Procter and Gamble

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Creating innovation for competitive advantage: A Procter & Gamble case study

Introduction

Companies must innovate in order to keep ahead of their competitors. If an organisation wants to create a business strategy that keeps it at the forefront of innovation, it must develop ways of making that strategy work. Being innovative does not just involve using the expertise of market researchers, scientists and product developers to create new products. It also involves using the capabilities of everyone within an organisation to generate the processes that help the new product to reach the market quickly and efficiently. It is after all people who innovate and not companies, and they need the right environment which provides both support and encouragement. So why are some companies more successful innovators than others? One theory about culture contrasts defender and prospector organisations. The defender culture resists change and favours strategies that provide security. This is usually supported by a bureaucratic style of management. On the other hand, a prospector organisation thrives on change and innovation. It differentiates its products in a creative and flexible working regime. This case study focuses upon one such prospector organisation - Procter & Gamble. It shows how building an innovative culture has enabled the company to meet wider business objectives and maintain its competitive advantage in a rapidly changing market place.

AG Lafley, the President and Chief Executive of Procter & Gamble, outlined the importance of innovation to the company. He would like to develop a business in which ‘big ideas attract the capital and talent they need’ and points to the innovation equation:

Procter & Gamble is now a global corporation, serving almost five billion consumers, with operations in 50 countries and products selling in more than 140 countries. With a range of brands as diverse as disposable nappies, snacks, juice drinks, shampoos, laundry detergents and feminine protection products - this makes Procter & Gamble one of the world’s largest consumer goods companies.

Setting goals

Globalisation and the explosion of technology make it more important than ever for Procter & Gamble to ‘embrace its future’. It has recently been re-structured in order to accelerate the creation of new products, speed up decision-making, set goals and stretch targets for developing the business and provide rewards for those who do so. A key element in building an organisation that is innovative and competitively further ahead than others is to set clear goals and objectives that help to provide the direction for the organisation. Within P&G this is reflected through a series of principles which underpin how employees work and help to provide a purposeful base for their activities. The goals are as follows:

It respects all individuals - the uniqueness of each employee is valued and their contributions listened to the interests of the company and the individual are inseparable -both employees and the company work for mutual benefit. •It is strategically focused in its work - product development helps the company to sustain a competitive advantage over other organisations. •Innovation is the cornerstone of its success - the company is proactive in leading the field of product development. •It is externally focused – the company listens to consumers and monitors markets. •It values personal mastery – the skills of employees are nurtured. •It seeks to be the best – the company is not complacent about product and market development. •Mutual interdependency is a way of life - the company depends upon employees, markets and consumers.

Innovation, culture and people

One simple definition of organisational culture is ‘the way we do things around here’. It helps to show what an organisation stands for and is reflected through the organisation’s actions, rituals, beliefs, meanings, values, norms and...
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