Disposable Diaper and Pampers :Role of Innovation Strategy and
Ecosystem Management in making these two items synonymous
Disposable Diapers and Pampers2011
No one likes change except babies in diapers. - Barbara JohnsonA
human being should be able to change a diaper, plan an invasion,
butcher a hog, conn a ship, design a building, write a sonnet,
balance accounts, build a wall, set a bone, comfort the dying, take
orders, give orders, cooperate, act alone, solve equations, analyze
a new problem, pitch manure, program a computer, cook a tasty meal,
fight efficiently, die gallantly. But definitely be able to change
a diaper. Robert Heinlein, Science fiction writer Diaper backward
spells repaid. Think about it.- Marshall McMuhan, Canadian
communications theorist Educator, Writer and Social ReformerYou
have to change those diapers every day, I mean literally. When
those directions on the side of the Pampers box say, 'holds 6-12
pounds' they're not kidding!- Comedian Jeff Foxworthy commenting on
the absorption capabilities of todays diapers
IntroductionThe use of some form of diaper to wrap children is
as old as human history. Other than food, water and clothing, it
fulfills a fundamental need of human beings that is surpassed by
few other products. Does a need so universal mean that all you need
to do is develop the product and it will be an instant success? It
would appear so but it is certainly not the case. The disposable
diaper a quintessential innovation that is the solution to an
age-old problem has had a tremendous ride along the innovation
ecosystem over its evolution in over 80 years. Many players have
tried to put the pieces together in this ecosystem and capture the
enormous market potential but only a couple of frontrunners have
emerged and one has come out as the winner Procter & Gamble
with its Pampers line of diapers. How did Procter & Gamble
achieve this competitive edge to become the dominant player,
especially with a consumer/commodity level product such as a
diaper? The answer is hidden in how P&G managed the ecosystem
better than anyone else and how it has done so in a sustainable
fashion that will perpetuate into the future. These secrets behind
P&Gs success are exposed through this analysis of the evolution
of the disposable diaper and Pampers ecosystem below.HistoryAs
early as 1887, mothers began experimenting with different materials
to create diapers that are comfortable for their babies and prevent
untimely leaks. Cotton was the material of choice as it was readily
available and was known to absorb better than other fabrics. It was
also the material of choice because it was easy to wash and
durable. Soon mothers and doctors began using Turkish toweling with
an inner soft muslin layer. Also, the wide spread commercialization
of the safety pin that had been invented in 1849 lent ease of use
for the cloth diaper and added to its viability. However, cloth
diapers meant lack of air circulation, roughness when wet, transfer
of bleach from laundry to babys skin etc. that led to diaper rash
and other infections. These problems were hard to mitigate and
hence difficult to commercialize with no added value when compared
to diapers that mothers could make on their own at home. Throughout
the early 1900s, various inventions led to continued improvements.
The idea of using paper was first suggested in the 1940s when Hugo
Drangel of a Swedish paper company suggested the idea of placing
sheets of paper tissue inside the cloth diaper. This led Valerie
Hunter Gordon in the UK to develop the first 2-part system diaper
cellulose wadding covered with cotton wool and outer plastic. This
diaper called the Paddi had an adjustable garment with
press-stubs/snaps. However, Valerie Hunter with her Paddi and
similar efforts by other inventors including Marion Donovan in the
US and Hugo Drangels daughter in Sweden faced resistance from big
manufacturers as purchasing managers were mostly male. Many of them
declared they would never allow their wives to put paper on their
children. Although the Paddi went on to be a successful product for
retailer, Robinsons of Chesterfield, for many years, its use did
not spread widely.Only due to changes in socio economic structure
of the 1950s with more mothers entering the work force as a result
of the Second World War did the demand for disposable diapers rise.
This fundamental change in mothers wanting more freedom to enter
the workforce and travel caused the advent of big players such as
Johnson and Johnson, Playtex, and Parke Davis into the disposable
diaper market. Not until 1956 did P&G make its arrival.
