Q: How many times has Procter

1
Q How many times has Procter Gamble touched
YOU?

• Procter Gamble touches peoples lives over two
  billion times every day!
• Source 2003 Annual Report

2
Procter Gamble

• Philip Ho Katherine Hui Karen Lui Brent Sellors
  Kamen Sun
• Group 13

3
PG History A Legend of Firsts
Sources PG Annual Report 2003 and
http//www.pg.com/about_pg/overview_facts/history.
jhtml?document2Fcontent2Fen_US2Fxml2Fcorporat
e2Fcorporate_history_1837.xmltemplateFile2Fabo
ut_pg2Foverview_facts2Fhistory.jhtml
4
Business Strategy Components Model

• CFK, 18

5
Superior Quality Value
Provide branded products and services of
superior quality and value that improve the lives
of the world's consumers
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
6
Leadership
Achieve leadership in sales, profit, and value
creation for employees, shareholders, and the
community
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
7
Growth
Sustain growth in new and existing markets
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
8
Product Lines
Consumer products in five categories
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
9
Retailer Focus
Global retailers (80 of sales were from the top
10 markets)
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
10
Consumer Focus
Global consumers
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
11
Marketing
Marketing
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
12
Design
Design
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
13
Manufacturing
Manufacturing
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
14
Logistics
Logistics
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
15
Customer Service
Customer Service
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
16
Quality Value
High Quality and Good Value
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
17
Availability
Available
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
18
Purchaser-Friendly
Customer- and consumer-friendly
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
19
Innovation
Innovative products, designs, packaging, in-store
presentation
Sources PG Annual Report 2003 and
http//www.pg.com/company/who_we_are/ppv.jhtml
20
Linkages
Sustain growth in new and existing markets
Innovative products, designs, packaging, in-store
presentation
Design
21
Linkages
Achieve leadership sales, profit, and value
creation for employees, shareholders, and the
community.
High Quality and Good Value
Manufacturing
22
Linkages
Provide branded products and services of
superior quality and value that improve the lives
of the world's consumers.
Global consumers
Marketing
23
Did You Know

• Procter Gamble introduced the worlds first
  two-in-one shampoo and conditioner, Pert Plus, in
  1986.

Source http//www.pg.com/company/who_we_are/ourhi
story_4.jhtml
24
Key Organizational Capability Innovation

• PG Principle Innovation is the Cornerstone of
  Our Success
• PG places great value on big, new consumer
  innovations. PG challenges convention and
  reinvents the way it does business to
  better win in the marketplace.

http//campus-sostenible.mty.itesm.mx/divulgacion/
archivos/Procter_Gamble_Values_and_code_of_conduct
.pdf
25
Innovation Simplified

• The capacity to stimulate and support strategies
  based on new ideas
• Successful only if it provides meaningful value
  to consumers
• Involves the creation of new markets, new
  products, and new processes
• Can also be accomplished through acquisition

Source CFK, 140
26
Strategic Advantage Creation of New Markets

• Expanding target markets and reaching new
  consumers

27
New Markets

• Health Care
• Created a new product market with ThermaCare
• Innovations across Health Care generated over 1B
  in new sales
• Fabric and Home Care
• Swiffer WetJet and Swiffer Dusters developed the
  new surface cleaning systems market
• Febreze created the new fabric refresher market,
  generating over 250M in sales

Source Annual Report
28
Strategic AdvantageCreation of New Products

• Requires extensive RD for new products that
  answer customers continual needs
• Customer loyalty will help PG achieve leadership
  position in the industry

Source Annual Report
29
New Products

• Beauty Care
• Grown Olay into a billion dollar brand
• Daily Facials and Total Effects
• Health Care
• Crest Whitestrips, 300M in sales last year

Source Annual Report
30
Strategic AdvantageCreation of New Processes

• Innovative design, packaging to provide greater
  customer value

Source Annual Report
31
New Processes

• Baby and Family Care
• Invested 1B in a sustainable capital
  standardization program
• Computer aided virtual design used to make better
  fitting diapers

Source Annual Report
32
Strategic AdvantageInnovation Through
Acquisition

• CEO Alan Lafleys goal to see 50 of the
  companys new products come from external sources
  
• Currently at 20

http//www.bain.com/bainweb/publications/publicati
ons_detail.asp?id12633menu_urlpublications_resu
lts.asp
33
Recent Acquisitions

• Acquired Wella, Clairol, Hugo Boss, SK-II, Iams,
  Dr.Johns Spinbrush
• To maintain innovative position, PG requires
  resource tradeoffs and that includes dealing with
  slower growth areas - Example Crisco

Source Annual Report, http//www.euromonitor.com/
article.asp?id2180
34
Did You Know

• Through its ongoing sponsorship of daytime
  television, Procter Gamble gave rise to the
  term Soap Opera

35
Organizational Leverage Points Model
Source CFK p. 141.
36
Leverage Point Organizational Structure
Source CFK p. 141.
37
Structural Alignment

• Desired
• Product organization structure
• Formal and informal cross unit liaisons
• Strategic alliances

• Actual
• Five Global Business Units, based on product
  category
• Products developed as single global RD projects
• Strategic alliances with Mr. Proper, Bold and
  Gain Enhancer
• Reduced Global Business Units from seven to five

38
Gap? Yes

• Conclusion PGs product organization structure
  and alliances support innovation except for the
  one gap we identified.

39
Leverage Point Management Processes
Source CFK p. 141.
40
Process Alignment

• Desired
• Decentralized authority on product decisions
• Efficient operational routines
• Tap external sources of innovation
• Hire retain talented innovators
• Results-oriented rewards

• Actual
• Clear and measurable success criteria
• Improved product pipeline through external
  sources
• Hired and retained leaders in RD
• CEO would like to see half of new ideas come from
  outside PG
• Innovative success is rewarded

Source www.ismindia.org/cases/pandg.html
41
Gap? Yes

• Seeking innovation from external sources may
  confuse PG employees
• Conclusion In PGs management process,
• decision-making and rewards support the
• innovation capability. But there is a gap in the
• operational processes.

42
Leverage Point Leadership Behaviour
Source CFK p. 141.
43
Leadership Alignment

• Desired
• Culture that fosters new ideas
• Company-wide commitment to innovation
• Demonstrate support through action
• Set direction that motivates employees to be
  innovative

• Actual
• Executives committed to technological innovation
• Innovation is cornerstone of success
• Generous financial and infrastructure support for
  RD
• PG spends 5 million per day on RD, placing top
  20 in US on RD investment

Gap? No PG Walks the Talk
Information from www.PG.com
44
Good, but Room for Improvement

• All three leverage points support PGs
  organizational capability of innovation. However,
  there are minor areas for improvement in
  management processes and organization structure.

45
Innovation A Successful Strategy

• PG achieves its innovative capability through
  new products, new processes, new markets, and
  acquisitions. Even though our analysis indicates
  a few gaps in PG's leverage points, overall, the
  leverage points support the innovative capability.