Growth Speed - The Secret Of Proctor And Gamble

There are few better examples of the challenges of scaling an innovation program to decent financial returns than Proctor and Gamble, the consumer products multinational.

P&G have, as a company, adopted a Play-2-Win innovation strategy. Stated differently, their approach recognises the fact that most of their future success is dependent on how well they manage their innovation effort, as it has been throughout the long history of the company.

The company spends most of its efforts in fast moving consumers goods. There, it operates in five separate categories, searching, always, for the unique propositions that can drive major global brands.

For a large organisation like P&G, it is generally necessary to show shareholders growth rates of between 4 and 6 percent per annum. Now, considering the size of the company, this essentially means any innovation efforts would have to drive new revenues of almost $4 billion a year. The company, by 2000, had realised that such a challenge was probably insurmountable if it continued with its capital intensive research and development activities.

It realised, in fact, that the investment needed to generate those kinds of returns was increasing faster than the investments were capable of returning. For example, P&G had 7500 researchers, and they found that adding more scientists was resulting in incrementally less productivity each time.

It is extremely typical that central innovation teams face this challenge. When the team is responsible for everything, scale issues almost always occur. You put more resources into the program in an attempt to get more results, but this strategy failed at P&G. They were unable, even with sustained investment, to outpace shareholders demands for growth.

How did P&G respond? They gave up their traditional and capital intensive R&D process, in favour of making it possible for anyone to innovate. Customers, partners and employees (scientists or not) were allowed to make new things for the company. With this decision they decided on an ambitious additional goal: to make sure that from then on, 50% of all new products would be sourced from outside the company.

About the Author:
For more information on how to create an innovation program which makes your organisation significant returns, review expert James Gardners free, online innovation book.

Article Originally Published On: http://www.articlesnatch.com

Tags: financial returns

, innovation

, funding

, growth

, entrepreneurialism

, strategy

, business

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