The disposable diaper ecosystem evolution and P&Gs
dominanceThe story once P&G began researching the disposable
diaper and how this company developed its stronghold can be
examined by dividing up the analysis into three distinct eras on
the time chart Inception, Growth and Competition, and Future
Development. In each of the eras or stages, P&G faced
challenging and transforming execution and adoption risks that
needed to be addressed. Below, these risks are elucidated and
P&Gs efforts in mitigating these risks by carefully leveraging
co-innovations and developing an innovation strategy governed by
informed expectations are presented. Inception (1960 to 1980)"This
one will fly. - Victor Mills on P-57, precursor diaper to Pampers
brand
After three years of research, Victor Mills, a chemical engineer
at P & G and his team conceptualized the disposable diaper in
1959, which went on to become Pampers at launch in 1961. Although
similar product research was occurring at Playtex, Johnson and
Johnson and other companies, P&G and Pampers came out as the
winner with over 80% market share within a decade of launch. Below
is the analysis of how P&G achieved this incredibly successful
launch. Execution Risk In the early days of research and
development of the disposable diaper and the launch of Pampers,
P&G faced challenging execution risks. But throughout this
process the innovation strategy was not driven by the need to enter
the market first but by the goal to bring a product that will enjoy
widespread popularity and adoption. These execution risks can be
grouped into product risks and manufacturing risks.Product
risks:The development of the disposable diaper was not without
risks for P&G. On one hand it had considerable R&D budget
and talented individuals to drive the innovation efforts. But on
the other hand, the end customers were highly demanding mothers who
can be unyielding in comfort and safety expectations for their
children. Plus, all this had to be achieved while keeping the price
low for this consumer product to allow widespread adoption.Faced by
all these challenges, P&G managed this risk in two ways. First
and foremost, it listened to its end customers relentlessly. After
experimenting and developing the product in-house for five years,
it finally presented its 3-layer (Exhibit 1) diaper to mothers in
Peoria, Illinois. But, mothers did not like the price tag of 10
cents apiece, when diaper services prices ranged from 2 to 5 cents
per unit, and laundering cloth diapers had a cost of 1-2 cents.
Also, offering the diapers at 10 cents per unit would only
reinforce the idea that disposable diapers were specialty items for
high income customers, which was prevalent at the time. This was
against the goals set by P&G to make the disposable diaper a
true consumer product. P&G had to develop a product of high
quality at a much lower cost and they went back to the drawing
board.After 5 more years of diligence, P&Gs engineers developed
a sophisticated machine that took rayon, wadding, polyethylene and
other materials to cut, shred and fold the materials into finished
Pampers at incredible rate of productivity 400 diapers per minute!
At that production rate, P&G was able to offer the disposable
diaper at a much lower price of 5.5 cents per unit. Customer
testing after 10 years of development was done in California to
very positive reviews. By the end of 1969, the product was
available throughout the United States of America. Instead of being
holed up in R&D centers in Cincinnati and wasting effort in
making a product that would not meet customer demands in the end,
P&G engineers worked closely with the end customer throughout
the development process to ensure customer demands drove the
direction of the product. This helped mitigate information gaps
that can be critical to successful execution of any innovation
effort.
Manufacturing Risks:With a goal to sell the Pampers product
nationwide and establish it as the leader in the market place,
P&G had to ensure that it maintained its cost advantages while
manufacturing the product in large volumes. Also, these economies
of scale had to be attained immediately, not over time as is
generally the case. The strategic acquisition of Charmin Paper
Company in 1957 set up P&G with incredible advantages on this
front. By utilizing existing Charmin factories and a workforce
already skilled in handling similar materials to make Pampers in
large volumes alongside tissue paper at the Charmin mill in
Mehoopany, PA, P&G was able to put in place a manufacturing
process that would lend economies of scale that this product launch
demanded.Hence, they were able to offer a superior product at an
affordable price for its customers. Co-innovation in parallel with
other industriesThroughout the research and development that went
into designing the diaper, P&G engineers worked closely with
mothers to ensure satisfaction. When a test group in Dallas
complained that the babies were uncomfortable in 90 degree weather,
the engineers went back to design a diaper with better features
such as zee pleats, superior containment, hydrophobic top sheet and
a plastic back sheet. At the time of launch, the Pampers diaper was
made of three parts: an inner liner of smooth nonwoven rayon thats
designed to enable moisture flow one way, a middle pad of fibers,
and an outer water proof sheet of Polyethylene. Fluff pulp, Rayon
and Polyethylene:Each of these materials was adopted ingeniously
from innovations in other industries. P&G engineers replaced
paper with fluff pulp in the middle pad to improve the performance
tremendously. Fluff pulp originated in the paper industry when the
Kraft process was invented in the advent of the 20th century to
process wood pulp. Consisting of long cellulose fibers that provide
a strong capillary effect, Fluff pulp draws in the liquid and the
surface tension binds the water once it has been absorbed. Most
importantly, it could absorb liquid up to 20 times its weight
increasing the capacity of the diaper, from 100 ml up to 400 ml.
