even in the 21st century.

In 1955, P&G launched Crest toothpaste, establishing itself in the toiletries industry. After years of research, the company came up with a breakthrough product that had the potential to significantly reduce cavities, and hence, it was even endorsed by the American Dental Association.

P&G never limited itself and was always on the lookout for opportunities and diversification. In the 1950's1950's, P&G entered into the paper-goods market and introduced White Cloud toilet paper in 1958 and Puffs tissues in 1960. The following year, P&G launched Head and Shoulders and Pampers disposable diapers and used smart pricing strategies as well as advertising to win market share. 

The diapers were a huge success and a testament to P&G'sP&G's ability to churn out innovative products. In 1976, P&G launched a premium diapers brand called Luvs.

Throughout the late 20th century, P&G continued its rapid growth. It consistently improved its previous products and added new ones, including Bounce fabric softener, Coast Soap, and Sure antiperspirant. Rely tampons were introduced and quickly became a hit due to their absorbent properties. Later on, Always pads were launched, and they became the sanitary napkin of choice, winning market share and trust of women.

A-List of Acquisitions & International Expansion Fuel Growth

P&G had gone international in 1930 when it acquired the British firm, Thomas Hedley and Company, the makers of fairy soap.

Beginning in the 1950's1950's, P&G began aggressively acquiring smaller companies in its quest to expand to new markets and regions. W.T. Young Foods, a Kentucky-based nut company, and Nebraska Consolidated Mills Company were purchased in 1955 and 1956.

In 1957, P&G bought Charmin Paper Mills and began producing toilet and tissue paper. In the same year, it also acquired Clorox Chemical Company, the leading American liquid bleach manufacturer.

In the early 1960's, P&G set its eyes on the food industry and strived to expand its footprint. The 1963 acquisition of Folgers coffee brand and launching of Pringles potato chips allowed them to do just that.

However, contending the charges put forward by Federal Trade Commission, P&G had to divest Clorox in 1967 and agree to not make any groceries and coffee acquisitions for a decade. P&G made further inroads into the groceries industry by acquiring Ben Hill Griffin citrus products in the 1980’s. It also purchased Pantene and Oil of Olay skincare products in 1985.

Given the boom in the healthcare industry in the 1980’s, P&G left no stone unturned in trying to capitalize on the opportunities. It entered into the over-the-counter (OTC) drug market by acquiring Norwich-Eaton Pharmaceuticals, the manufacturer of Pepto Bismol and Chloraseptic, and Richardson-Vicks Company, the manufacturer of Vicks and Nyquil. It also purchased Dramamine, the motion-sickness treatment, and Metamucil, a laxative, from G.D. Searle & Co, becoming a leader in the OTC market. It also partnered up with a number of companies, including Syntex Corporation, Gist-Brocades Company, UpJohn, and Triton Bioscience, and Cetus Corporation, to formulate various OTC drugs that had huge potential.

P&G was a very versatile company and never narrowed its focus. This was clear when P&G entered into the cosmetics business in 1988 with a billion-dollar acquisition of Noxell Corporation, maker of Noxema products and Cover Girl cosmetics. In the same year, P&G also acquired Blendax, a European health and beauty-care goods producer, as well as Bain de Soleil sun care-product line. In 1990, P&G purchased Shulton's Old Spice, an American brand of male grooming products. The very next year, P&G also bought Max Factor and Betrix lines from Revlon, Inc. In 1992, Pantene Pro was launched, and it soon became the best shampoo in the world.

Some Crucial & Much-Needed Changes In the Late 20th Century

In 1985 P&G witnessed its first decline in earnings after more than 30 years. This didn't go down well with the analysts, who claimed that P&G was slow to respond to changes in consumer preferences and its mass marketing practices were not yielding results anymore. It was clear that some fundamental changes were needed.

Hence, P&G diversified its advertising. Rather than solely relying on network television, it changed its marketing strategy by adopting micro-marketing techniques across a broad spectrum of marketing channels. Plus, market research was computerized. P&G also changed its brand management structure and opted for a matrix system in which category managers were put in charge of leading several brands, increasing the efficiency by cutting down layers of management. Moreover, P&G, for the first time, began focusing on profits rather than settling for market share.

P&G was threatened by the weak economy and increased interest of consumers in value. Hence, the company came up with "Every Day Low Pricing" (EDLP) for the majority of its products. This bode well with the consumers but brought criticisms from wholesalers. Additionally, P&G embraced the going green bandwagon and began taking sustainability quite seriously. This was followed by divesting a few of its holdings, including one-half of its Cellulose & Specialties pulp business, the forestry business, and an Italian coffee business.

While sales stood at a whopping $30 billion in 1993, the company decided to undertake a major restructuring of the business to streamline it. The primary goal was to boost the company's private-label brands by making them more price-competitive, bringing products to market faster, and improving profitability. It was a difficult yet much-needed step. 13000 jobs were cut, and 30 plants were closed worldwide. Resultantly, P&G improved its bottom line by $600 million.

Even during the restructuring period, P&G continued to expand internationally and acquire new companies at a brisk pace. P&G acquired Vereinigte Papierwerke Schickedanz AG's European tissue unit in 1994, marking its entry into Europe's tissue and towel market. In the same year, it also acquired the fragrance line of Giorgio Beverly Hills, Inc. Moreover, the company reorganized its management structure around four regions, North America, Latin America, Europe/Middle East/Africa, and Asia. A couple of years later, P&G bought Eagle Snacks brand line, Baby Fresh, and Lavan San household cleaner, and Magia Blanca bleach. The very next year, P&G acquired Tambrands, Inc. and the Tampax line of tampons, becoming the leading provider of feminine products.

