Colgate-Palmolive enjoys the kind of global brand recognition other conglomerates would envy: Its products are in two-thirds of all households around the world, which is broader penetration than Coke. With that kind of competitive moat, one would think its businesses would be fairly safe from digital start-ups. Not necessarily, said Jenny Gomez, worldwide director of global strategic innovation and growth initiatives at the company.
Start-ups are aiming at parts of Colgate-Palmolive’s business and focusing on niche markets — such as connected toothbrushes for consumers who want to track their personal wellness data, or competing locally in individual countries instead of looking to sell all over the world like Colgate.
After speaking at the “Strategies for Success in the New Era of Connected Ecosystems” conference held by Wharton’s Mack Institute for Innovation Management, Gomez talked to Knowledge@Wharton about how to institutionalize innovation in a global business like Colgate-Palmolive, how it competes in a data-centric world and how it leverages the advantages accorded an established old guard in an era of fast-moving tech advances.
An edited transcript of the conversation appears below.
Knowledge@Wharton: What does innovation look like at Colgate-Palmolive?
Jenny Gomez: Innovation at Colgate is primarily product-driven, given the business model that we’re in and the history of the organization. We classify innovation into four key areas.
The first two are about serving the market that we’re in — building and maintaining the engine of the company. Core innovation [reflects] the type of things we do just to stop us from declining — changes in design; if it’s a licensed character, moving onto the next one; or bringing out a new flavor. Then we move into incremental innovation: This is where we’re not developing significantly new technology, but we may be targeting a new segment. We may be advancing consumer behavior in some way.
“I’d agree that we have a [competitive] moat, to a degree. I don’t agree that it would be difficult for a digital start-up to compete with us.”
The other two involve trying to develop new growth platforms, or what we call “market makers.” Those [encompass] breakthrough and transformational innovation, where we’re looking to create new categories or segments and potentially change behavior in ways that will give us new opportunities into the future. At the moment, it’s probably a mix of about 90% on the first two and about 10% on the second two. And that’s really reflective of the type of categories that we’re in, but also, the right way to resource the business as we continue to grow around the world.
Knowledge@Wharton: How do you innovate soap and toothpaste?
Gomez: We’re pretty close to the consumer. We run a global model, so we try to understand what opportunities are scalable, but we also understand what’s happening at the local level. For instance, with a brand like Protex, which is prominent in Asia, Latin America and Africa, we have a base opportunity, a base formula, a base bundle, which we customize with local ingredients and local folklore, etc. So there are ways that we can continue to build into the hearts and minds of consumers with a big global organization.
Knowledge@Wharton: You make consumer products, so does that mean your innovation resides mainly in the back-end manufacturing rather than on the consumer-facing side?
Gomez: It’s really both, but very much driven by the consumer-facing side. But let me start with the back end. Part of the power of our organization is our global supply chain. That allows us to deliver really great products at prices that consumers can afford, because, even though they’re in different forms, we’re essentially sending out toothpaste and soap and shower gel around the world. However, the way that we actually focus on the needs that we’re delivering and the opportunities that we’re looking for is very much by looking to the consumer needs and [meeting those needs] first.
Knowledge@Wharton: As a manufacturer, Colgate Palmolive must have a large competitive moat that makes it hard for a digital start-up to take away part of your business — they don’t have factories. Do you agree?
Gomez: I’d agree that we have a moat, to a degree. I don’t agree that it would be difficult for a digital start-up to compete with us. I think the biggest asset that we have as a company is our brand equity. A brand like Colgate is actually the most penetrated brand in the world. It’s got broader penetration than Coke, even though Coke has high usage. About two-thirds of the households on the planet use Colgate. That’s the type of asset that you can’t easily take down.
It’s also something that we can build upon, because we’ve always had that trust with the consumer. We’ve been around for a long time. People have grown up with us, they have a relationship with us from childhood. But I think as access to information is changing, both on the consumer side and on the business side, that’s where these digital start-ups can really take the game into a different place.
“The biggest asset that we have as a company is our brand equity. A brand like Colgate is actually the most penetrated brand in the world.”
For instance, there are companies who are playing with connected toothbrushes, there are companies who are playing with subscription models. And for those consumers who seek convenience above all else, [the start-ups can cater to them as a way to] compete [with us], either with [someone else’s] products or with the ones they’re developing themselves.
They don’t have to go after the global game, they can go after us in individual countries. That’s really something that we’re seeing now: It’s not necessarily digitally-driven, but a lot of the game is not competing at the global level, it’s competing at the local level with local companies really having a say in what’s driving their own markets.
Knowledge@Wharton: How do you instill a culture of innovation in such a big, global company?
Gomez: One of the keys for us is to understand success. The company really does get behind a great initiative, and people try to replicate it in their own part of the business or their own geography. Having a great communication network is key. And Colgate is very driven by the relationships that people have built around the world, because a lot of our people have worked in multiple countries and continue to build out those networks. So the buzz is almost personal, and people feed off of that, and their energy leads to pushing into other areas of the business.
We also see innovation as something that is not the responsibility of the “innovators” — it’s the responsibility of all parts of the organization. So whilst the innovation teams are sending out the commercial innovations, every other team is responsible for innovating in their own environment.
Knowledge@Wharton: What’s next for Colgate Palmolive on the innovation front? Are we going to have toothbrushes that talk to us and remind us to floss, or tell us how long it’s been since we’ve flossed?
Gomez: Or toothbrush drones, maybe? Since that seems to be the innovation of the day.
Knowledge@Wharton: Toothbrushes that could brush your teeth on their own, without you having to hold them.
Gomez: We are definitely looking to respond to the evolution of the consumer in terms of how they’re changing and the way they look for products, the way they look for experiences overall — and that will affect many parts of our business. I do believe there will be change coming in the next few years in terms of what consumers demand and therefore, what we will deliver.
Knowledge@Wharton: What keeps you up at night? What’s the biggest threat that you see out there?
“As access to information is changing, both on the consumer side and on the business side, that’s where these digital start-ups can really take the game into a different place.”
Gomez: I work in a group that is very external facing and we’re looking for what comes next, so I’m not working on the engine of the organization, if you like. Because of that, I’m very focused on that digital change and the change in business model and how that will affect our traditional business model, which has, as you can imagine, millions of dollars in resources built around it. So for me, trying to understand where to experiment and how to interpret those learnings is the thing that I’m constantly thinking about.
Knowledge@Wharton: What’s top of mind right now as you think about those things for you?
Gomez: I think the subscription model, I think about access to data. I think about the Quantified Self movement [of using technology to track personal wellness and other data] and the way that that’s affecting how people understand themselves, and therefore, make choices for their own health. Because essentially, whilst we’re a consumer packaged good company, all of our categories are essentially in the wellness space, whether that be oral care, personal care, home care or our pet nutrition business. So that is a change that we believe will somehow affect almost all of our categories, and we need to understand how the consumer will change.