This represents a big leap ahead for the disposable diaper, from
being a one-time use product to a product that could now perform
for more than 3 hours at a time. Polyethylene, a product of the
chemical industry and widely used in consumer product industry was
a natural choice for the back sheet. Elasticized fabric, adopted
from the rubber and tire industry, was used in single and double
gussets around the leg and waist areas that aided in fitting and in
containing urine or stool which has not been absorbed. What also
really set apart the Pampers diaper from any other diaper ever
before was the use of another innovation from the field of
non-woven material science - Rayon. Rayon was widely used in the
textile industry as it was able to imitate the feel and texture of
silk, wool, cotton and linen despite being a semi-synthetic
material. Rayon fabrics were soft, smooth, cool, comfortable, and
highly absorbent, but they did not insulate body heat, making them
ideal for use in hot and humid climates. By carrying over this
innovative product from the textile industry and employing it in
the inner liner which is closest to the babys skin, P&G was
able to give Pampers a soft feel that was unexpected from a
disposable diaper. Other co-innovation needsApart from ensuring
that the disposable diaper innovation went hand in hand with
advances in material and non-woven science and other industries,
P&Gs pampers required parallel co-innovation in a couple of
other areas but the risks were not too high. Waste management was
an area where co-innovation could have been necessary. If proper
disposal channels were not available, the disposable diaper would
never have been used widely. Disposal had to be seamless and hassle
free for mothers to switch over from cloth. P&G worked closely
with government and regulatory organizations to make its case that
the disposable diaper fell into the category of Municipal Solid
Waste (MSW), as they are a household waste product that doesn't
have special regulations (they are not hazardous). Since most
household waste ended up in the incinerator, which was suitable for
the disposable diaper and no further co-innovation was required.
This ensured that mothers could dispose the diaper just as any
other garbage and did not need to make any other special
arrangements. Adoption RiskThe initial adoption of the Pampers
diaper was also wrought with challenges. This risk was mainly on
two fronts customers and channel. P&G conquered both these
risks because they anticipated these risks, realized the importance
of mitigating these risks quickly and decisively, and believed in
the quality of their product to bring them through.
Customers:Disposable diapers were a completely different approach
in serving the needs of mothers and their babies. Establishing
disposable diapers as the new solution for those needs required a
huge change in consumer understanding of the value, if any, that
the disposable diaper offers. It was up to P&G to change the
prevailing perception at the time that diapers were for travel and
that traditional laundering services were still the right approach
when you are not traveling. P&Gs marketing machine went into a
full gear onslaught on cloth diapers, concentrating its energies in
highlighting benefits of the disposable diapers such as convenience
and added health benefits such as eliminating sanitary problems
associated with using and re-using cloth diapers, diaper rash etc.
All means of communication with women was used to educate women on
these benefits. In another ingenious move, P&G marketed to
product with an aim to bring women from all walks of life on board,
not just working women. While working women would become early
adopters, the goal was to ensure widespread adoption. It
distributed free samples to women in childrens playgrounds,
demonstrated the product in supermarkets and went door to door in
suburban America. All this helped quick adoption and for habits to
be formed before even marginal negative reviews could discourage
the highly sensitive customer segment of mothers. Channel:Both
P&G and industry observers had high expectations for Pampers
success given the competitive pricing enabled by diaper production
innovation discussed above. To ensure quick and widespread
adoption, its diapers had to be first and foremost available to
customers nationwide in a hassle free manner. However, the low
margins on diapers like other consumer packaged goods caused
retailers to be concerned with the risk of low inventory turnover.
Also, Pampers was a bulky product which would require considerable
shelf space, space that retailers are very nitpicky about. Many
retailers did not know which product category to place Pampers in
and it sometimes even ended up in the drug aisle. P&G relied on
its well established retail relationships and customer research to
convince the channel to carry its diapers. Data from Pampers first
test market in Peoria, Illinois combined with the sheer potential
size of the disposable diaper market helped ease retailers
concerns. P&G further responded to this adoption chain risk
with discounts to retailers to incentivize extensive stocking of
pampers. At the same time, it invested heavily in advertising
campaigns, coupons, and promotions to further develop the market
and ensure high inventory turnover.In case of both the adoption
risks, it can be inferred that P&G knew that these risks
existed but also that it had the ability to mitigate these risks.
Both these factors were important to ensure a successful launch.
Informed Expectations driving innovation strategyIn-spite of all
the right steps that P&G adopted in conducting the innovation
of the disposable diaper and eliminating the execution, adoption
and co-innovation risks, none of this would have proven to be
fruitful had this strategy not been backed by clear expectations of
and from the product. As discussed above, at every step P&G
ensured that it was aware of the customers pulse and that its
innovation was responding to their demands. But more importantly,
P&G invested in over ten years of R&D in the product
because it was first and foremost clear that there was tremendous
potential from this product in the market place. With over 9
million babies in diapers in the 1950s, each getting his diaper
changed 8 times a day, 56 times a week, this translated into
roughly 25 billion diaper changes a year. At a cost of 6 cents a
year, this bill comes to $1.5 billion a year. Plus the second wave
of womens liberation movements was trending across the United
States and more and more women were joining the work force. Backed
by this knowledge, P&G set its expectations of the disposable
diaper and then aligned these expectations with executing an
innovation strategy that would bring the right product into the
hands of the customer at the right time as described above.Exhibits
2 and 3 present diagrammatic representation of the above ecosystem
innovation analysis and the ecosystem map that prevailed during
this era.Growth and competition (1980 to 2000)The explosion of
demand in the 70s for the disposable diaper continued into the 80s.
