netrashetty
MP Guru
Understand the Leadership Style for Procter & Gamble, Procter & Gamble HR policy and hierarchy. Procter & Gamble MBA project, Case study for Procter & Gamble, Procter & Gamble Management details -
Procter & Gamble Co. (P&G, NYSE: PG) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio[2] that manufactures a wide range of consumer goods. It is 5th in Fortune's Most Admired Companies 2011 list.[3] P&G is credited with many business innovations including brand management and the soap opera.
William Procter, a candlemaker, and James Gamble, a soapmaker, formed this global and Fortune 500 Corporation in 1837 (corporate profile). Procter and Gamble (P&G) is headquartered in Cincinnati, Ohio. These two entrepreneurs and inventors were immigrants from England and Ireland respectively; who have chosen for some reason to settle in the Cincinnati area. The company manufactures a wide variety of consumer goods including beauty, household, health and wellness products. According to CNNMoney.com “in the early parts of 2007, P&G was the 25th largest U.S Company by revenue, 18th largest by profit, and 10th in Fortune’s Most Admired Companies list”. “Touching Lives, Improving Life” is the corporate motto which is exemplified in their 138,000 employees and loyal customers worldwide. The worldwide demand for P&G’s products and services has forced management to focus on global marketing and innovation. This worldwide marketing and innovation success was achieved by making sure that what they produce is of highest quality and most importantly is what customers need. P&G is very adaptable to changing customer demands by carefully and clearly defining its innovative strategies; however, it almost lost its market dominance to competition in the mid 80’s had it not been its aggressive play-to-win strategy. (Davila, Epstein, & Shelton, 2006, p.73). “Senior P&G management admitted that they had not had a breakthrough innovation since 1985, and the company’s continued market dominance in the years ahead was in question” (Davila et al., 2006 p.73). The play-to-win innovation strategy had helped P&G to regain its industry leadership as stated by (Davila et al.,) in the company’s case study:
Management had planned to create a more nimble organization and to increase the
speed and quality of innovation. They also focused on improving the speed
of commercialization of new products. In addition, they wanted to move the company’s
focus to higher growth, higher margin businesses such as health care and personal care. (p.73)
Another innovative play-to-win strategy that P&G management had adopted was the acquisition of its domestic and foreign competitors. P&G acquired a number of other companies that helped diversified its product line and increased profits significantly. In order to foster this aggressive strategy, management had integrated and reorganized all the manufacturing processes of the companies they acquired. Manufacturing processes of companies like Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks, Noxell, Shulton’s Old Spice, and many others. “Innovation must be encouraged, carefully implemented within an organization at all times” (Hesselbein, Goldsmith, & Somerville, 2002, p. 82).
The pre-dominant leadership or management style in P&G is that of participatory, delegating, and empowerment. Management has decentralized decision making process in such a manner that middle level management most at times do not have to wait for headquarters approval and funding; in order to embark on certain key innovative projects. Because of the empowerment given to mid and senior level management within this multinational corporation, it is much easier for management to customize products and customer services internally. It is abundantly clear that, the success of this giant corporation can be closely tied to its management and leadership style. “He restored focus on leading brands and reminder everyone in P&G that the measure of success was not innovation per se, but the consumer” (Davila et al., p.74). This is a clear customer focus leadership style of a CEO who was brought in within the corporation to strengthen employee morale and to refocus employees’ attention to providing the needs and wants of customers in this ever changing global market.