1998 brought with it a major restructuring initiative named Organization 2005 to boost innovation, launch new products faster, and increase revenue as well as profit. The significant change that the restructuring brought to the fore was increasing focus on brands rather than geographies, and this helped P&G significantly in the years to follow.

Just before the close of the century, P&G made two significant acquisitions: one of Iams Company, the leading pet food maker in the US, and Recovery Engineering, Inc., which had the PUR brand of water-filter products. Safe to say, both these acquisitions worked out quite well.

In 1999, P&G went on to launch Swiffer, a dusting mop for quick cleaning, and Febreze as well Dryel, fabric care, and household cleaning products.

Key Takeaway 3: Adapt With Changing Times

P&G has never limited itself. From launching an array of quality products and entering in toiletries, paper goods, food, OTC drugs, and cosmetics industry to expanding internationally with an endless list of acquisitions, P&G continued to grow.

In the process, it faced numerous challenges, such as charges by FTC and a decline in earnings in 1985, but the company bounced back stronger than ever. It even took the difficult yet much-needed step to restructure the business in order to enhance efficiency. Being flexible and proactive enabled P&G to stay a step ahead and remain resilient in the face of adversities.

P&G In The 21st Century

Further restructuring, launching of new products, and acquisitions continued into the 21st century.

The restructuring that began in the 1990s was completed in the early 2000s. While operational problems were fixed, more than twenty-thousand jobs were shed. It was a difficult yet much-needed step to re-direct P&G on the growth path.

Some notable acquisitions included purchasing the Clairol haircare business from Bristol-Myers Squibb Company, which augmented P&G's positions in the fast-growing and profitable beauty and haircare industry. In addition to this, the acquisition of Dr. John's SpinBrush, a battery-powered toothbrush, and the launch of Crest Whitestrips, a tooth whitening product, gave a boost to the Crest brand, propelling sales.

In 2003, P&G made another successful acquisition of Wella AG, a leading producer of haircare products, entering into the growing salon market. Two years later, P&G became the largest consumer good company by acquiring Gillette.

Here Comes The Growth Factory

It's a well-documented fact that by the early 2000s, P&G was losing steam. There was a stark difference between the company's growth goals and what it was able to achieve due to its innovation pipeline. Something had to be done. The company launched Connect + Develop program to bring in innovation from outside and build on the. While it remains a success even today, it was soon realized that more had to be done.

This was when P&G came up with the unique idea of setting up a "new growth factory." It consisted of a network of structures and enhanced capabilities to quickly introduce new products from ideation to market. From business groups, entrepreneurial guides, a novel innovation manual, and a disruptive college, among other things, the growth factory had it all to strengthen the core business and capitalize on innovation opportunities faster than ever before.

It was a remarkable strategy that took a leaf from the book of Thomas Edison and Henry Ford, combining inspirational ideas with mass production in an age of cut-throat competition and shrinking product lifecycles.

Transformational-sustaining innovations to deliver breakthroughs in existing innovations strengthened organization support for forming and running disruptive businesses, and effective revamping of strategy development and review process enabled P&G to increase its innovation success rate significantly.

More Restructuring & Acquisitions

By 2012, P&G exited the food industry, having sold Jif Peanut Butter, Crisco, Folgers Coffee, and finally Pringles. By 2014, it also left the pet food business.

The company decided to restructure once again in order to streamline the company and enhance its focus on the main brands that were driving growth and contributing to the majority of the profits. From Vicks and the numerous beauty brands to Duracell, various brands were divested. At the same time, acquisitions such as that of the consumer health division of Merck Group, among others, laid bare the fact that P&G has not cast aside its main strategy to grow by acquisitions.

Key Takeaway 4: Never Stop Innovating

P&G came into the 21st century whilst still in a restructuring mode. It was clear that the company's growth was slowing. From new acquisitions and product launches, the company was continuing to do what had served it well.

But there was one main change: focus on innovation. It became crystal clear that P&G could only continue to grow in a vastly competitive world and changing consumer preferences as well as market dynamics by innovating. Hence, the company doubled down on its flagship program Connect + Develop and then came up with this revolutionary concept of "Growth Factory." It not only helped the company make the most of new opportunities but also re-invent the culture of the company, which in turn continued to deliver desirable results.

Core P&G Strategies Fueling Growth

How can a company as large and as diverse as P&G operates successfully and continues to grow? Through well-defined and clear-cut strategies that reinforce as well as build on each other and lead to substantial value creation.

P&G’s winning integrated strategy includes five key aspects, and they are as follows:

A Strong & Focused Portfolio

Superiority across the entire value chain, productivity an integral part of dna, constructive disruption, empowered & agile organization.

Let’s now take a look at each of the core strategies in detail to better understand how P&G does what it does so successfully time and again.

P&G product’s portfolio consists of ten categories of daily-use products, including personal healthcare, oral care, fabric care, home care, skin, and personal care, haircare, grooming, baby care, feminine care, and family care. In each of these categories, P&G has a market-leading share, and the company strives to leverage its position to scale up.

P&G pursues excellence in its products, packaging, communication, retail execution, and value offerings. The company is well aware that superiority matters and is an unparalleled opportunity that can give it a competitive advantage. Hence, it has set the superiority bar quite high and continuously tracks the underlying metrics, including category growth, market share, household penetration, sales, and profits.