But, the nature of the game had changed for P&G, from R&D
of a brand new innovation to constant improvements needed to both
meet rising customer expectations as well as maintain competitive
edge. Execution RiskP&Gs success hadnt gone unnoticed.
Competition rose to unprecedented levels with Kimberly Clark
emerging as a clear threat out of over 20 companies that ventured
into disposable diapers at this time. Kimberly Clark developed its
own disposable diaper using different materials and absorbent
technology. Kimbies boasted of better shape and premium quality and
attracted customers with a higher willingness to pay. Scott was the
first company to introduce snaps instead of pins. Innovations
ranged from elastic leg bands to reusable tabs, softer touch,
better fit, using baking soda to improve absorbency and so on.
P&Gs greatest challenge was to continue to maintain its
leadership and innovate without losing market share against this
competitive barrage.At this time, P&G uncharacteristically
stumbled. It failed to understand that the willingness to pay was
increasing amongst the baby boomer population and that customers
were migrating to the premium end, where Kimberly Clark was
positioning itself with its Huggies brand. Instead of focusing on
this migration, P&G introduced a two-brand strategy Luvs as the
higher priced premium diaper, and Pampers as the lower priced
diaper. P&Gs brand managers did not realize that premium
features were in fact becoming generic. Huggies contained all the
best features and was priced to compete with Pampers making it an
easy choice for parents. Huggies had replaced Pampers as Americas
leading disposable diaper. In order to recover, P&G came
through with some revolutionary innovations. It quickly
restructured its innovation and product strategy on informed
expectations of the customers. In other words, it went back to its
roots embodied in its slogan Inspired by babies. Capacity and
dryness were the top requirements and P&G focused its efforts
on improving these features. They achieved these qualities through
a well-managed co-innovation strategy. 1990s
Forget the money. Show me the all the new Pampers. We developed
Ultra Dry Thins diapers that pulled moisture into the core, then
sprang back to absorb even more. And we also came up with the first
stretch panels to make diapers more comfortable.
2000s
"What will they think of next?" Well, we're the ones thinking of
that next stuff. We've already made diapers that breathe, yes
breathe. And Premium and Baby-Dry diapers that have a protective
layer of lotion that helps keep little bottoms soft and smooth.
Grandpa Vic would be oh so proud.
Co-innovation strategyP&G embraced thoroughly the importance
of innovation that was occurring in parallel industries such as
non-woven material science, petrochemical industry and even the
agriculture industry. Their ingenuity was not in organic research
and development of every material that goes into the diaper but
more in bringing together the right components based on progress in
other industries. The innovation of the diaper proceeded along with
inventions of new materials and progress in parallel industries
such as feminine hygiene products.
Super Absorbent Polymers (SAP):Pampers introduced the first thin
diaper made with absorbent gelling material. Crystals of
polyacrylate (also called Waterlock) were dispersed in the
absorbent pad made of fluff pulp. This polyacrylate, with large
number of polymeric chains cross linked within, provided water
absorption greater than 400 times its weight. Also, most
importantly, the material did not release liquid water the way that
fiber based absorbents do. Instead, the water gets trapped in the
fluff pulp and does not escape from the matrix when the baby sits
down or moves around causing shear on the diaper. The SAP (super
absorbent polymer) came into a Pampers diaper through an unusual
path. The origins of super absorbent polymer chemistry trace back
to the early 1960s when the U.S. Department of Agriculture started
conducting work on materials to improve water conservation in
soils. P&G acquired this technical know-how from the USDA to
further develop the basic technology and incorporate it into its
3layer diaper. Even before soil amendment applications came into
market as was the intention behind the polymer, the Pampers diaper,
added the material to the absorbent core. Adopting the SAP material
required further refinement. Many different schemes for mixing
fluff and superabsorbent polymer were investigated in order to find
optimum diaper performance. Methods to delay superabsorbent
swelling in the core of the diaper were developed so that this
delayed wetting will provide more time to distribute liquid through
the diaper. Premium diapers with leakage below 2% became a reality
at last. The average weight of a typical medium size diaper was
reduced by 50%. Now with SAP, a new generation of high performance
diapers was possible. As mothers continued to adopt the disposable
diaper and its usage penetration increased for 25% in the 1970s to
77% in the 1990s, P&G was ready to meet their new demands.