P&G has demonstrated that its success depends on its customers, people, and innovation. Each and every employee is brought together by the company’s common culture, values, and goals. The company recognizes its diversity as a unique characteristic and strength and it’s been able to maximize the talents and creativity from these people. P&G has also demonstrated that it is not just in business to maximize shareholders wealth but it’s also a social responsible company. This is illustrated in its summer camp program that is open to community youth. “We developed our Summer Camp program as a way to seek out the best and brightest. But, it's also a way for us to give these candidates a head start, not only on their schooling, but also their careers.” (P&G Management Camp Program)
Characteristics of Innovative Organization
“By describing the landscape of unmet customer needs and analyzing where new offering have worked before, you can chart a path that will produce successful innovations time after time” (Anthony, Eyring, & Gibson p.104). Understanding customer needs and building lasting relationships are important in helping an organization innovate. Businesses innovate through unmet customer needs. Customers express their needs that have not been met and organizations innovate to meet those needs. This is why P&G is still leading the domestic product industry because, it listens to customers unmet needs and innovates aggressively to meet those needs. For instance, when babies were wearing cloth diapers, they were very leaky and labor intensive to wash; at that time, mothers needed an innovative product on the market to help fix the labor intensive part of washing the cloth diapers as well as the leakage. P&G answered this innovative call by introducing a revolutionary product called “Pampers” into the market.
Pampers helped simplified the diapering process by resolving the leakage and the labor intensive washing. Innovation means change and to change you must know why you are changing, that is to say you must understand the pros and cons of the change process. In addition, you must understand the characteristics of innovation or change and its implication organization wide. According to Kinicki (2007);
Why are organizations going through change? Simple. Globalization. International competition. The spread of information technology. All of these factors have escalated competition and the need to change in order to maintain competitive advantage. Organizations have to be faster, more responsive, and produce higher quality. All told, there is more pressure than ever, on everyone, to be able to change (p.1)
The aforementioned are the primary features of change and P&G management has recognized that. Sometimes, what employees do not understand is the impact of change on their professional and family lives; and it is the responsibility of management to communicate this impact to employees both positive and negative; but mostly, management overemphasizes on the positives and pays little attention on the negative impact. Kinicki mentioned further:
Managerial changes viewed as good and necessary can be seen by employees as
intimidating and even terrifying. But when companies don't take this into account,
and force changes that employees aren't prepared to handle, those companies risk
alienating their workers, losing money and, in the end, seeing those great strategic
changes fall flat.
This is a communication strategy that P&G has been successful in implementing corporate wide. The company ensures that the length and breath of all its units understand the impact of any change mostly at the professional level. Management ensures that everyone involved is interested in the change process. The more employees are interested in the change process the greater the success of the change or innovation. The most important element here is motivation. Management must let employees see a win-win situation in the change process. Another case in point here was the mismanagement of the change process in the United States Department of Agriculture, Forest Service. Forest Service management didn’t recognize the importance of communicating their re-organization plan to employees ahead of time; and this had resulted in a loss of great talents and good teams; because, some of them felt intimidated, terrified, and alienated. Change must be carefully managed to ensure success.
It is impossible to address all the characteristics of innovation in this paper however; the salient features will thoroughly be discussed. Organizational culture must be nurtured to accept change at all levels. The nurturing of the organizational culture relies on the fundamental responsibility of management to plan, direct, motivate, and control the day to day operations of the organization. Innovative cultures must be built and supported by management.
To begin with, anything that gives a corporation a competitive advantage over the other is a characteristic of innovation. Most companies are described as first movers into some specific industries and once they get in, they make it very difficult for others to get in due to a specified or unspecified characteristic of innovation. This could be innovation in technology, innovation in financial management (capital acquisition), innovation in customer service and what have you. One main innovation characteristic of P&G is to move innovation to commercialization faster than any other competitor in the industry. “Defining the innovation strategy and the resulting portfolio characteristics (play-to-win or play-not-to-loose and the associated mix of incremental, semi-radical, and radical innovations) are the first major responsibility of a company’s leadership” (Davila et al., p.85).
Secondly, anything that creates a situation that people had to deal with is a characteristic of innovation. When innovation is implemented, it changes people’s attitude toward the new process. It makes people think and act different from the way they used to. It creates different vision and mission that people have to focus on; and this gives rise to altering behaviors and attitudes. All this is because of innovation. Whenever P&G introduces a new product line, it alters situations and behaviors. Anything that creates a problem or resolves a problem is a characteristic of innovation. When Listerine mouth wash was introduced into the market, it solved the problem of bad breath but than people had to deal with the burning sensation.