Boosting efficiency across all business operations is part of the P&G DNA. From reinventing the way it works, figuring out economical ways of doing things, and delivering cost and cash efficiency to harnessing the power of technology to automate, going digital, and deriving insights from data, P&G continues to take numerous steps to do things better.

Leading with constructive disruption to create positive outcomes is something that P&G continues to do. Combining around 180 years of experience and expertise with the leanness and agility of a startup, P&G comes up with creative solutions to create value for all its stakeholders. To stay on top of the changing customer preferences and market dynamics, P&G goes the extra mile to innovate.

From enabling and engaging employees to creating a strong, driven culture, P&G has created an organization that’s accountable and supportive of each other to deliver desired results. This is done through strong leadership, empowering people to accelerate growth, committing to being a force for good, ensuring sustainability, equality, and inclusion while abiding by ethics and corporate responsibility.

Key Takeaway 5: Craft An Effective Business Strategy

P&G continues to grow due to its highly specific business strategy consisting of action plans that drive the company forward. 

A versatile and strong products portfolio followed by the pursuit of excellence, focus on enhancing efficiency, continuous innovation, and empowerment of the employees help P&G post balanced top and bottom-line growth.

What’s even better is that P&G continues to make iterative improvements in its core strategies in the quest to achieve even better results, continuing to raise the bar for all.

P&G Today & Key Strategic Takeaways

Today, P&G remains committed to improving the lives of 5 billion people in around 180 countries and continues to innovate and lead in each and every aspect while supporting good causes and protecting the environment.

Growth By Numbers

Key strategic takeaways, don’t wait for opportunities. create them.

From delving into new industries and geographical regions to launching new products ahead of time, P&G created growth opportunities for itself. Rather than getting bogged down with problems at hand, such as growing competition, supply chain disruptions, and high risks associated with expanding, P&G constantly explored new and better ways of doing things. This has continued to serve the company quite well.

Hire The Right People For The Right Work & Take Care Of Them

Investment in human capital pays high returns, and it’s the only way companies can make it big. P&G knew this. Right from its profit-sharing plans with employees in the 19th century to beneficial human resources policies today, P&G has continued to be the top employer of choice today. It has always empowered employees and encouraged them to contribute more in order to help the company grow. This has proven to be a master-stroke that separated P&G from the rest of the companies.

Craft A Business Strategy For Today & Tomorrow

P&G has evolved its strategy a number of times, restructured its business more often than it would have liked to, and never hesitated to take risks. Why? Because P&G understands that if you worked a certain way in the past and that delivered results, there’s no guarantee that it will continue to work in the future. This is why it is imperative to stay on your toes and think ahead. Being bold and taking risks in what you believe is crucial; otherwise, you’ll find yourself lagging behind.

Encourage Collective Creativity

Individual creativity can be uncontrollable, but collective creativity can be managed and encouraged. P&G did just that. The company firmly believes that breakthrough innovations improve lives and can win the company decades instead of just quarters. This is precisely why the company spends on average $2 billion on R&D to come up with new offerings that are simpler, easier to access, affordable, and deliver better results.

Award winner: Big Data Strategy of Procter & Gamble

This case won the Knowledge, Information and Communication Systems Management  category at The Case Centre Awards and Competitions 2020 .  #CaseAwards2020

Author perspective

Who – the protagonist.

Linda W. Clement-Holmes , Procter & Gamble (P&G) Chief Information Officer (CIO).

P&G is a leading consumer packaged goods company, regarded as a pioneer in extensively adopting big data and digitization to understand consumer behaviour.

Former Chairman and CEO, Bob McDonald , and CIO, Filippio Passerini , were responsible for the push on big data, which had resulted in P&G becoming more nimble and efficient.

However, some experts were sceptical about P&G’s obsession with digitization, and how it could slow the speed of decision making.

It was in June 2015 when Linda replaced Filippio.

P&G is headquartered in Cincinnati, Ohio, but its brands are sold worldwide.

“ Change movement is one of the biggest challenges of big data implementation. Analytics need to be integrated with processes. We had to educate and train our field force over and over again in order to make analytics a part of their daily routine.” A head of analytics at a leading logistics company

Linda had the big responsibility of continuing and leveraging the big data initiatives started by Filippio.

In order to achieve this, a culture of data-driven decision making within the organisation needed to be implemented by the leadership team.

Linda’s job was to convince them of her vision.

AUTHOR PERSPECTIVE 

Vinod said: “I am extremely honoured to receive such a prestigious award from The Case Centre, popularly dubbed the Case Method Oscars!

“I am earnestly grateful for the recognition I have received for my effort which would not have been possible without the guidance and support of my Dean, Debapratim Purkayastha, who gave me an opportunity to associate with him in writing this case.”

Predicting the future

Debapratim commented: “Big data analytics has always been a key strategy for businesses to have a competitive edge and achieve their goals. Now, predictive analysis through big data can help predict what may occur in the future.

“The topic is very contemporary to current business trends and the case helps the students to be updated with the organisational readiness to welcome latest changes in technology for better performance. The case discusses in detail how Procter & Gamble adapted the big data through different tools like Decision Cockpit and Business Sphere.”

Vinod commented: “The case helps understands many strategic, as well as technical aspects of big data and business analytics, and how they are implemented in a fast-moving consumer goods (FMCG) like Procter & Gamble.