Mothers wanted diapers to hold liquid longer while keeping the
babys bottom dry. The Pampers brand was rejuvenated by the
introduction of the Pampers Ultra in 1986. Spandex and
Polypropylene:This co-innovation strategy continued to work as
P&G adopted Lycra (also known with the generic name Spandex)
into making the cuffs for the waist and the legs, the lateral side
panels and in tape construction. Spandex could stretch as much as
400% of its original length before it breaks and was the perfect
material to adopt for the new thin diaper. With new generations of
softer and stronger elastic materials continuously being developed
by the Elastomeric industry led by 3M and Lycra, P&G could
continue to benefit by adopting this material. P&G brought in
Polypropylene to replace Polyethylene for the back sheet from the
chemical industry. Two American chemists working for Phillips
Petroleum of the Netherlands, Paul Hogan and Robert Banks, invented
the material in 1950s. Polypropylene is similar to its ancestor,
polyethylene, and shares polyethylene's low cost, but it is much
more robust and can be blow molded. More importantly, it provides a
cloth like look and a softer and natural feel that mothers
demanded. It provided the aesthetic look to alleviate mothers fears
of non-natural materials coming in touch with their babies.
Overall, Pampers made tremendous leaps ahead of the market through
this co-innovation strategy. The quality was so remarkable that
even NASA turned to this technology in developing the Maximum
Absorbency Garment used by astronauts during long space walks!
Adoption RiskPampers grew to become P&Gs biggest global brand,
with products serving consumers in 98 countries. But this growth
stage presented P&G other new challenges to overcome to achieve
the widespread adoption.
Resistance from doctors:Before the advent of SAP material into
diapers, doctors became wary of the bulk of the absorbent diaper
and its effects on the babies developing bones. To mitigate the
risk of parents abandoning its diapers due to this concern, P&G
came out with the Luvs brand in 1975, modifying the old rectangular
shape to a more modern hourglass shape. Kimberly Clark launched
Huggies in 1976 in response with the same hour glass shape. This
assuaged the doctors regarding diapers causing any adverse effects.
Doctors continued to debate about how disposable diapers are
delaying toilet training for young children. Family psychologist
John Rosemond claimed that it was a "slap to the intelligence of a
human being that one would allow baby to continue soiling and
wetting himself past age two. Pediatrician T. Berry Brazelton,
countered saying that toilet training is the child's choice.
P&G took its step in this debate by designing training pants
which bridge the gap between bay diapers and normal underwear
during the toilet training process. It enlisted Dr. Braselton to
appear in various commercials for Pampers Size 6, a diaper for
older children, where he announced that enforced toilet training
can cause serious long term problems, and that it is the child's
decision when to stop wearing diapers, not the parents. At the same
time, P&G and Pampers have long engaged with parents on best
practices to toilet train a child and provided many resources to
parents to encourage early training. This has only helped to
establish Pampers as a caring brand while allowing for incredible
carryover products as seen below.Channel problems:As competition in
the diaper market grew, promotional activities and retailer
incentive programs increased in intensity to drive short-term sales
gains. The promotional activity was so aggressive that P&G
estimated that only 50% of their promotional spending reached
customers to the benefit of retailers. By the end of the 1980s,
promotional spending had reached $1.6 billion for P&G with the
cost of trade promotions exceeding customer promotions. In the
early 1990s, P&G noticed that varying prices from store to
store because of special and varying promotions to retailers was
causing customers to either pay an inflated price or to hunt around
for a shop where the product was on special offer. P&G felt
that it was eroding customer brand loyalties and decided to replace
its fluctuations with everyday low prices upsetting many retailers
who went towards generic brands. To improve channel relationships
and reduce costs along the value chain P&G introduced CRP
(continuous replenishment) in 1988. CRP allowed P&G to offer
retailers reduced inventory, fewer stockouts, increased sales, and
saved labor costs. Importantly, the promise of improved inventory
management opened retailers to consider carrying additional P&G
SKUs. By 1994, 26% of P&G sales volume from 47 channel
customers was ordered through CRP. This allowed P&G to continue
to offer consistent prices for customers.Exhibits 4 and 5 present
diagrammatic representation of the above ecosystem innovation
analysis and the ecosystem map that prevailed during this
era.Innovation strategy that led to incredible carryoverI didn't
want to be so shortsighted as to be worrying about diaper rash, and
not taking care of bigger things, like nuclear war. Barbara
Donachy
Throughout this growth period P&G continued to capture the
pulse of its core customers, mothers. Funneling this deep
understanding into its innovation strategy, P&G was able to
generate incredible carryover products that brought customers from
one product to another without customers having to spend valuable
time searching for options as their babies grew. The power of this
carryover is another critical element that sustained P&Gs
leadership throughout the years and established is as a natural
choice for mothers all around the world. Here is a look at
carryover potential of the Pampers diaper.
