Corporate New Ventures at

Procter & Gamble

International Business Theory
Heiko A. S. Johannsen

AGENDA
1.Introduction 1.1 Procter and Gamble case study 1.2 Procter and Gamble 2. Managerial decision making 2.1. Characteristics of managerial decisions 2.2 Identifying and diagnosing the problem 2.3 Group decisions & group decision management 3. Assignment Procter and Gamble 3.1 History of Procter and Gamble 3.2 Cornerstones of the culture 3.3 The corporate new ventures team 3.4 Functioning of the new ventures team 3.5 Key success factors for entrepreneurial spirit 3.6 Other approaches for corporate new ventures

Amabile and Whitney - Corporate New Ventures at P & G

1. INTRODUCTION

Amabile and Whitney - Corporate New Ventures at P & G

1.1 PROCTER AND GAMBLE CASE STUDY

1.1 Procter and Gamble Case Study

Confrontation of P&G with the pressing demand to rehabilitate their product innovation

High long term goals to double the business every ten years Establishment of a small Corporate New Ventures team (CNV)
Such approaches need management and good structured decision making, which will be presented subsequently

What does Procter and Gamble do?

Amabile and Whitney - Corporate New Ventures at P & G

1.2 PROCTER AND GAMBLE

Batemann and Snell 2010: Management - Chapter three

2. MANAGERIAL DECISION MAKING

2. Managerial Decision Making

Agenda 2.1 Characteristics of managerial decisions 2.2 Identifying and diagnosing the problem

2.3 Group Decisions & Group Decision Management

Batemann and Snell 2010: Management - Chapter three

2.1 CHARACTERISTICS OF MANAGERIAL

DECISIONS

2.1 Characteristics of Managerial Decisions

Managerial decisions are influenced by four different challenging forces Risk Uncertainty

Lack of structure

Conflict

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Risk

2.1 Characteristics of Managerial Decisions

Lack of Structure

Lack of structure

Uncertainty

Conflict

Most decisions are novel and unstructured - not solvable by existing structures or procedures

Divide in
Programmed decisions
Frequent, repetitive, routine there is certainty regarding cause-and-effect relationships Dependence on policies, rules, and procedures

Nonprogrammed decisions
Novel, unstructured. there is uncertainty regarding cause-andeffect relationships Requirement for creativity, creative problem solving

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Risk

2.1 Characteristics of Managerial Decisions

Lack of structure

Uncertainty

Conflict

Examples
University

Programmed decisions
How many students will be accepted

Nonprogrammed decisions
Construction of new classroom facilities

Private

What kind of Noodles to buy

Buy a house

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Risk

2.1 Characteristics of Managerial Decisions

Uncertainty

Lack of structure

Uncertainty

Conflict

Manager has insufficient information to know the consequences of different actions I.e.:

An Important decision under the circumstance nonprogrammed then uncertainty is almost every time connected with the outcome

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Risk

2.1 Characteristics of Managerial Decisions

Risk

Lack of structure

Uncertainty

Conflict

Exists when the probability of an action being successful is less than 100 percent and losses may occur Manage risk means willing and able to see and to predict different outcomes of a decision

Managers consider all choices within their scope to operate the risk and reduce it to the lowest common denominator

If a manager takes important decisions, which are influencing subordinates, peers or even superiors, he will face resistance Conflict
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Risk

2.1 Characteristics of Managerial Decisions

Conflict

Lack of structure

Uncertainty

Conflict

Individual decision makers experience psychologial conflict

Managers are exposed to various options These various options are more or less interesting and always connected with advantages and disadvantages

A manager must take all of these aspects into consideration

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Batemann and Snell 2010: Management - Chapter three

2.2 IDENTIFYING AND DIAGNOSING THE PROBLEM

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2.2 Identifying and Diagnosing the Problem

Identifying and diagnosing the problem Generating alternative solutions Evaluating alternatives Making the choice Implementing the decision Evaluating the decision

Identifying and diagnosing the problem

Current status differs from future expected, past performance or plans

Generating alternative solutions

Ready-made solutions, custom-made solutions

Evaluating alternatives
Diagnose problem, awareness of all circumstances - past & present

Making the choice

Estimate the effect of the solutions & decide for the best, constant check if main goals met

Implementing the decision

Stay visible, take care, establish action plan (time, HR needed, responsibilities)

Evaluating the decision

KPIs clear evidence of success or failure
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Batemann and Snell 2010: Management - Chapter three

2.3 Group Decisions & Group Decision

Management

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2.3 Group Decisions & Group Decision Management

Advantages:

Two heads are better than one Is this statement really

valid?

