‘How P&G tripled its innovation success rate’ by Bruce Brown and Scott D Anthony, Harvard Business Review, June 2011

My long standing contact and previous employment with Unilever has caused any reference to Procter and Gamble to be a combination of hostility and grudging admiration. They have been a formidable competitor over the years yet have also had their ups and downs, and revelations about the way they operate have not always painted a pretty picture.

So I was sceptical about an article which claims that P&G have a formula that increases innovation success rates; I would not dispute that it might work for them but would question whether any formula would work in other less controlling cultures. This scepticism was increased when I read early on that there has been a ‘strategic effort to systematise innovation and growth’. Surely the systemisation of innovation is likely to stifle creative thinking, particularly as the CEO Bob McDonald says ‘There needs to be an emotional component, a source of inspiration that motivates people’.

Clearly P&G had problems in this area in the early 2000s when only 15% of new innovations were achieving targets. They introduced what they called a ‘Connect and Develop’ process with different stage gates but this did not do enough to satisfy senior management. The top management were disappointed that innovations were merely incremental; they were looking for more breakthrough ideas that would change the market place.

The answer was another organisational change, introducing ‘new growth factories’, based on the ideas of a Harvard Professor, Clayton Christensen, who developed the concept of disruptive innovation. The new growth factories were effectively cross-functional teams with the brief to challenge existing thinking; where the opportunity was big enough, these people were taken away from their existing businesses and functions to operate full time.

This seems a good idea even though it is not particularly new - for many years a range of companies have operated such teams outside the normal structure - but the article claims that success is due to the processes operated by the teams. This is where I began to have my doubts and to think how typical this is of a company like P&G, famous for its close top down control. Each of the ‘factories’ had to have the following:

• New growth business guides
• A step-by-step business development process manual
• Specialised project and portfolio management tools
• Innovation and strategy assessments
• Training in key innovation concepts

This may have worked in P&G but it’s hard to see this kind of structured approach working more generally; it seems the complete opposite of the thinking in most other businesses, initially stimulated by ‘In Search of Excellence’ nearly 30 years ago. The general view was that breakthrough innovation is more likely if it is right outside the normal structure, unencumbered by bureaucratic processes.

The article moves on to suggest various lessons that have been learnt from the application of this approach but these are not particularly new or helpful; they mostly relate to the need for a centralised and coordinated approach which is aligned to the P&G culture. One interesting and unexpected point towards the end was that they recognised the need to bring in outside talent, because the effectiveness of these groups was restricted by the practice of promoting from within. A temporary swop of personnel with Google was a particularly eye catching example of this practice.

The article claims that the new approach is working well and describes a number of successful breakthroughs to prove it, the most interesting of which was the launch of Tide Dry Cleaning shops, which was news to me. And the success rate of 15% has grown to 50%, which proves that it is delivering value for P&G. Whether it would deliver value for others is more questionable and this makes the article of passing interest rather than practical value.

Click here to read the article in full:

http://hbr.org/2011/06/how-pg-tripled-its-innovation-success-rate/ar/1