Carryover based on size:The ingenuity lies in the evolution of
the Pampers product line. From the original launch of Pampers which
was a basic diaper that came in two sizes, the Pampers product line
grew to be multifarious. As more and more mothers adopted the
disposable diaper, Pampers expanded its products in multiple
directions. The number one carryover has come through size. Pampers
introduced the Swaddlers diaper specifically focusing on new born
babies. At a higher price apiece, the Swaddler presents superior
comfort, uses gentle and hypoallergenic materials with a touch of
aloe, adds breathability and comes with a color-changing wetness
indicator. What really differentiated the product was the umbilical
cord notch that helped mothers to protect the babys umbilical cord
area without the diaper rubbing on the area. Pampers also
introduced the Premie diaper for the comfort of premature babies.
So, now mothers were introduced to the Swaddler brand from day one.
By ensuring incredible product performance in the first ten to
twelve days of a newborns life, P&G won over mothers loyalty
towards Pampers presumably forever. Now, all that was needed was to
facilitate right size diapers with good quality as the baby grows
to ensure that customers carried over throughout the years when
they made diaper purchases. Pampers offered 7 different sizes
depending on the weight of the baby and the activities it was
capable of at each stage. After Swaddlers for newborns, moms could
carry over to Swaddlers up to size 2 or up to 4 months of infant
life. Mothers could then switch to Cruisers from size 3 to 6, which
enabled the baby to move around without discomfort as its mobility
increased. A size 7 was available in the cruiser line for more
cherubic babies. Once the baby was ready for toilet training,
mothers could now carryover to the training pants line under the
name Easy-ups. Easy ups could be used until the child was toilet
trained. For children who were prone to bedwetting, Pampers offered
Underjams for night use. Through all the sizes, P&G ensured
that it was well informed of the expectations that each stage
brought with it. Features such as hypoallergenic material for
Swaddlers, active fit for cruisers, flexible pleats for pull-ups
ensured customer satisfaction to carryover through the stages.
There was no reason for customers to spend valuable time
considering switching to a different brand and instead focus their
time elsewhere.Carryover through ancillary products:Apart from
diapers, another natural yet ingenious move was into the ancillary
products. When P&G noticed that mothers were increasingly
worried about how to clean the babies during diaper changes, it
introduced the baby wipes which went on to become a big revenue
generator for P&G. They also introduced disposable swim pants
sold under the brand name Splashers. The carryover effect as
explained above built incredible brand loyalty amongst mothers for
Pampers. It enabled highly successful marketing efforts and
campaigns. Pampers diapers were introduced to women as early as
during college days and free samples were given out in hospitals
during prenatal visits and womens health resource centers during
labor and birthing classes. The strategy to hook the parent early
and successfully carryover the customer throughout the lifecycle of
diaper use is the masterstroke that has sustained P&Gs
leadership and dominance in this highly competitive growth stage.
2000s
"What will they think of next?" Well, we're the ones thinking of
that next stuff. We've already made diapers that breathe, yes
breathe. And Premium and Baby-Dry diapers that have a protective
layer of lotion that helps keep little bottoms soft and smooth.
Grandpa Vic would be oh so proud.
Future Development (2000 onward)Pampers entered the 21st century
as the most successful P&G brand of all time with 4 B dollars
in revenue. The early years saw introductions such as Pampers
Premium segments and softer baby wipes. But, macroeconomic changes
around the world during these years have been and will continue to
be the defining elements in this innovation ecosystem. Here we
analyze how P&G has faced these challenges in a new era and
what it can do to continue to maintain its dominance.
Execution Risks The turn of the century was marked by two
factors that affected the disposable diaper globalization and
heightened environmental consciousness. Product and marketing risks
driven by globalizationOur cheaper diaper had a more plasticky
feel. It took us awhile to figure out that softness was just as
important to moms in a developing market. - Kelly Anchrum, Director
of global baby care, external relations, and sustainability at
P&G
As free trade across the world grew and countries in the
emerging markets began to benefit through their comparative
advantages in skilled labor, manufacturing abilities, natural
resources etc., per capita income and living standards of huge
populations increased tremendously. This increased affordability
meant that parents could now invest more in ensuring comfort for
their children and convenience for themselves. The potential for
disposable diapers was not lost on companies like P&G.But,
entry into these unknown areas carried unexpected marketing risks.