Keeley (2006) has found that:
Innovations can have both positive and negative implications. A few years ago, people were discussing the “revenge of technology”. Now there are a few people that are warning us about the “pursuit of technology”. Whatever the pundits say, the future is probably going to happen anyway. So here is my initial list of characteristics of innovations that might change the world: Anything that provides a service or solves a problem in a significantly better way, anything that changes how society works or plays, anything that eliminates a major problem (or cost) for people and or organizations. (p.1)
The reason why leadership hype is critical for innovation, creativity and change in an organization is that; at P&G innovation or change occurs from top down. This sends a clear message to everyone that if the entire leadership has changed to accommodate innovation, it’s about time for them to change also (employees). Management makes employees creative and innovative by hyping innovation and making it a priority. To encourage creativity and innovation within an organization, leadership must hype it; institute a reward system to compensate creative employees and link innovation and creativity to the broader mission and vision of the organization.
P&G Strength, Weaknesses, Opportunities, and Threats (SWOT) Analysis
One strategic management tool that P&G uses to stay ahead of its competition is the effective and efficient utilization of SWOT analysis. This involves specifying the goals and objectives of the business as well as identifying the internal and external factors that are favorable and unfavorable in achieving the goals and objectives. These analyses are based on the company’s case study as well as the industry trend. Because of the segmentation and size of the company, P&G faces a lot of domestic and foreign regulatory threats and distribution systems where foreign competition tries to imitate P&G’s brand names for the seek of misleading consumers for self profit. This threat of foreign brand imitation is due to weak foreign business laws and regulations.
P&G’s strength includes: strong financial position both in the domestic and foreign markets. The company was the 25th largest U. S company by revenue in the early part of 2007, and the 18th largest by profit. This is why the company is one of the most admired companies in the United States. Also, the company has the ability and capability to push innovation to commercialization faster than any other competitor in the industry; even though it faces competition from Johnson & Johnson, Kimberly Clark, and Unilever, it’s been able to move products and services from the innovation phrase to commercialization faster; P&G has effective and efficient manufacturing processes which include total quality management as well as just in time inventory systems; this has enabled the company to save on inventory costs; and this cost saving is generously passed on to consumers in a form of high quality and lower prices of goods and services.
Another unique strength of P&G is its pool of skilled labor. In a Congressional briefing luncheon hosted by the Athena Alliance and the Congressional Economic Leadership Institute held at the Rayburn House Office Building in Washington DC in June 2006; P&G’s Corporate Director of Innovation Capability mentioned, “P&G has 9,000 R&D associates including 1,100 PhDs.” This clearly explains the tremendous success of the company. The company’s pool of highly skilled employees in the industry has given it the edge to lead in the innovation of over 40 product categories for which it holds more than 27,000 patents. The Director of Corporate Innovation Capability added “Our research and development organization is fluent in a broad range of competencies including chemistry, engineering, materials science, biological sciences, medicine, and mathematics.”
Also, P&G has a track record of producing high quality products which is very difficult to match or beat. Consumers want high quality products at reasonable and affordable prices, and this is the main reason why P&G is the driver of the consumer product industry worldwide. P&G’s innovative products and services have helped consumers save a lot of money on dental hygiene and on other health care products.
Just about everyone wants a bright healthy smile, but not everyone can spend $600 for the dental visits needed to achieve whiter teeth. And unlike the stereotypical eureka moment, a lone P&G scientist didn’t accidentally stumble onto the Crest White Strips formula late one night at the lab. What we did do was work backward from the consumer need for a convenient, affordable solution to whiter teeth. We brought together a diverse team of experts across our technology centers who were at the leading edge of their fields from our flexible films group, adhesive group, dental experts from our oral care organization and bleaching experts from our laundry business. And through solution focused R&D, we delivered Crest Whitestrips with a level of tooth whitening that surpasses anything else available in the retail market, and consumers pay only $35. (P&G Corporate Director of Innovation Capability).
Some weaknesses of P&G include: Lack of effective distribution system in some segment as well as poor location in some foreign countries and high cost of inputs. Another area of weakness is the employment of foreign based local management who doesn’t have any international business experience. This makes collaboration with headquarters a little difficult because of their inexperience in the global business arena.