If there is enough time - groups usually make higher decisions than most individuals

Use of more information possible Different perspectives adoptable to all kinds of problems Possibility for intellectual exchange and stimulation

Stakeholders Loyalty and motivation of decision stakeholders kept if part of the group discussion
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2.3 Group Decisions & Group Decision Management

Disadvantages:

Domination

A group member influences the group and leads to a decision he wants to have Every group member tries not to criticize anybody to keep the spirit Leads to low creativity and hinders the ideal decision making Choosing an option that is acceptable even if this is not the best possible solution (due to laziness or time constraints) Battle between two team members Both want to win the fight, and the actual target gets out of sight

Groupthink

Satisficing

Goal displacement

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2.3 Group Decisions & Group Decision Management

Group composition Scientists have different opinions about the perfect group size

The perfect group size is defined by:

The managers ability to manage the communication, tasks and potential conflicts The group members ability to interact and influence the others effectively more effective in generating ideas

Bigger group

more difficult to achieve an agreement

Experience showed that a group, composed with people from various backgrounds, had the highest outcome
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2.3 Group Decisions & Group Decision Management

Leadership 1.Avoid domination 2.Encourage input 3.Avoid groupthink and satisficing 4.Remember goals Constructive conflict 1.Air legitimate differences 2.Stay task related 3.Be impersonal 4.Play devils advocate

Effective group decision making

Creativity 1.Brainstorm 2.Avoid critizising 3.Exhaust ideas 4.Combine ideas

(Batemann, Snell; 2010; p. 101)

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Amabile and Whitney - Corporate New Ventures at P & G

3. ASSIGNMENT PROCTER AND GAMBLE

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3. Assignment Procter and Gamble

Agenda 3.1 History of Procter and Gamble

3.2 Cornerstones of the Culture

3.3 The Corporate New Ventures Team 3.4 Functioning of the New Ventures Team

3.5 Key Success Factors for entrepreneurial Spirit

3.6 Other approaches for Corporate New Ventures

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Amabile and Whitney - Corporate New Ventures at P & G

3.1 HISTORY OF PROCTER AND GAMBLE

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3.1 History of Procter and Gamble

Founded in 1837 William Procter (candle maker) James Gamble (soap manufacturer) to ease the purchase of animal fats Acquisitions Spic and Span (1945), Duncan Hines (1956) Clorox (1957), Charmin Paper Mills (1957) Folgers Coffee (1963) Move into the health care business Norwich-Eaton (1982), Richardson-Vicks (1985), G.D. Searle (1985) Largest cosmetics company in U.S. Noxell (1989), Max Factor (1991)
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Amabile and Whitney - Corporate New Ventures at P & G

3.2 CORNERSTONES OF THE CULTURE

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3.2 Cornerstones of the Culture

What is culture in a company and how is it defined?

Underlies a constant dynamic change Influenced by all people in the company

People bring certain values and behavior to the organization

Values and behaviors change the culture over time & keep it in the company from generation to generation Depends on outside influences

laws, regulations, ethical and cultural background

The culture of a company is the collective experience, routines, beliefs, values, goals and the inside informal and formal system of a company

(Howard, 2008)

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3.2 Cornerstones of the Culture

What are the cornerstones of the culture at Procter & Gamble
Beginning in 1837 - Founders brought strong religious, moral and ethical values into the company

P&G produces every product between toilet paper and fruit juice

P&G is a grown company which is based on a really deep and breadth competency

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3.2 Cornerstones of the Culture

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3.2 Cornerstones of the Culture

What are the cornerstones of the culture at Procter & Gamble
First Cornerstone: Product development and innovation

P&G invested about two billion dollars in 2010 for R&D 50% more than the closest competitor Unilever Target to double sales every ten years

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3.2 Cornerstones of the Culture

What are the cornerstones of the culture at Procter & Gamble
Second Cornerstone: Employees

Since the early years: hiring the best and brightest (sharp examination) Nearly impossible to access P&G as a high ranking manager from outside Every manager is grown from a lower position.

