INTRODUCTION:
The overall marketplace has been witnessing different changes and advancements because of the increasing technological environment and globalisation. It has become important for the organisations to keep on coming up with innovative products and processes in order to remain competitive in the industry and come up with competitive advantage. The technological advancements have made it easier for the organisations to respond to the changing needs and demands of the customers along with other changing factors. This in turn results in either coming up with new innovative product or process on the part of the organisations. Hence, technology has become the greatest factor for organizations and firms to go a step ahead against their competitors and show the world what they really are. Technology changed the business patterns and business strategies from the scratch.
Proctor and Gamble is one of the largest multinational Fast Moveable Consumer Goods (FMCG) organisations and is operating in around 180 countries all over the world. The company was established in the year 1905 and since then has been focusing providing the customers with the high quality and innovative products and goods. The products of the Proctor and Gamble are sold around the globe with the help of different distributors, retailers, and merchandisers. Proctor and Gamble has organised itself into two main Global Business Units (GBUs) known as: household care business unit and beauty and grooming business unit. These are further divided into five broad segments, namely; grooming, beauty, fabric care and home care, baby care and family care, and healthcare (Reuters, 2013). The company reported sales of around $84 billion along with the $10 billion net earnings in the year 2012. Proctor and Gamble have a huge portfolio of around $ 25 billion dollar brands which contributes huge amount towards the overall sales per year, ranging from $1 billion to around $ 10 billion per year (P&G, 2012a). The main driving force behind the success of the company is ongoing and continuous innovation. The company is using innovation as one of the main sources for creating competitive advantage over other competitors and capturing larger market share.
In this report an attempt has been made to critically evaluate and explore the innovation strategy and intellectual property strategy of the Proctor and Gamble with special focus on cosmetic products as the company struggled in the start regarding the performance of the cosmetic products but then improve the overall growth and performance of this business unit with the help of the efficient and effective innovation strategy. This has been done by applying different conceptual models and theories of the innovation management. P&G has acquired and lunched different cosmetic brands and have been able to come up with new and innovative products according to the analysis of the technology, demand, and market.
TECHNOLOGY AND GLOBALISATION LEADING TO INNOVATIONS:
In its very broader terms technology refers to “The application of scientific knowledge for practical purposes.” As defined technology is exactly how it is stated above but in its true essence the meaning and implication of technology is way far scoped than it can be defined in any dictionary.
In today’s tech-savvy globalized world technology is the path to the world – the GLOBAL WORLD. Globalization has spread its wings at a very fast pace during the past few decades and now the world has become what they call a global village. Foreign investments, mergers and acquisitions, multinationals increasing their operations throughout the world, increasing brand awareness, increasing number of aware consumers, increasing imports and exports, increased competition and all such other factors are part & parcel of the globalized business economy we live in today.
The one medium which has enabled it all with ease and reliability is ‘technology’. Adapting technology has been the key to global success as it is what connects the world together. Technology again has to be seen as a multifaceted factor, there are computers, laptops, mobile phones, conference call/ video conferencing, tracking devices / applications, robots, factory lines and the list goes on. Various areas of business have enhanced differently by development and improvement of technology and that too as such fast pace that the world has become smaller and business reach has gone wider.
All of these factors in turn result in different changes and innovations by organisations operating in the highly competitive and globalised industry. Hence it can said that Technology lead to diversification of production, offices, services of different products through ecommerce, CAD, CAM etc. It helped businesses to cut down their various costs and become efficient. It also helped improving the quality of services for different firms. Cloud-computing, smart mobility has changed the shape of business completely, they are the sources of reaching and having an over look of the global businesses.
Technology is being advanced every day, it is helping the businesses to grow more and more and become innovative. The time has come to actually use the amazing technologies which are being invented and use them in the business so as to reach the global arena and help the business to rise and shine in this big cluster of different businesses.