P&G’s opportunities include: Well defined market niche, just in time manufacturing technology, wide range of demography, and the removal of trade barriers in some foreign countries. The removal of trade barriers in some foreign countries has enabled the company to operate competitively without much government intervention. Trade barriers historically has been known to be one of the biggest threats for most multinational businesses because of hostile takeovers by some foreign governments, difficulty of entry, corruption among government officials and bribery, and unhealthy business environment.
Threats include: New entry into the household product industry, use of substitute products, increased trade barriers in some developing nations, unfavorable business laws and political instability. Investors do not like uncertainty. They want to ensure that there is democracy and stable government in whatever country they invest and most importantly, they should be able to repatriate their profits without much restriction. This has been a threat to most businesses as well as P&G.
A series of innovation systems that are now common practices in corporations across America including extensive market research, the brand-management system, and employee profit-sharing programs, were first developed at P&G; however, two key innovation systems will be discussed. These include the “AskMe Enterprise” and the “Corporate Standards System.”
It is important to analyze and contrast these two key innovation systems within P&G. I have decided to choose the AskMe Enterprise innovation system because innovation begins with ideas or brainstorming sessions among the subject matter experts, and AskMe Enterprise innovation system provides that capability.
In July of 2001, P&G acquired the second installment of AskMe Enterprise from AskMe Corporation, one of the leading providers of enterprise knowledge sharing solutions in order to increase and strengthen its innovation net. AskMe Enterprise is one of the most important and the largest innovation systems in P&G. It is an intranet site that facilitates greater employee collaboration and enables more consumer-driven innovations. “AskMe Enterprise reaches 18,000 key knowledge workers in P&G as well as in departments such as R&D, Engineering, Purchasing, Consumer and Market Knowledge, and knowledge sharing.” (Qu, 2001).
According to Delphi Group study (as cited in Qu’s 2001) “Nearly 88% of a company’s knowledge resides in the minds of its employees. But most companies lack an efficient system that enables them to tap into that knowledge in ways that provide a strong return on investment.” With AskMe Enterprise, employees can identify qualified individuals with relevant expertise, submit questions or business problems to individuals and receive solutions from colleagues in order to take appropriate and effective actions. Solutions transferred via AskMe Enterprise are captured in a knowledge database so other employees can reuse them in the future. The most interesting aspect of this innovation system is its inclusiveness. It takes into consideration all personality types within the corporation (introverts and extroverts). Introverts and Extroverts can use the system effectively without any feelings of intimidation or alienation.
The AskMe Enterprise system brings the best out of individuals, leadership, and groups, because it challenges employees at all levels of the organization to be innovative and think creatively within and outside the organization. The leadership stimulates the minds of employees by putting them in the position of customers with real problems that need immediate solution. That is why the success of every organization or system depends on good leadership. Organizational culture is the personality of the organization and how it learns. In implementing this innovation system, it is very important for the leadership to have a better understanding of the culture and how to incorporate the system with the culture. The culture at P&G is totally different from the culture at Johnson & Johnson and so on. Different cultures learn at different pace at a time and the leadership must not lose sight of this differences.
Corporate culture and learning are particularly important when managing an organization wide change. Learning organizations turn weaknesses and threats into strengths and opportunities by not getting frustrated and quitting when confronted with difficult situations and challenges. This is how P&G learns and more importantly, builds its culture to understand that quitting is not an option in the innovation process.
Several challenges and factors confront management when leading and managing innovative change processes in a multicultural and diverse organization like P&G. Dooley and O’Sullivan (2001) have found the following to be the fundamental challenges of leading and managing innovative change process “ Poor alignment between goals and actions, poor participation in idea generation and problem solving, poor planning and control of action implementation, poor management and monitoring of overall process and more importantly poor leadership of the innovation process.” (p. 179). This reemphasizes on the importance of good leadership in every problem solving situation. The diversity and multiculturalism of P&G needs leadership that will accept responsibility and move change throughout the organization by stressing on the importance of the change to individuals and groups; as well as the organization as a whole.