“Not only does it help understand the opportunities and challenges in implementing a big data strategy, but also the significance of accessibility to information in an organisation and how its functioning can be transformed through the availability of real-time data.

“The case enables a discussion on ways in which big data could be productively employed in an organisation in some of the key business functions.” 

Debapratim added: "Educators may like using our other case,  Consumer Research at Procter & Gamble: From Field Research to Agile Research , as a follow-up, as it shows how the pioneers of marketing research is now leveraging big data for agile research.

Identifying the right information

Debapratim explained: “Understanding of the concepts that are going to be taught through the case study is a prerequisite of writing a case. Finding the relevant information, and presenting the case in an understandable manner to students is also equally important.

"Most importantly, people new to case writing should work with more experienced case writers to hone their skills in case writing.”

The authors

Celebrating the win

Unfortunately, due to the Coronavirus pandemic, we were unable to present the authors in person with their trophies for winning the Knowledge, Information and Communication Systems Management category in 2020.

We are delighted to celebrate Debapratim and Vinod's win by sharing these pictures of them with their awards - congratulations!

The protagonist

Educators can login to view a free educator preview copy of this case and its teaching note.

View all the 2020 winners

Stay in touch with all the latest case news and views in our free newsletter,  Connect .

Read it online or sign up to have it delivered direct to your inbox!

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Case Study: Implementation of Collaborative Customer Relationship Management at Procter & Gamble

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Procter & Gamble’s Generic Competitive Strategy & Growth Strategies

The Procter & Gamble Company (P&G) applies its generic competitive strategy to achieve competitive advantage in the consumer goods industry. Michael Porter’s model for generic competitive strategies focuses on business approaches that lead to competitiveness and resilience amid competition. In the case of Procter & Gamble’s generic strategy, the emphasis is on product quality and value. These factors are significant in supporting P&G’s efforts to achieve and maintain a leadership position in the consumer goods industry. It is worth noting that quality and value are also included as major points in Procter & Gamble’s vision statement and mission statement . Moreover, the company applies intensive growth strategies alongside its generic strategy. These intensive strategies facilitate Procter & Gamble’s growth in terms of market performance. Considering the tough competition in the consumer goods market, it is essential that these intensive growth strategies are effective and relevant to the current market conditions affecting Procter & Gamble.

Procter & Gamble’s generic competitive strategy (Porter’s model) defines the main approach of the business to achieve competitiveness. This competitiveness relates to the business competencies described in the SWOT analysis of Procter & Gamble . In this regard, the generic strategy also influences managerial decisions, in terms of marketing, research and development (R&D), and innovation. On the other hand, Procter & Gamble’s intensive growth strategies depict the strategic approach of the business in addressing consumer goods markets. These intensive strategies affect the company’s growth and expansion plans.

Procter & Gamble’s Generic Strategy (Porter’s Model)

Procter & Gamble uses differentiation as its generic strategy for competitive advantage. Differentiation involves developing the uniqueness of the business and its products to attract target customers. In this case, Procter & Gamble highlights quality and value in its consumer goods. For example, the company offers high quality cleaning agents, like Tide laundry detergent, at affordable prices. Based on this generic competitive strategy, a suitable strategic objective is to maintain P&G’s high investments for R&D to ensure high-quality and valuable products. Another strategic objective based on Procter & Gamble’s generic strategy of differentiation is to maintain effective marketing strategies that emphasize the uniqueness of such products. Such product uniqueness determines pricing and promotional activities. These considerations are included in Procter & Gamble’s marketing mix or 4Ps .

The cost leadership generic competitive strategy (also known as the low-cost provider strategy) is partially applied to some of Procter & Gamble’s products, focusing on cost or pricing to achieve competitive advantages. For example, Pantene hair care products are priced relatively lower compared to competitors, like Unilever ’s Dove hair care products. Procter & Gamble’s marketing mix also considers this generic competitive strategy. A strategic objective based on the cost leadership generic strategy is to develop Procter & Gamble’s competitive advantage based on cost-minimization approaches. For example, automation is increasingly used to minimize cost and maximize efficiency in Procter & Gamble’s operations management and production processes.

Procter & Gamble’s Intensive Strategies (Intensive Growth Strategies)

Market Penetration (Primary Intensive Strategy) . The Procter & Gamble Company’s primary intensive growth strategy is market penetration. In this intensive strategy, the main aim is to increase the company’s market share. Procter & Gamble does so through marketing campaigns to increase consumer awareness about the company’s consumer goods. This strategy is especially significant for low-performing products in the market. In addition, Procter & Gamble implements this intensive strategy through beneficial agreements with retailers. For example, P&G grows its market share by offering higher retail profit margins for some large retailers. In return such retailers display Procter & Gamble’s products in prominent locations or shelves in their stores. The differentiation generic strategy creates competitive advantages that help increase success in applying the market penetration intensive strategy. A strategic objective based on this intensive growth strategy is to increase Procter & Gamble’s market share through aggressive marketing.

Product Development (Secondary Intensive Strategy) . Product development is used as a secondary intensive growth strategy in Procter & Gamble’s business. This intensive strategy involves design and production processes for products that attract target customers. Procter & Gamble applies product development to support continuous business growth, while addressing competition. For example, P&G develops new products to increase its share of the global consumer goods market. In addition, Procter & Gamble increases its competitiveness by continually enhancing current products. The differentiation generic competitive strategy directly determines the kinds of products that the company develops, especially in terms of competitive advantage based on quality and value. A strategic objective associated with this intensive strategy is to grow Procter & Gamble through continuous innovation.