DEFINITION AND CONCEPT OF INNOVATION AND INNOVATION MANAGEMENT:
Innovation has been defined differently by different authors. According to Porter innovation is new ways of doing that has been commercialized (Christensen, 1997). Hauschildt has defined the term innovation is creation of qualitatively new products or processes that have not been present before (Gerybadze, & Reger, 1999). It has been said that organizations that are more innovative are more likely to be successful. However over the last few years it has been identified that it is significant for the organizations to manage their innovation in order to be successful (Anthony, Eyring, and Gibson, 2006).
In order to make sure that the innovation is a success it is highly important for the organisation to employ appropriate strategies to manage the whole process of innovation in effective and efficient manner. Along with this it is also important to understand the changes in the technology, demand, and the market before coming up with a new innovation, as any new product or process is designed in order to respond to the changing needs and demands of the market and industry (Anthony, Eyring, and Gibson, 2006).
With reference to Proctor and Gamble, innovation refers to coming up with new products and services that are significantly different from the products and services that already exists. P&G has been a highly innovative organizations and it has taken several steps to ensure that their company not only remains an innovative organization but it is also able manage its innovation. P&G is a renowned organization particularly in terms of innovation and the strategy it has adapted to be innovative.
INNOVATION AND INTELLECTUAL PROPERTY STRATEGY OF PROCTOR & GAMBLE:
Innovation management has been aimed to systematically influence the business processes of the organization that are used in creating of new products or services. Innovation management is important in increasing the chances of making and innovating more successful products and processes. By managing innovation appropriately, organizations are able to reduce their costs and reduce chances of failure of products as they are launched (Gerybadze, & Reger, 1999).
The business operations and strategies of Proctor and Gamble are based on the time tested business model; this model enables the company to explore and evaluate the changing needs and demands of the customers, on the basis of which the company comes up with different products and innovations, which are then communicated with the help of marketing and advertising, and finally the products are priced keeping in view the overall value and experience delivered to the customers (P&G, 2012a). This business model is in line with the requirement of the analysing technology, market and demand before bringing in any innovation. This business model has allowed the company to increase the overall sales and revenue and creative sustainable competitive advantage over other competitors in the industry. One of the main elements in this business model is the innovation and for this reason Proctor and Gamble has been investing in the research and development activities and coming up with new innovations and products. The company invest around $2 billion in year on the research and development activities (P&G, 2011).
There are different strategies that an organization can adapt in order to manage its innovation. The innovation strategy adapted by Procter and Gamble is Open Innovation. Open innovation can be defined as working in collaboration with external partners like they are an extension of the organization. Lafley, Chief Executive Officer at P&G, has stated that open innovation adapted by P&G has been one of the main strategies that have resulted in the growing of the markets for innovation and expertise. He further added that the company has linked some of the most innovative minds of the world to develop the products that can help consumers in their lives. P&G has come up with innovative products by partnering with other companies or individuals and this has helped the company in generating sufficient amount of revenue (P&G, 2008). Along with this the company is also working on the concept of the incremental innovation and brings in changes slowly and gradually. However the management is also considering radical innovation for some products and processes resulting in making the existing products obsolete (P&G, 2011).
Innovation management is very important for any organization. By managing innovation, an organization is able to reduce the chances of failure of the products. At Procter & Gamble innovation is managed using different strategies with the aim that the product or innovation adds value to the consumer, but still the ratio of failure of products at P&G is high. P&G has achieved a lot of recognition as an innovative company. But almost half of the products introduced and innovated by P&G fail. Even though the rate of failure of innovation is high, but it is important for organizations to be innovative in their approach and style, as innovation allows firms to gain competitive advantage and come up with more products that could meet the needs of the consumers.