P&G did not have to persuade parents that its diapers were the
best; instead it had to persuade them that they needed diapers at
all. The disposable diaper, a commodity in the west, was just not
part of the cultural norm in emerging markets such as India, China,
Brazil etc. Parents felt that it was not right to use the
disposable diaper just for their own convenience. To mitigate this
risk, P&G used its marketing clout and budget to educate
consumers that using diapers was not about parents convenience but
about the babys cognitive development through its ability to
concentrate and get a restful sleep. In terms of product risk in
these markets, when P&G first launched Pampers in China in
1998, the effort flopped. Instead of developing a unique product
for the market, P&G made a lower-quality version of U.S. and
European diapers, wrongly assuming that parents would buy them if
they were cheap enough. To overcome this execution flaw, P&G
used the concept of reverse engineering to re-launch the Pampers
diaper in China. Instead of stripping down the diaper sold in the
western world to create a cheaper product, P&G concentrated on
lower-price diaper line without all the bells and whistles while
preserving the core features of dryness and comfort. It also
invested in developing more efficient technology platforms and
moved manufacturing operations to China to eliminate shipping
costs. Through creatively managing the above execution risks,
P&G was able to bring a revamped diaper to the China market
selling for the equivalent of 10 cents in local currency. This
helped P&G to become the number one brand in China and it
continues to grow as adoption of the product rises. Adoption
RiskThe difficulties of raising a baby are enough without the added
pressure of being told you are environmentally unfriendly. We just
have to pick and choose when and where to do our bit." K. Moore,
Parent, Southampton, England
In the 21st century, P&G faces a new challenge as people
become more environmentally aware and realize the amount of waste
that is generated by disposable diapers every year. 80% of
diapering is done with disposables in the US and western markets.
That comes to over 18 Billion diapers in a year adding up to 82,000
tons of plastic and 1.3 million tons of wood pulp. Consequently,
disposable diapers have been highly criticized because of their
negative environmental impact and parents are being encouraged to
return to reusable cloth diapers. Several states have proposed
taxing disposable diapers to limit their use. Manufacturers of
cloth diapers are gaining market share as the debate on green
footprint of disposable vs. cloth diapers rages on. P&G has
invested hundreds of millions of dollars on advertising
specifically to customers that appreciate the convenience of
disposable diapers. However, one of its greatest risks is whether
these consumers will continue to value the convenience of
disposable diapers, or if they will eventually be convinced that
the damage to the environment is more important. Much of P&Gs
efforts in the recent years have focused on addressing this
specific issue. P&G turned to consulting and research firms to
prove that disposable diapers were not as evil compared to cloth
diapers as they were made out to be. Research conducted by Arthur
D. Little, Inc. and commissioned by P&G concluded that
laundering a cloth diaper over the course of its lifetime consumes
up to six times the water used to manufacture a single-use diaper.
That water consumption, P&G reiterated was comparable in impact
to the waste produced by disposables. While these research and
marketing efforts did not negate the debate entirely, it did manage
to dissipate the major fears in the minds of parents regarding the
environmental impact of their choice to use a disposable
diaper.Channel:The emergence of e-commerce only further stirred
tensions between diaper manufacturers and retailers. In 2000,
Pampers launched the Pampers Institute, an online community
targeting mothers that offered coupons, free samples, and baby care
tips. Most importantly, the Pampers Institute represented the first
time that P&G sold diapers directly to consumers. P&Gs then
chief executive Bob McDonald I dont feel the need to have every
sale go through a retailerWe want to maximize our sales through
retailers but we also want to be where the consumer wants to shop.
Pampers eStore offered P&G a new distribution channel and gave
them the opportunity received direct detailed information on
customer buying habits and trends. Continued innovation and
co-innovation Driven by the above adoption risks, P&G has
concentrated its innovation efforts on reducing the green print of
the disposable diaper. It has sought to use cellulose from wood
supplied from well-managed forests in North America. These trees
are harvested as a crop, like cotton, in accordance with local
environmental and legislative requirements. Suppliers were
encouraged to eliminate the use of elemental chlorine-free
processes that do not result in the formation of any toxins. Apart
from the above, the Pampers diapers today use less material than
those made 20 years ago. They have also reduced the packaging
weight by two thirds. Through these efforts in raw materials and
product design, Pampers diapers claim significant reductions in
energy use, water use and emissions from manufacturing plants.
Reusable containers for Pampers wipes have also significantly
reduced its footprint.P&G continues to invest in leveraging
progress in parallel industries and emerging technologies to
develop cutting edge materials that can improve its diapers.