Market Development . The Procter & Gamble Company uses market development as a supporting intensive growth strategy. Market development contributes to the company’s growth through entry into new markets or market segments. For example, Procter & Gamble could enter new market segments when it creates an entirely new product line or when it changes its market focus. In this way, Procter & Gamble can expect a new revenue stream. The generic competitive strategy of differentiation makes it easier for P&G to enter new markets or market segments when implementing this intensive growth strategy. Also, a strategic objective based on market development is to increase Procter & Gamble’s R&D investment in new product lines, or to reform its marketing strategies to enter new segments in a growing or stable consumer goods market.

Diversification . Diversification is one of Procter & Gamble’s supporting intensive growth strategies. This intensive strategy involves establishing new business operations. For example, every acquisition and corresponding business diversification in Procter & Gamble’s history has led to considerable growth. However, this intensive growth strategy is considerably difficult to implement because of its large-scale effects on P&G’s business organization. For instance, each acquisition leads to adjustments in Procter & Gamble’s organizational structure (business structure) . The differentiation generic strategy helps build competitive advantage the company needs to succeed in new business operations. Also, this intensive strategy leads to the strategic objective of using an aggressive approach to acquire other firms to grow Procter & Gamble’s business.

• Ali, B. J., & Anwar, G. (2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. International Journal of Advanced Engineering, Management and Science, 7 (6), 42-51.
• López, D., & Oliver, M. (2023). Integrating innovation into business strategy: Perspectives from innovation managers. Sustainability, 15 (8), 6503.
• The Procter & Gamble Company – Form 10-K .
• The Procter & Gamble Company – Innovation .
• U.S. Department of Commerce – International Trade Administration – Consumer Goods Industry .
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Home » Business Analysis » Case Study of Procter and Gamble (P&G): Structure and Culture

Case Study of Procter and Gamble (P&G): Structure and Culture

Three billion times a day, P&G brands touch the lives of people around the world. This happens because P&G provides branded products of superior quality and value to improve the lives of the world’s consumers. This results in leadership sales, profit and value creation , allowing employees, shareholders and the communities in which we operate to prosper. The Procter & Gamble Company (P&G) is a brand behemoth. The world’s first maker of household products courts market share and billion-dollar brands. Its business is divided into three global units: beauty, health and well being, and household care. It also makes pet food and water filters and produces soap operas. Some 25 of P&G’s brands are billion-dollar sellers, including Gillette Fusion, Always/Whisper, Braun, Bounty, Charmin, Crest, Downy/Lenor, Folgers (which it reportedly plans to spin off), Gillette, Iams, Olay, Pampers, Pantene, Pringles, Tide, and Wella, among others.

The P&G consists of over 138,000 employees working in over 80 countries. It began as a small, family-operated soap and candle company now provides products and services of superior quality and value to consumers in more than 180 countries. In P&G, they are focusing their efforts on where they can make the most meaningful difference in both environmental and social sustainability. Their commitment begins with P&G’s Purpose, values and principles, in which sustainability is embedded, and manifests itself in a systemic and long-term way. They try to make their company better.

Business Structure

The Procter & Gamble Company (P&G) is divided into three main worldwide units, which are household care, beauty and grooming and health and well-being. Every units’ report is sent to president of global business units. P&G has restructured its hierarchy of top executives in order to meet the changing needs of their larger, more flexible and faster-paced global business. Lafley, who is the chairman of P&G , announced that ‘P&G has nearly doubled its business since 2000 with the acquisitions of the Clairol, Wella hair care businesses and Gillette. The change in structure is designed to meet the needs of a larger business that is also developing new initiatives faster than in the past’.

Initially, P&G managed its international operations through an international division of foreign expansion, in the same manner many other multinational enterprises. A variety of products were identified to match national differences and preferences. Consequently, a portfolio, consisting of subsidiaries, run by country general managers was established. However, this management structure may result in two basic problems. Firstly, the cost of operating these subsidiaries is high, and secondly the ferocious autonomy of national subsidiaries prevented the global roll out of new products and technology improvements. Therefore, P&G needed innovation in the subsidiaries management structure. It concluded that the matrix structure , in which subordinates report to more than one superior, is a better alternative for P&G, as it allows authority to be kept at lower levels. However, most firms would have some difficulty implementing this Matrix structure into their organization because it is difficult to organize multinational activities through this complex structure. For example, dual reporting can lead to disagreements and confusion and a possible overlap of responsibilities. This may result in a loss of accountability and wastes time. Through time P&G has been trying to optimize its structure. The current structure resulted in a culture within P&G, which was viewed as slow, conformist and risk-averse. This led to a decrease in productivity and an increase in inefficiency in the organization. Moreover, these factors would slow down the decision making process and reduce the competitiveness of the company. Although, the management structure of P&G seems imperfect at the moment. However, the Procter & Gamble Company is still a giant in the area of consumer goods and the leading maker of household products in the United States. P&G operates its business in over 80 countries around the world and has approximately 300 brands in more than 160 countries. The matrix structure helps P&G develop its global business structure into more specific areas. As a result, the company has become more flexible to change within market competitions and the different expectation of P&G.

The final stage of completing the innovation process of management structure is to transform the formal structure and responsibilities of the company. For example, the global business units of P&G were established in order to manage product development, manufacturing and marketing of their respective categories all around world. Furthermore, global business service units were established to organize with the transactional activities such as Accounting, HR, IT, etc. Eliminating bureaucracy and increasing accountability is another main objective of structure change.