Guarantees to keep the culture of P&G on a high innovative & constant productive level with less negative outside influence Strengthens the satisfaction of the employees & supports the company targets

Profit sharing plan established in 1892. Every employee gets benefit if P&G is successful
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3.2 Cornerstones of the Culture

What are the cornerstones of the culture at Procter & Gamble
Third Cornerstone: Single brands

Brands managed by responsibility of one brand manager (since 1930)

Keeps the competition in the different categories

Expertise tied to brands through marketing, management & single brand targets

Company stays proficient and focused to its allover targets

Internal competition between different brands is effective and biasing regarding the culture behavior Competition led to a protective culture

Information i.e. brand strategy only shared with people who need to know

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3.2 Cornerstones of the Culture

What are the cornerstones of the culture at Procter & Gamble
Fourth Cornerstone: Knowledge

Not shared with everyone P&G has humongous databases of knowledge

Used to shape the future of the company and to keep it in motion

Cross communication between the divided sectors of specific businesses

Fifth Cornerstone: Commitment to the customer

Extensive product & market testing before any product gets on the market Established products are tested for years to ascertain that it is better than competing (Customer satisfaction)
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Testing led to an issue connected to the culture in the 1970s

Amabile and Whitney - Corporate New Ventures at P & G

3.3 THE CORPORATE NEW VENTURES TEAM

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3.3 The Corporate New Ventures Team

Lack of innovation:

The Corporate New Venture Teams (CNV) were established to bring back the innovation which was the leading virtue of P&G
Within every sector one New Venture team was established to explore the different expertise in the division and to create new products and categories

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3.3 The Corporate New Ventures Team

CNV Teams:

Controlled by an Innovation Leadership Team (ILT)

Based on seven main officers of the company (independence of the former sector support systems)

ILT had undergone an examination of the structural issues of the company and established a Corporate Innovation Fund to support the NVs

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3.3 The Corporate New Ventures Team

CNV ILT Fund

Sector A NV

Sector B NV

Sector C NV

Sector D NV

Problems:

Innovation did not fit within a special sector

Communication between different departments created problems

New CNV team was established (focus on reliable innovation process)

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3.3 The Corporate New Ventures Team

Management

CNV

External & Internal Consultants

Focusing on reliable innovation process

Consisted of different members from different company sectors

Developed a system of best practices in new product development Support of external and internal consultants Able to connect the technical core competencies with a system to generate and select new product concepts People with particular knowledge were concentrated in one group, not divided by sectors or any borders Report directly to the head of the North American business

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Amabile and Whitney - Corporate New Ventures at P & G

3.4 FUNCTIONING OF THE NEW VENTURES TEAM

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3.4 Functioning of the Corporate New Ventures Team

Main goal:

Develop one major new business every year and to create a process for innovation

They established technological and business success criteria for new product innovations

Work as a contract between management and the team

Regarding the subordinate New Venture Teams

If a team meets the previous set goals they were able to proceed with the project in line with the management Motivation is promoted - No lack of information

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3.4 Functioning of the Corporate New Ventures Team

Small Team:

Brand management, R&D, finance, market research and product supply and support

Due to various backgrounds & small number of members

High outcome is reasonable

Ideas are systematic driven:

Understand the technological capabilities of P&G Find hidden consumer needs Team members have to understand the functions of a product by themselves - not with the support of plenty of scientists
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3.4 Functioning of the Corporate New Ventures Team

Support by:

Location and environment

Airy space with plenty of snacks, coffee and inspiring magazines

Advanced information search system People should go for ideas which they think are interesting

No assigned ideas

Investigation of ideas trough:

Traditional sectors: society science, cultural exploration, demographics New paths: watching newest blockbuster, go for a walk

Key factor: Identify intersections between various trends

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3.4 Functioning of the Corporate New Ventures Team

Idea Evaluation: six stage discipline to refine & create ideas 1. Identify Driving Trends

Supported by international leaders and world experts, who are

able to recognize potential connections between trends and show product opportunities Arranged into different trend areas:

Consumer/Demographic; Social/Cultural; Technological; Regulatory/Environmental; Political/Economic; Industrial/Business

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3.4 Functioning of the Corporate New Ventures Team

Idea Evaluation: six stage discipline to refine & create ideas 2. Identify Opportunity Buckets

Result of the trend analysis Provided the framework to guide the CNV team to identify the consumer needs and trends

3. Application Areas

Supported by the consumers: buckets led to usage possibilities in different areas

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3.4 Functioning of the Corporate New Ventures Team

Idea Evaluation: six stage discipline to refine & create ideas 4. Concept Development

Meet the needs in identified application areas

Concept selection by the consumers and the evaluation of potential refinement Ideas were put into standard measures to determine possible success and then presented to the management

