Sunday, October 7, 2012

Is the P&G Innovation Well Drying Up?

I talk quite a bit about P&G in my book "Living in the Innovation Age." P&G is an admirable company that has thrived for 175 years with one innovative product after another. Starting with their "Ivory" soap in 1879 to the first all-vegetable shortening oil "Crisco", to "Deft" and now "Tide", Crest, Pampers, Pringles, Febreze, and Swiffer, the list goes on with amazing products that are household names. Over the decades, P&G has not only innovated products but has innovated product "categories"! As a testament to its commitment to innovation, P&G has more than 1,000 Ph.D.’s among the 8,000 employees at its 26 innovation facilities around the world.

Businessweek recently published an excellent article titled "At P&G, the Innovation Well Runs Dry." The article explains how lately there’s been a dearth of pioneering brands emerging from the world’s largest consumer-products company. Spending on research and development in fiscal 2012 ended June 30 was $2.03 billion, or 2.4 percent of sales, the same as the prior year and down from 3 percent of sales in 2006. Add to that the fact that P&G’s most recent homegrown blockbusters - Swiffer cleaning devices, Crest Whitestrips, and Febreze odor fresheners - were all launched at least a decade ago. Considering that the company’s current product pipeline is mainly focused on “reformulating, not inventing, products," the situation does appear a bit dire for P&G.

So, is P&G losing it's edge in the game of innovation? I encourage you to read the aforementioned Businessweek article, which does a decent job of exploring this question with a combination of facts and expert opinions.

The Bottom Line
P&G has become a household name because of its ability to innovate - new products and new product categories. Sustaining its competitive advantage depends on it being able to maintain its leadership with such homegrown, innovative products that are not just "reformulations" of existing products but true revolutions that continue to delight its customers.

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