The Procter & Gamble Company’s corporate structure has been mainly dependent on worldwide subsidiaries and merging. During this time of restructuring, P&G has continued its active acquisitions pace. For instance, P&G entered the European tissue and towel market through the purchase of Vereinigte Papierwerke Schickedanz AG’s European tissue unit and added the luxury fragrance business of Giorgio Beverly Hills, Inc. In the same year, P&G returned to the South African market following the lifting of U.S. sanctions. The company has altered its geographic management structure gradually. As a result, P&G has divided its operations into United States and International, which is would now managed around four regions, North America, Latin America, Asia and Europe/Middle East/Africa.

Procter & Gamble announced a new restructuring initiative in September 1998. A key factor of this restructuring was a shift from an organization centered around the four geographic regions to one centered on seven global business parts based on product lines: Baby Care, Beauty Care, Fabric & Home Care, Feminine Protection, Food & Beverage, Health Care & Corporate New Ventures and Tissues & Towels. P&G has continued to restructure and adapt to different markets and different financial situation worldwide. According to a firm press release announcing the new structure, ‘This change will drive greater innovation and speed by centering strategy and profit responsibility globally on brands, rather than on geographies”.

Business Culture

Culture plays an important role in any organization to run their organization well in this fast growing business world. Culture is defined as a pattern of shared basic assumption that the group learned as it solved its problem of external adaptation and integration that has work well enough to be considered valid and therefore to be taught to new members as a correct way to perceive, think and feel in relation to those problem. Organizational culture is the acquired outcome of group experience, as it is to a large extent unconscious. The organizational culture comprises of three layers first one is the artefacts, espoused values and underlying assumption.

• Artefacts:   Innovation culture is the mission statement of Procter and gamble organization in which they state that “the consumer is boss”, consumer should be the heart of all P&G do from ideation stage through the purchase of the product. For example if 15 seconds with a deodorant or two minutes with a disposal diaper have made a small part of your life a little bit better then P&G made a difference. P&G policies made the company a unique one that respect of governments and law, respects in workplace and respect in the market place. P&G is a multinational company and it is widely spread geographically. They maintain open work system in lots of work places around the world. Executive offices do not have doors. Leaders do not have a secretary cordoning them off. All the offices on the executive floors at Procter and gamble are open the conference room is an open round space. They made it round as a small symbol of the new approach.
• Espoused values:   P&G is having hierarchy of company ethics principles. PVP(Purpose, Values and principles) , corporate policies, worldwide business conduct standards, operating policies/procedure/practices. For over 170 years P&G purpose values and principles has been guiding the way they do business. There purpose is to provide branded products and services of superior quality and values that improves the lives of the world’s consumer. P&G lives with its people and values, they recruit the finest people in the world who built organization by promoting and rewarding people without regard to any difference related to performance. For example Procter and Gamble pioneered a technician based system in its manufacturing plants during the 1960’s and 70’s. In this system they avoided the approach in which one person assigned to do only one job. The technician system still operates today. To get the highest evaluation rating in P&G factory, you learn how to do all the jobs on line and once you have that rating, company expect you to be capable of problem identification, problem solving, and innovation. This background has made it easier for us to plug manufacturing and engineering in to the innovation culture. P&G CEO Lafely said in one conference that once people in our organization have succeeded at innovation you can see the energy in the company changing. People routinely says that we can do this is feasible and the change of attitude of the people in P&G is incredible to watch. Integrity, leadership, ownership, passion for winning and trust are the main asset values of P&G. By considering purpose and values they made their principles like the show respects for individual, interest of the company and individual are inseparable and innovation is the cornerstone of P&G success. These are the officials objectives which had been espoused by the company head and it is common for P&G organization all over the world.
• Underlying Assumptions: It consists of unconscious, taken for granted beliefs, perception, thoughts and feelings. P&G are having problem relating to external adaption and internal integration. P&G keep refining their products, launch model from ideas, to prototype, to development, to qualification and to commercialization. Applying this sequential practice on large scale and replicate them does not mean to eliminate judgment, that’s why P&G needs active leaders and a strong innovation culture. Therefore P&G introduces the inclusive culture for leaders and they expected to build inclusive work environment that welcomes and embraces diversity an environment where people feel comfortable. Forced diversity training/learning process are utilized to equip leaders to values and nurture difference in management experience, style of leadership and problem solving approaches.

By analyzing the P&G’s culture it is seen that P&G is having a strong and dominant culture and that culture follows in every part of the world. Innovation is the main theme of P&G’s success and to bind organization culture together.

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• May 8, 2023
• By: EmpoweringCPO Insights Team

Procter & Gamble’s Supplier Relationship Management: A Model for Collaborative Success

Introduction, a. brief overview of procter & gamble (p&g).

Procter & Gamble, commonly known as P&G, is a multinational consumer goods corporation founded in 1837. With its headquarters in Cincinnati, Ohio, P&G has grown to become one of the world’s leading companies in the fast-moving consumer goods sector. The company’s diverse portfolio includes well-known brands in categories such as personal care, home care, health care, and baby care. With a strong commitment to innovation and sustainability, P&G continues to make a significant impact on consumers’ lives worldwide.