Through a longstanding partnership with Los Alamos National
Laboratory (LANL), P&G is collaborating to incorporate
computational fluid dynamics based technology to develop software
tools that simulate how to insert and layer materials to enhance
the performance of diaper design and the manufacturing process. It
is also offering this technology to its small and mid-sized
suppliers so that they can be cost efficient and provide better
products.Exhibits 6 and 7 present diagrammatic representation of
the above ecosystem innovation analysis and the ecosystem map that
prevailed during this era.Potential Disruption and Future
Strategy"What will they think of next?" Well, we're the ones
thinking of that next stuff. We've already made diapers that
breathe, yes breathe. And Premium and Baby-Dry diapers that have a
protective layer of lotion that helps keep little bottoms soft and
smooth. Grandpa Vic would be oh so proud. Pampers Website
Today, the industry is mature and consolidated after growing
consistently along the S-curve (Exhibit 8). Most of the customer
requirements focused on improvement in baby skin care, and making
the diapers environment friendly. Disruption at this stage can come
in many veiled forms. More than radical product inventions that
will eliminate the diaper, immediate threats to the use of diaper
come in the form of restrictions on its use due to environmental
factors. Especially as P&G targets over 3 Billion people in
emerging markets, disposal of diapers becomes less manageable than
in the western world today. P&G has countered all arguments
against disposable diapers by reiterating over decades that diapers
end up in the incinerator at municipal dumps just like all other
household waste and that there is minimum added impact of the
disposable diaper on the waste management system today. This above
argument will fall short in emerging markets where disposal of
waste is largely unmanaged and unregulated. There is no way to
ensure that a diaper that is sold will end up in an incinerator.
Most likely, it will end up strewn across outskirts of villages,
towns and cities where it can remain there for years to come.
Negative impact of such unregulated disposal can be very
detrimental to the mass appeal of the disposable diaper as well as
P&Gs Pampers because of its widespread use and its brand name
displayed on each and every diaper. A single instance of a
communicable disease that is traced back to indiscriminate diaper
disposal can be catastrophic to sales across the world. A single
story of how adverse effects of new materials used in the diapers
threatened the health of a child can also lead to mass emigration
of consumers towards alternatives such as cloth diapers. Parents
are not known to take chances. Also, possible government
regulations against disposable diapers pose another major threat.
It will be hard for P&G to manage its ecosystem against
regulations and directives from governments encouraging parents to
eschew disposable diapers and adopt reusable diapers.Biodegradable
diapers pose another threat that has so far been curtailed by
P&G based on the fact that biodegradable diapers are not truly
environmentally friendly. Todays biodegradable diapers leave a
large residue behind because they do not end up in the incinerator.
But innovation continues in this direction and once manufacturers
figure out a low food print biodegradable diaper, it will be hard
for disposable diapers and hence P&G to maintain its market
share.
ConclusionSuccess in the market for any innovation is not
through the shear genius of the innovation but through the deep
understanding, effective management and control of the various
risks in the innovation ecosystem and the various players in the
ecosystem. As seen above, disposable diapers are a poster child for
this mantra. Even after a late entry, P&G was able to attain
leadership through exercising its power and skilled management of
the ecosystem. Not through brute in-house research but through
clever management of co-innovations did P&G develop its Pampers
brand to incorporate groundbreaking performance features. Even
against formidable competitors P&G did not lose its grip over a
long period of incessant innovation by consistently employing
customer research to develop informed expectations and drive its
innovation strategy. Innovation is not the product of logical
thought, although the result is tied to logical structure. Albert
Einstein
If P&G and Pampers will maintain its dominance on the
disposable diaper market into the future will be determined by how
carefully and continuously it will manage the ever changing
ecosystem. This fascinating story is set for an exciting ride that
is worth a watch for all innovation aficionados.
Exhibit 1: 3-layer diaper components as designed by Victor Mills
at P&G
Exhibit 2: P&Gs management of Innovation Ecosystem during
the Inception stage (1060-1980) Exhibit 3: Ecosystem map showing
important entities during inception stage (1960-1980)
Exhibit 4: P&Gs management of Innovation Ecosystem during
the Growth stage (1060-1980) Exhibit 5: Ecosystem map showing
important entities during inception stage (1960-1980)
Exhibit 6: P&Gs management of Innovation Ecosystem for
Future Development (2000 onward):
Exhibit 7: Ecosystem map showing important entities for Future
Development (2000 onward)
Exhibit 8: Innovation and adoption path of Pampers described
along the S-curveP&G found a breakthrough for mass production.
Prices decreased significantly. Disposable diapers were adopted by
masses. A series of innovations followed for next 30 years
TimeIndustry reaches maturity. Innovations focus on baby skin
care and making disposable diapers environment friendlyInitial
stages Technology for mass production did not exist. Disposable
diapers were not affordable to the masses.Customer
requirements200019701935Technology
Exhibit 9: Various developments over the years for Pampers
Main Sources and
References:www.wikipedia.comwww.pg.comwww.pampers.comhttp://www.ncbi.nlm.nih.gov/pubmed/1914346www.thedisposablediaper.net
Case Study: HBS_Diaper industry 1974Case Study: Darden_Pampers
Disposable Diaper WarCase Study: HBS_Diaper industry 1994Case
Study: Pampers Brand History
Chemistry EncyclopediaSociety for BiomaterialsNon-woven material
scienceFeldberg Library Databases3