Procter & Gamble Co. (P&G, NYSE: PG) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio[2] that manufactures a wide range of consumer goods. It is 5th in Fortune's Most Admired Companies 2011 list.[3] P&G is credited with many business innovations including brand management and the soap opera.
William Procter, a candlemaker, and James Gamble, a soapmaker, formed this global and Fortune 500 Corporation in 1837 (corporate profile). Procter and Gamble (P&G) is headquartered in Cincinnati, Ohio. These two entrepreneurs and inventors were immigrants from England and Ireland respectively; who have chosen for some reason to settle in the Cincinnati area. The company manufactures a wide variety of consumer goods including beauty, household, health and wellness products. According to CNNMoney.com “in the early parts of 2007, P&G was the 25th largest U.S Company by revenue, 18th largest by profit, and 10th in Fortune’s Most Admired Companies list”. “Touching Lives, Improving Life” is the corporate motto which is exemplified in their 138,000 employees and loyal customers worldwide. The worldwide demand for P&G’s products and services has forced management to focus on global marketing and innovation. This worldwide marketing and innovation success was achieved by making sure that what they produce is of highest quality and most importantly is what customers need. P&G is very adaptable to changing customer demands by carefully and clearly defining its innovative strategies; however, it almost lost its market dominance to competition in the mid 80’s had it not been its aggressive play-to-win strategy. (Davila, Epstein, & Shelton, 2006, p.73). “Senior P&G management admitted that they had not had a breakthrough innovation since 1985, and the company’s continued market dominance in the years ahead was in question” (Davila et al., 2006 p.73). The play-to-win innovation strategy had helped P&G to regain its industry leadership as stated by (Davila et al.,) in the company’s case study:
Management had planned to create a more nimble organization and to increase the
speed and quality of innovation. They also focused on improving the speed
of commercialization of new products. In addition, they wanted to move the company’s
focus to higher growth, higher margin businesses such as health care and personal care. (p.73)
Another innovative play-to-win strategy that P&G management had adopted was the acquisition of its domestic and foreign competitors. P&G acquired a number of other companies that helped diversified its product line and increased profits significantly. In order to foster this aggressive strategy, management had integrated and reorganized all the manufacturing processes of the companies they acquired. Manufacturing processes of companies like Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-Vicks, Noxell, Shulton’s Old Spice, and many others. “Innovation must be encouraged, carefully implemented within an organization at all times” (Hesselbein, Goldsmith, & Somerville, 2002, p. 82).
The pre-dominant leadership or management style in P&G is that of participatory, delegating, and empowerment. Management has decentralized decision making process in such a manner that middle level management most at times do not have to wait for headquarters approval and funding; in order to embark on certain key innovative projects. Because of the empowerment given to mid and senior level management within this multinational corporation, it is much easier for management to customize products and customer services internally. It is abundantly clear that, the success of this giant corporation can be closely tied to its management and leadership style. “He restored focus on leading brands and reminder everyone in P&G that the measure of success was not innovation per se, but the consumer” (Davila et al., p.74). This is a clear customer focus leadership style of a CEO who was brought in within the corporation to strengthen employee morale and to refocus employees’ attention to providing the needs and wants of customers in this ever changing global market.
P&G has demonstrated that its success depends on its customers, people, and innovation. Each and every employee is brought together by the company’s common culture, values, and goals. The company recognizes its diversity as a unique characteristic and strength and it’s been able to maximize the talents and creativity from these people. P&G has also demonstrated that it is not just in business to maximize shareholders wealth but it’s also a social responsible company. This is illustrated in its summer camp program that is open to community youth. “We developed our Summer Camp program as a way to seek out the best and brightest. But, it's also a way for us to give these candidates a head start, not only on their schooling, but also their careers.” (P&G Management Camp Program)
Characteristics of Innovative Organization
“By describing the landscape of unmet customer needs and analyzing where new offering have worked before, you can chart a path that will produce successful innovations time after time” (Anthony, Eyring, & Gibson p.104). Understanding customer needs and building lasting relationships are important in helping an organization innovate. Businesses innovate through unmet customer needs. Customers express their needs that have not been met and organizations innovate to meet those needs. This is why P&G is still leading the domestic product industry because, it listens to customers unmet needs and innovates aggressively to meet those needs. For instance, when babies were wearing cloth diapers, they were very leaky and labor intensive to wash; at that time, mothers needed an innovative product on the market to help fix the labor intensive part of washing the cloth diapers as well as the leakage. P&G answered this innovative call by introducing a revolutionary product called “Pampers” into the market.