B. Importance of supplier relationship management in today’s competitive market

In the increasingly competitive global market, companies are constantly seeking ways to improve efficiency, reduce costs, and drive innovation. One key aspect that plays a significant role in achieving these goals is supplier relationship management (SRM). Effective SRM enables organizations to create mutually beneficial relationships with their suppliers, leading to better collaboration, increased value, and streamlined processes. By fostering strong supplier partnerships, businesses can enhance their product offerings, adapt to changing market conditions, and maintain a competitive edge.

C. Overview of P&G’s supplier relationship management program

Recognizing the immense potential of SRM, Procter & Gamble implemented a comprehensive program to strengthen its relationships with suppliers. This program focuses on identifying and nurturing strategic partnerships, streamlining the supplier base, and promoting collaboration and innovation. As a result, P&G has been able to improve efficiency, reduce costs, and bring more innovative products to market faster. The success of P&G’s supplier relationship management program serves as an inspiring example for other companies looking to optimize their supply chains and foster a collaborative environment with their suppliers.

Streamlining P&G’s Supplier Base

A. identifying strategic partners.

• Criteria for selection – Procter & Gamble recognizes the importance of carefully selected strategic partners to optimize its supply chain. Key criteria for selecting suppliers include their ability to deliver high-quality products, cost competitiveness, expertise in the relevant industry, commitment to sustainability, and capacity for innovation. Additionally, P&G values suppliers that demonstrate a strong cultural fit, aligning with the company’s values and vision for the future.
• Benefits of strategic partnerships – Strategic partnerships with suppliers offer numerous benefits for P&G. These partnerships enable the company to leverage the expertise, resources, and innovation capabilities of its suppliers to drive growth and create value. By working closely with strategic partners, P&G can improve its responsiveness to market changes, reduce lead times, and capitalize on opportunities more effectively. Additionally, strategic partnerships foster a collaborative environment that can lead to joint problem-solving, shared risk management, and continuous improvement.

B. Reducing the number of suppliers

• The rationale behind consolidation – P&G’s decision to consolidate its supplier base stems from the understanding that managing a large number of suppliers can be complex and resource-intensive. By reducing the number of suppliers, the company can focus its resources on nurturing meaningful relationships with strategic partners, leading to better alignment, more effective communication, and improved collaboration. This consolidation also simplifies the supply chain, making it easier to monitor supplier performance and ensure consistent quality across all product categories.
• Impact on efficiency and cost savings – The reduction of P&G’s supplier base has had a significant impact on efficiency and cost savings. With a streamlined supplier base, the company can negotiate better terms, reduce transaction costs, and optimize procurement processes. Additionally, a consolidated supplier base allows for improved visibility into the supply chain, enabling P&G to identify bottlenecks, redundancies, and opportunities for further improvement. Ultimately, this approach to supplier management has led to lower costs, enhanced operational efficiency, and a more agile supply chain that supports P&G’s growth and innovation objectives.

Fostering Collaboration and Innovation

A. joint business planning with suppliers.

• The process of developing shared goals – Procter & Gamble places great importance on developing shared goals with its strategic suppliers. This process begins with understanding each other’s objectives, priorities, and capabilities. P&G and its suppliers then collaborate to create a joint business plan that outlines mutual goals, identifies opportunities for growth and innovation, and establishes performance metrics. This collaborative approach ensures that both parties are working towards common objectives and helps to build a strong foundation for a long-term partnership.
• Aligning strategies and resources – Once shared goals have been established, P&G and its suppliers work together to align their strategies and resources to achieve these objectives. This includes aligning procurement, product development, and manufacturing processes, as well as sharing knowledge, expertise, and best practices. By working together and leveraging each other’s strengths, P&G and its suppliers can drive innovation, improve efficiency, and create value for both parties.

B. Open communication channels

• Regular meetings and information sharing – Open communication is vital for fostering collaboration and innovation between P&G and its suppliers. To facilitate this, regular meetings are held to review progress, share updates, and discuss challenges and opportunities. These meetings provide a platform for both parties to share information, gain insights, and collaborate on solutions. By maintaining open lines of communication, P&G and its suppliers can work together more effectively and adapt to changes in the market.
• Addressing challenges and opportunities – In addition to regular meetings, P&G encourages its suppliers to proactively communicate any challenges, risks, or opportunities that arise. By addressing these issues together, P&G and its suppliers can jointly develop solutions, mitigate risks, and capitalize on new opportunities. This collaborative approach helps to strengthen the relationship between P&G and its suppliers while driving continuous improvement and innovation.

C. Incentivizing supplier innovation

• Rewarding suppliers for new ideas – Procter & Gamble understands the value of supplier innovation and encourages its suppliers to contribute new ideas and solutions. To incentivize this, P&G recognizes and rewards suppliers for their innovative contributions. This can include public recognition, financial incentives, or opportunities for increased business. By rewarding innovation, P&G fosters a culture of continuous improvement and encourages its suppliers to think creatively and take calculated risks.
• Collaborative product development – P&G actively engages its suppliers in the product development process, leveraging their expertise and capabilities to create innovative products that meet customer needs. By involving suppliers from the early stages of product development, P&G can access new technologies, materials, and ideas, leading to more innovative and competitive product offerings. This collaborative approach to product development strengthens the relationship between P&G and its suppliers while driving growth and value creation for both parties.

