More on Innovation from P&G's Lafley

Last May, I posted an item about A.G. Lafley's "Game Changer" book of tips and the item is still getting page views.

Now, Lafley, the head of Procter & Gamble, has a follow-on article in the autumn 2008 issue of Strategy + Business published by consulting firm Booz & Company.
Lafley describes P&G's innovative culture and how it invests in people to get results. Innovation, once again, is the name of the game.

He notes that when he became CEO in 2000, P&G had a commercial success rate for new products of about 15 to 20 percent. That meant that out of six new products developed, one might sell. After retooling the consumer goods giant to be more innovative, the success rate climbed to 50 to 60 percent or roughly one of of every two products developed found a place in the market.

Incredibly, P&G did so while reducing R&D spending as a percentage of sales. By turning to people and encouraging them to think creatively and freely, P&G got more value from every invested dollar.

How did that happen? Besides encourging creativity, managers realized that innovation was scalable. Plenty of engineers & sicentists were on hand -- about 12,000 or so. But many didn't consider their duty to be innovative.

So, management reached inward and reeducated them while also reaching outside and tapping good ideas from contractors. About 40 percent of P&G's innovation comes from outside the U.S. And, P&G's global reach offered many opportunities to tailor products to market niches.

One example is Febreze, an odor control spray. The Japanese have a low tolerance for bad smells, especially women. Many Japanese men enjoy smoking tobacco but their wives deplore it. So, the men often have to change clothes before their wives will let me in their homes. Enter Febreze and marriages were saved.

Indeed, corporations need to recognize such cultural opportunities since from 1 to 2 billion people will be entering the buying consumer classes in the next 10 years in Latin America, Eastern Europe and the Middle East.

Lafley hasn't done badly with such philosophies. Sales have gone from $39 billion to $80 billion since 2000. I say more power to Lafley. I covered P&G in the 1990s and at the time it had one of the most ossified, authoritarian corporate bureaucracies I had ever encountered. Having spent six years in Moscow, I found it a every bit as annoying but without any romantic thrill.

For more on P&G's secrets of innovative success, see BNET's feature "OR inside."