With so many confusing, weak signals to process, how can corporate strategists stay ahead of the curve and create new products that meet changing market demands? Larry Huston, global manager of innovation and knowledge at Procter & Gamble, offered his perspective on P&G’s approach in a presentation called “Hard Lessons Learned” at the May 2 Wharton Conference on “Peripheral Vision: Sensing & Acting on Weak Signals.”
P&G – which has a research and development staff of some 8,000 professionals and market dominance in a variety of consumer goods – might seem to be in the driver’s seat when it comes to creating new products in response to weak market signals. However, until P&G rethought its innovation strategy recently, “our model for research and development was unsustainable,” Huston said. “The cost of doing R&D was going up faster than the returns.”
Echoing earlier conference commentary about converging new technologies, Huston explained that “if you look at the maps, there are 35 new technologies and we have been forced into all of them” because of “competitive pressure.” P&G’s other major challenge, according to Huston, was “the huge number of new consumer products” – 26,000 in the U.S. and 44,000 products globally. “Ninety-five percent of them fail, and many of them fail quickly,” he said.
To overcome these challenges, P&G created a “New Brand Discontinuity Boot camp,” an initiative involving “accelerated conceptual prototyping.” Within a mere 16 weeks, participants in each team had to develop a new half-billion dollar business – a goal that typically had taken three years. The effort has been successful, Huston said, generating such profitable new P&G brands as Therma Care (heat wraps); Swiffer Wet and Dry Mops (light, easy floor care); Whitening Strips (at-home whitening technology); the Crest SpinBrush (a throwaway, $5 electric toothbrush), Fabreze (an odor removal product) and Fit (a fruit and vegetable wash.)
What can strategists learn from P&G’s experience? Huston outlined these key lessons:
· Framing the hypothesis for a brand is critical: Where is the consumer going? “Few people have created a new brand,” Huston said, and brand managers at P&G, as elsewhere, were traditionally versed in “tweaking an existing brand,” not building a new one. When Huston asked staffers to “go create a $500 million company in hair care,” most staffers “showed up with incremental goals” rather than a fresh new hypothesis for brand value. The best results came from framing the hypothesis of a new brand in very specific terms. An example of such a hypothesis is: “I will create an indulgent … hair-care experience in people’s own homes,” Huston said.
· Asking the right questions is critical. “Most people are not working from robust hypotheses,” Huston suggested. “This causes them not to see what’s important and to just wander in the forest.” As Peter Drucker once wrote, “Seventy percent of the output of innovation is driven by the questions that get asked.” To dramatize the point, Huston analyzed the experience of P&G’s Crest brand. Crest had lost market share to Colgate because P&G wasn’t asking the right questions about customers’ values and perceptions. The brand’s earlier success had been driven by cavity prevention. Crest lost market share even as it became a more effective treatment for gums. “Our brand statement was [about] healthy teeth and gums,” explained Huston. But while “70% of consumers have some gingivitis, you can’t tell them that.”
· Define the problem clearly: “A problem well-defined is a problem half solved,” Huston noted.
In the case of Crest, P&G missed key events that were happening on the periphery; it did not define the problem properly and it asked the wrong questions. “We defined our brand too narrowly. We didn’t watch for small premium segments” that weren’t at the core of the traditional market for toothpaste. Competitors like Colgate were surging ahead of Crest by focusing on whitening, adding baking soda and peroxide, and providing specialized toothpaste for “sensitive teeth.” Meanwhile, “we sat on the healthy teeth space … and they ate our lunch,” Houston said. “We didn’t see this gorilla. We saw, ‘Crest stands for this.’ Branding is all about creating meaning – it’s about semiotics. We didn’t realize that ‘whitening’ is a key signal for ‘healthy.’”
Having recognized its mistake, P&G launched its “Healthy Smiles” campaign, which positioned Crest as both a healthy product and an effective whitener of teeth. Crest is again a market leader.
As a result of P&G’s New Brand Discontinuity Boot Camp, “We write the business plan on day one, right after talking with people, right after they create the hypothesis.”
Nevertheless, Huston acknowledged that, even for the rare company with P&G’s resources, “it is impossible to ask the right questions in new areas that are outside your experience.” P&G confers with corporate allies and external experts – including former employees who are working elsewhere – for insights and suggestions. As it turned out, Huston said, Crest’s five-dollar disposable toothbrush, a roaring success, was developed by outside inventors.