Enhancing Product Offerings and Reducing Time to Market

A. leveraging supplier expertise.

• Utilizing supplier knowledge in product development – Procter & Gamble recognizes the immense value of its suppliers’ knowledge and expertise in product development. By actively involving suppliers in the development process, P&G can tap into their specialized skills, industry insights, and innovative ideas. This collaboration allows P&G to create products that are better tailored to consumer needs, while also incorporating the latest advancements in materials and technology.
• Access to new technologies and materials – Suppliers often have access to new technologies, materials, and manufacturing techniques that can help improve product quality and performance. By working closely with its suppliers, P&G can gain insights into these innovations and incorporate them into its product offerings. This not only enhances P&G’s products but also helps the company stay ahead of its competitors and maintain its reputation for innovation.

B. Accelerating product launch timelines

• Streamlined supply chain processes – A key benefit of P&G’s strong supplier relationships is the ability to streamline supply chain processes. By working closely with suppliers, P&G can identify and eliminate inefficiencies, optimize inventory levels, and reduce lead times. These improvements help accelerate product launch timelines, ensuring that P&G’s innovative products reach consumers as quickly as possible.
• Improved coordination between P&G and suppliers – Effective coordination between P&G and its suppliers is crucial for reducing time to market. Open communication channels, joint business planning, and shared goals all contribute to improved coordination and alignment. This close collaboration enables P&G and its suppliers to work together more effectively, respond to changes in the market more rapidly, and bring innovative products to consumers faster.

Measuring the Success of P&G’s Supplier Relationship Management Program

A. key performance indicators (kpis).

• Cost savings – One of the primary objectives of P&G’s supplier relationship management program is to reduce costs. By streamlining the supplier base, improving collaboration, and optimizing procurement processes, P&G can achieve significant cost savings. Monitoring cost reductions over time is a crucial KPI for measuring the success of the program and ensuring that these savings are sustained.
• Efficiency improvements – Efficiency improvements are another key metric for evaluating the success of P&G’s supplier relationship management program. These improvements can be measured by assessing factors such as lead times, inventory levels, and production throughput. By tracking these metrics, P&G can gauge the effectiveness of its supplier relationships and identify areas for further optimization.
• Innovation rates – The rate of innovation is an essential KPI for P&G, as it indicates the company’s ability to maintain its competitive edge and meet evolving consumer needs. This can be measured by tracking the number of new products launched, the speed of product development, and the adoption of new technologies and materials. By monitoring innovation rates, P&G can ensure that its supplier relationships are contributing to the company’s growth and success.

B. Long-term benefits

• Strengthened brand reputation – P&G’s supplier relationship management program contributes to the company’s strong brand reputation. By collaborating with suppliers to develop innovative, high-quality products, P&G demonstrates its commitment to meeting customer needs and staying at the forefront of industry trends. This, in turn, enhances the company’s brand image and increases consumer trust and loyalty.
• Increased market share – A successful supplier relationship management program can also help P&G increase its market share. By accelerating product launch timelines, improving efficiency, and reducing costs, P&G can bring innovative products to market more quickly and at a competitive price. This enables the company to capture a larger share of the market and expand its presence in existing and new product categories.

Lessons Learned and Best Practices

A. the importance of trust and transparency in supplier relationships.

One of the key lessons from P&G’s supplier relationship management program is the critical role of trust and transparency in building strong supplier relationships. By maintaining open communication channels, sharing information, and jointly addressing challenges, P&G and its suppliers can build a foundation of trust that enables them to work together effectively and achieve mutual benefits. Companies looking to improve their supplier relationships should prioritize trust and transparency as cornerstones of their approach.

B. Adapting supplier relationship management strategies for different industries

P&G’s success demonstrates that supplier relationship management strategies must be tailored to the unique characteristics of each industry. By understanding the specific needs, challenges, and opportunities within their industry, companies can develop a more targeted approach to managing supplier relationships. This involves identifying the most relevant criteria for selecting suppliers, aligning strategies and resources, and adapting communication and collaboration methods accordingly.

C. Fostering a culture of continuous improvement

Another important lesson from P&G’s supplier relationship management program is the value of fostering a culture of continuous improvement. This involves encouraging suppliers to contribute new ideas, learn from each other, and seek out opportunities for optimization. By creating an environment in which both the company and its suppliers are committed to ongoing improvement, businesses can drive innovation, enhance efficiency, and strengthen their competitive advantage. To achieve this, companies should incentivize supplier innovation, collaborate on problem-solving, and regularly review performance metrics to identify areas for further improvement.

A. Recap of P&G’s supplier relationship management program’s impact on collaboration, innovation, and product offerings

Procter & Gamble’s supplier relationship management program has had a significant impact on the company’s collaboration, innovation, and product offerings. By streamlining its supplier base, fostering trust and transparency, and promoting a culture of continuous improvement, P&G has built strong relationships with its strategic partners. These relationships have enabled P&G to leverage the expertise and resources of its suppliers, accelerate product launch timelines, and bring more innovative products to market. As a result, the company has experienced cost savings, efficiency improvements, and increased market share.

B. The potential for other companies to adopt similar approaches to strengthen their supplier relationships and achieve greater success

P&G’s success demonstrates the potential benefits of implementing a robust supplier relationship management program. By adopting similar approaches, other companies can strengthen their supplier relationships, improve collaboration, and drive innovation. This, in turn, can lead to greater operational efficiency, cost savings, and a more competitive product portfolio. The key to achieving these benefits lies in prioritizing trust and transparency, tailoring strategies to the unique needs of each industry, and fostering a culture of continuous improvement. By following P&G’s example, companies across various industries can unlock the full potential of their supplier relationships and achieve greater success.

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