Pampers helped simplified the diapering process by resolving the leakage and the labor intensive washing. Innovation means change and to change you must know why you are changing, that is to say you must understand the pros and cons of the change process. In addition, you must understand the characteristics of innovation or change and its implication organization wide. According to Kinicki (2007);
Why are organizations going through change? Simple. Globalization. International competition. The spread of information technology. All of these factors have escalated competition and the need to change in order to maintain competitive advantage. Organizations have to be faster, more responsive, and produce higher quality. All told, there is more pressure than ever, on everyone, to be able to change (p.1)
The aforementioned are the primary features of change and P&G management has recognized that. Sometimes, what employees do not understand is the impact of change on their professional and family lives; and it is the responsibility of management to communicate this impact to employees both positive and negative; but mostly, management overemphasizes on the positives and pays little attention on the negative impact. Kinicki mentioned further:
Managerial changes viewed as good and necessary can be seen by employees as
intimidating and even terrifying. But when companies don't take this into account,
and force changes that employees aren't prepared to handle, those companies risk
alienating their workers, losing money and, in the end, seeing those great strategic
changes fall flat.
This is a communication strategy that P&G has been successful in implementing corporate wide. The company ensures that the length and breath of all its units understand the impact of any change mostly at the professional level. Management ensures that everyone involved is interested in the change process. The more employees are interested in the change process the greater the success of the change or innovation. The most important element here is motivation. Management must let employees see a win-win situation in the change process. Another case in point here was the mismanagement of the change process in the United States Department of Agriculture, Forest Service. Forest Service management didn’t recognize the importance of communicating their re-organization plan to employees ahead of time; and this had resulted in a loss of great talents and good teams; because, some of them felt intimidated, terrified, and alienated. Change must be carefully managed to ensure success.
It is impossible to address all the characteristics of innovation in this paper however; the salient features will thoroughly be discussed. Organizational culture must be nurtured to accept change at all levels. The nurturing of the organizational culture relies on the fundamental responsibility of management to plan, direct, motivate, and control the day to day operations of the organization. Innovative cultures must be built and supported by management.
To begin with, anything that gives a corporation a competitive advantage over the other is a characteristic of innovation. Most companies are described as first movers into some specific industries and once they get in, they make it very difficult for others to get in due to a specified or unspecified characteristic of innovation. This could be innovation in technology, innovation in financial management (capital acquisition), innovation in customer service and what have you. One main innovation characteristic of P&G is to move innovation to commercialization faster than any other competitor in the industry. “Defining the innovation strategy and the resulting portfolio characteristics (play-to-win or play-not-to-loose and the associated mix of incremental, semi-radical, and radical innovations) are the first major responsibility of a company’s leadership” (Davila et al., p.85).
Secondly, anything that creates a situation that people had to deal with is a characteristic of innovation. When innovation is implemented, it changes people’s attitude toward the new process. It makes people think and act different from the way they used to. It creates different vision and mission that people have to focus on; and this gives rise to altering behaviors and attitudes. All this is because of innovation. Whenever P&G introduces a new product line, it alters situations and behaviors. Anything that creates a problem or resolves a problem is a characteristic of innovation. When Listerine mouth wash was introduced into the market, it solved the problem of bad breath but than people had to deal with the burning sensation.