P&G has been highly focusing on innovation and according to the management of P&G, innovation along with productivity are the two main ingredients that would ensure the success of P&G in the years to come (P&G, 2012b). The company has been innovating and coming up with a number of products every year and it has planned to launch several new products in 2013 as well. Moreover, the company has planned to improve the existing products so that they are better able to meet the needs of the consumers (P&G, 2012b)
Huston and Sakkab (2006) have said that Procter and Gamble has adapted the strategy of open innovation. Moreover, almost 35% of the innovative products of P&G are introduced from the strategy of open innovation and this strategy has been highly successful in generating a substantial amount of revenue and improving the profitability (Huston and Sakkab, 2006). Not only the company has improved its strategy of innovation, but the company has also increased the pace of introducing the product in the market from the phase of idea. Pringles potato crisps in 2004 was the prime example. When the idea of having pictures and words came, the product was launched immediately and therefore the product became a hit. One of the problems over the years with innovation has been that companies tend to take a lot more time than they should as they used to spend time in analysing the demand and whether the product is feasible or not and it used to take almost two years, however the immediate launch of Pringles showed the way of innovation management and how immediate launch can help the product to succeed (Huston and Sakkab, 2006).
Another change in strategy of managing innovation of P&G is to refocus on discontinuous innovation. Tide PODS, Swiffer, and Crest Whitestrips are prime examples of refocusing on discontinuous innovation. Disruptive innovation is the other strategy that has been adapted by P&G. Disruptive innovation is to create new markets and network which ultimately results in disturbing one of the existing markets. P&G believes by refocusing on the discontinuous innovation, these brands would have an impact on the existing markets (P&G, 2012a).
Protection of intellectual properties is one of the most important elements for organizations that focus on innovation. P&G like several other companies try to protect its products by using trademark, patent and logo on areas of products wherever possible to increase the inherent value (Traitler, and Saguy, 2009).
One of the main product categories which required ongoing innovation is cosmetics and beauty products. The cosmetic business of P&G is one of the examples that how efficient and effective innovation management contributes toward the growth of the organisations and products. P&G has been able to change the overall outlook and performance of its cosmetic business with the help of the properly planned and implemented new product development strategies. The company first acquired ‘Cover Girl’ and ‘Clarion’ brands in the year 1989 and acquired ‘Max Factor’ in the year 1991. In the initial years the management of the company was not able to apply the right strategy for innovation management and for this reason the cosmetics business of the company witnessed decline. The ‘Clarion’ brand was removed from the list and a failed attempt to launch ‘Olay’ was made. However, in the late 90’s the company transformed the overall outlook of the cosmetics business with the help of the P&G initiatives diamond philosophy. After the implementation of this innovation model the company was able to improve the overall performance and profitability of the cosmetics business. The initial innovation diamond for the new product development is given in the figure below:
(Cooper and Mills, 2005)
The innovation diamond clearly integrates the four main elements which should be keep in consideration while developing new product namely; new product and innovation strategy, out of the box idea to launch the overall process, resources available, and the climate and culture of the organisation. This innovation diamond was transformed by P&G to the ‘Initiatives diamond’ as shown in the figure below:
(Cooper and Mills, 2005)
The key of success for P&G in its successful innovation management is the integration of all factors and elements. This ‘Initiatives diamond’ can directly be related with the concept of associating innovation with the technology, market analysis, and demand. In order to make sure that the innovation is a success it is important to first evaluate, analyse, and understand the market and customers along with the changing technology. The management of P&G with the help of this new model for innovation make sure that the company is able to come up with new innovations according to the needs and demands of the customers and market. At the same time this model allows the management to evaluate and analyse the internal resources and skills required to work on a particular innovation.
CONCLUSION:
Procter and Gamble is one of the largest multinational enterprises in the world and innovation has been one of the main success factors of the company. The company has taken several steps in order to manage its innovation. P&G comes up with new and innovative products every year and therefore the company ensures that most of the products that are launched are able to meet the consumer needs. Not only this, the company has been refocusing on discontinued product. Moreover, P&G has been following a disruptive innovation strategy and this has also helped the company over the years to improve the profitability.
References
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