5. Concept Selection

6. Establish Priorites

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3.4 Functioning of the Corporate New Ventures Team

Idea Evaluation:

Idea judgment was influenced by an outside agency

Receive an outside look not connected to the P&G opinions

First time that at this early stage of concepts the consumer point of view was included

Three main factors:

Determining of basic consumer needs Evaluation of technological possibilities to provide the product Determine the business opportunity

After idea approval hand over to the responsible sectors

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3.4 Functioning of the Corporate New Ventures Team

Challenges

Ideas did not fit perfectly into a special sector No involvement of the different sectors to create an ownership CNV team was not the only creative team

CNV reported to the top management, other groups were separating their ideas from the CNV team

Key: the systematic approach to be disciplined during the idea finding process Important to run the ongoing business and to come up with a high level of entrepreneurship at the same time

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Amabile and Whitney - Corporate New Ventures at P & G

3.5 KEY SUCCESS FACTORS FOR ENTREPRENEURIAL

SPIRIT

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3.5 Key Success Factors for entrepreneurial Spirit

Key success factors:

The right people on the right place Constant connection to external knowledge databases

Universities, stakeholders, customers from competing companies

Listening to the market Motivated and reliable employees (Screening of the employees) Internal competition between the different brands Communication (cross connection of different innovation segments)

I.e.: rotating meetings and communication databases

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Managing authority which is responsible of the whole innovation process

3.6 OTHER APPROACHES FOR CORPORATE NEW

VENTURES

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3.6 Other approaches for Corporate New Ventures

Unilever:

One of the biggest competitors of P&G Production of a wide range of food, home and personal care products (Magnum ice cream, Lipton or Knorr)

Two global divisions Food and Home & Personal care

Organized in business groups - all products organized in categories

R&D process is organized on a product category base

Category base had the authorization to direct and manage the corporate R&D resources
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3.6 Other approaches for Corporate New Ventures

Innovation process based on an IT tool

Developed to facilitate the knowledge process across the products and business groups Designed to increase the transparency and the innovation process for all Unilever employees

Knowledge Management Group (KPMG)

Responsible for the implementation of innovation network Coordination of innovations on the product category level

Group shifted the former divided R&D process from a global, regional and local perception to a European point of view in the Food category

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3.6 Other approaches for Corporate New Ventures

Problems
Communication between the different units Cooperation only common within the units and not on a corporate level IT tool bridge the knowledge between the units

Fear of the local organizations to lose control over local power Important to set a clear structure and goals of the innovation network
Innovation

Process Management (IPM) program was established to clearly clarify the tasks

Establish certain rules of communication and behavior to be successful Management to be aware of the innovation process in line with
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3.6 OTHER APPROACHES FOR CORPORATE NEW

VENTURES

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3.6 Other approaches for Corporate New Ventures

Consumer goods player on the global market Clear defined Innovation process
Innovative Partnerships Vision and the strategy

target: innovation leader

establishing of networks with the customers and stakeholders

Innovation culture based on an internal open information exchange network Innovative processes and tools learning and adapting from best practice methods

Innovation organization innovation teams

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3.6 Other approaches for Corporate New Ventures

Target:

Establish regional organizational units to gain better knowledge & connection to regional and local customer needs Regional units act independent in sales, marketing, R&D and supply chains

Information is delivered to the headquarter in Dsseldorf

Basis of the market research are home visits all over the world

Scientists & marketing specialist go into average households and observe customers to identify trends and behavior by monitoring housework and the usage of Henkel or competitor products
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3.6 Other approaches for Corporate New Ventures

Interface between information and innovation

Inno-Power-Teams

Every product category Henkel has its own innovation team

Teams are located below the supervisor of a product category Three to seven members from different company parts

Task

Scan the environment through eight different topics

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3.6 Other approaches for Corporate New Ventures

Topics get presented through regular meetings

Evaluation and weight of topics

Information gets connected and assigned to different years to establish a long term five year view Roadmaps get established

Indication of important strategic fields

Clarify where search for innovation should be focused

The puzzle of single information is not useful. Only the linkage of modules and information leads to success
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Conclusion
Innovation is not based on I have an idea-light bulb approach Structured centralized or decentralized managed system to drive a companys business Communication, the constant learning process and the linkage of different thinking people is hereby an important key success factor as well as the collecting of data from surrounding and inside forces
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Conclusion

The management of all these factors will always be an important part to get future businesses and brands into the market
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Thank you for your attention!

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Questions?

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