Keeley (2006) has found that:
Innovations can have both positive and negative implications. A few years ago, people were discussing the “revenge of technology”. Now there are a few people that are warning us about the “pursuit of technology”. Whatever the pundits say, the future is probably going to happen anyway. So here is my initial list of characteristics of innovations that might change the world: Anything that provides a service or solves a problem in a significantly better way, anything that changes how society works or plays, anything that eliminates a major problem (or cost) for people and or organizations. (p.1)
The reason why leadership hype is critical for innovation, creativity and change in an organization is that; at P&G innovation or change occurs from top down. This sends a clear message to everyone that if the entire leadership has changed to accommodate innovation, it’s about time for them to change also (employees). Management makes employees creative and innovative by hyping innovation and making it a priority. To encourage creativity and innovation within an organization, leadership must hype it; institute a reward system to compensate creative employees and link innovation and creativity to the broader mission and vision of the organization.
P&G Strength, Weaknesses, Opportunities, and Threats (SWOT) Analysis
One strategic management tool that P&G uses to stay ahead of its competition is the effective and efficient utilization of SWOT analysis. This involves specifying the goals and objectives of the business as well as identifying the internal and external factors that are favorable and unfavorable in achieving the goals and objectives. These analyses are based on the company’s case study as well as the industry trend. Because of the segmentation and size of the company, P&G faces a lot of domestic and foreign regulatory threats and distribution systems where foreign competition tries to imitate P&G’s brand names for the seek of misleading consumers for self profit. This threat of foreign brand imitation is due to weak foreign business laws and regulations.
P&G’s strength includes: strong financial position both in the domestic and foreign markets. The company was the 25th largest U. S company by revenue in the early part of 2007, and the 18th largest by profit. This is why the company is one of the most admired companies in the United States. Also, the company has the ability and capability to push innovation to commercialization faster than any other competitor in the industry; even though it faces competition from Johnson & Johnson, Kimberly Clark, and Unilever, it’s been able to move products and services from the innovation phrase to commercialization faster; P&G has effective and efficient manufacturing processes which include total quality management as well as just in time inventory systems; this has enabled the company to save on inventory costs; and this cost saving is generously passed on to consumers in a form of high quality and lower prices of goods and services.
Another unique strength of P&G is its pool of skilled labor. In a Congressional briefing luncheon hosted by the Athena Alliance and the Congressional Economic Leadership Institute held at the Rayburn House Office Building in Washington DC in June 2006; P&G’s Corporate Director of Innovation Capability mentioned, “P&G has 9,000 R&D associates including 1,100 PhDs.” This clearly explains the tremendous success of the company. The company’s pool of highly skilled employees in the industry has given it the edge to lead in the innovation of over 40 product categories for which it holds more than 27,000 patents. The Director of Corporate Innovation Capability added “Our research and development organization is fluent in a broad range of competencies including chemistry, engineering, materials science, biological sciences, medicine, and mathematics.”
Also, P&G has a track record of producing high quality products which is very difficult to match or beat. Consumers want high quality products at reasonable and affordable prices, and this is the main reason why P&G is the driver of the consumer product industry worldwide. P&G’s innovative products and services have helped consumers save a lot of money on dental hygiene and on other health care products.
Just about everyone wants a bright healthy smile, but not everyone can spend $600 for the dental visits needed to achieve whiter teeth. And unlike the stereotypical eureka moment, a lone P&G scientist didn’t accidentally stumble onto the Crest White Strips formula late one night at the lab. What we did do was work backward from the consumer need for a convenient, affordable solution to whiter teeth. We brought together a diverse team of experts across our technology centers who were at the leading edge of their fields from our flexible films group, adhesive group, dental experts from our oral care organization and bleaching experts from our laundry business. And through solution focused R&D, we delivered Crest Whitestrips with a level of tooth whitening that surpasses anything else available in the retail market, and consumers pay only $35. (P&G Corporate Director of Innovation Capability).
Some weaknesses of P&G include: Lack of effective distribution system in some segment as well as poor location in some foreign countries and high cost of inputs. Another area of weakness is the employment of foreign based local management who doesn’t have any international business experience. This makes collaboration with headquarters a little difficult because of their inexperience in the global business arena.
