Procter and Gamble: Operation Management

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Introduction

Founded in 1837 by Villiam Procter and James Gamble, P&G settled their headquarters in Cincinnati. Where its based till now. The main objective of the organization is to unify employees and growth strategy under the common cause of improving more consumers lives in a small but meaningful ways each day.

Procter & Gamble has become one of the most important International players as a consumer product manufacturer based on revenue production and industry market share. Their net profits span over $ 82.559bn and $15.818bn in operating income according to P&G 2011 annual report. As such a big International consumer product manufacturer, P&G encounters a lot of problem solving in their everyday activities like: innovation, operation management, marketing and many others. Innovation department is one of their most prosperous departments and can currently be an example to their competitors and other developing market players. That’s why the main goal of this case is to show the path they had to take to succeed in a rough nowadays market.

Executive Summary

In this case study we are going to determine and explain the reasons behind P&G’s radical approach change in their innovation department, explain the innovation techniques in place to them to production facilities, express our opinion on how innovation can help streamline operations based on the facts given & choose a specific product for consideration on it’s operational success.

As the growing market and the need of consumers pushes companies to keep their fingers on the pulse of the future, P&G had to over think their innovation strategy. Despite the success in their innovation process that worked for generations, year 2000 showed that their internal model of innovations has become unsustainable and their stock share dropped by more than 50 percent. From a “closed door” approach towards their innovation they had to move to an open platform and search for ideas outside company’s walls for their R&D department. This related in a complete system change, which was proposed by Alan George Lafley. The main purpose behind this was to make R&D department more efficient in every way possible. Through the approach of ‘Connect & Develop’ they managed to reach out for the ideas coming from out of borders in the company. As a result they found out that some of the most important innovations were coming from small and mid size entrepreneurial companies, individuals licensing their intellectual property, university and government labs searching for ways to monetize their research. For a company delivering products for a global market getting global ideas was the only next logical step they could take. Some radical changes came into place when putting together a system on how they search, deliver, develop and implement their innovations. In every country in which they had their branch, had to change it’s way of actions towards looking for ideas from outside sources as well as perfecting the connections coming from within companies resources. In order to manage the turn around of the quantity of information different networks were created and new frameworks came into play to help process the ideas in to profitable results.

Methodology

The research and development department model that worked for P&G since the late 1980s was too expensive and inefficient way to deliver new products to the market. All their innovations were based on “invent-it-yourselves model” which resulted in hiring scientists, technicians, chemists, and other idea generating individuals to work solely for the company. Since company was generating ideas only from the resources they had inside, they were restricted from a vast amount of ideas that were floating around the globe. The other reason behind changing the way R&D department works was the explosion of new technologies that was a burden on the innovation budgets. No matter how big the company is it cannot allow itself to develop...
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