P&G’s opportunities include: Well defined market niche, just in time manufacturing technology, wide range of demography, and the removal of trade barriers in some foreign countries. The removal of trade barriers in some foreign countries has enabled the company to operate competitively without much government intervention. Trade barriers historically has been known to be one of the biggest threats for most multinational businesses because of hostile takeovers by some foreign governments, difficulty of entry, corruption among government officials and bribery, and unhealthy business environment.
Threats include: New entry into the household product industry, use of substitute products, increased trade barriers in some developing nations, unfavorable business laws and political instability. Investors do not like uncertainty. They want to ensure that there is democracy and stable government in whatever country they invest and most importantly, they should be able to repatriate their profits without much restriction. This has been a threat to most businesses as well as P&G.
A series of innovation systems that are now common practices in corporations across America including extensive market research, the brand-management system, and employee profit-sharing programs, were first developed at P&G; however, two key innovation systems will be discussed. These include the “AskMe Enterprise” and the “Corporate Standards System.”
It is important to analyze and contrast these two key innovation systems within P&G. I have decided to choose the AskMe Enterprise innovation system because innovation begins with ideas or brainstorming sessions among the subject matter experts, and AskMe Enterprise innovation system provides that capability.
In July of 2001, P&G acquired the second installment of AskMe Enterprise from AskMe Corporation, one of the leading providers of enterprise knowledge sharing solutions in order to increase and strengthen its innovation net. AskMe Enterprise is one of the most important and the largest innovation systems in P&G. It is an intranet site that facilitates greater employee collaboration and enables more consumer-driven innovations. “AskMe Enterprise reaches 18,000 key knowledge workers in P&G as well as in departments such as R&D, Engineering, Purchasing, Consumer and Market Knowledge, and knowledge sharing.” (Qu, 2001).
According to Delphi Group study (as cited in Qu’s 2001) “Nearly 88% of a company’s knowledge resides in the minds of its employees. But most companies lack an efficient system that enables them to tap into that knowledge in ways that provide a strong return on investment.” With AskMe Enterprise, employees can identify qualified individuals with relevant expertise, submit questions or business problems to individuals and receive solutions from colleagues in order to take appropriate and effective actions. Solutions transferred via AskMe Enterprise are captured in a knowledge database so other employees can reuse them in the future. The most interesting aspect of this innovation system is its inclusiveness. It takes into consideration all personality types within the corporation (introverts and extroverts). Introverts and Extroverts can use the system effectively without any feelings of intimidation or alienation.
The AskMe Enterprise system brings the best out of individuals, leadership, and groups, because it challenges employees at all levels of the organization to be innovative and think creatively within and outside the organization. The leadership stimulates the minds of employees by putting them in the position of customers with real problems that need immediate solution. That is why the success of every organization or system depends on good leadership. Organizational culture is the personality of the organization and how it learns. In implementing this innovation system, it is very important for the leadership to have a better understanding of the culture and how to incorporate the system with the culture. The culture at P&G is totally different from the culture at Johnson & Johnson and so on. Different cultures learn at different pace at a time and the leadership must not lose sight of this differences.
Corporate culture and learning are particularly important when managing an organization wide change. Learning organizations turn weaknesses and threats into strengths and opportunities by not getting frustrated and quitting when confronted with difficult situations and challenges. This is how P&G learns and more importantly, builds its culture to understand that quitting is not an option in the innovation process.
Several challenges and factors confront management when leading and managing innovative change processes in a multicultural and diverse organization like P&G. Dooley and O’Sullivan (2001) have found the following to be the fundamental challenges of leading and managing innovative change process “ Poor alignment between goals and actions, poor participation in idea generation and problem solving, poor planning and control of action implementation, poor management and monitoring of overall process and more importantly poor leadership of the innovation process.” (p. 179). This reemphasizes on the importance of good leadership in every problem solving situation. The diversity and multiculturalism of P&G needs leadership that will accept responsibility and move change throughout the organization by stressing on the importance of the change to individuals and groups; as well as the organization as a whole.
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