The Game-Changer How You Can Drive Revenue and Profit Growth With Innovation by AG Lafley & Ram Charan
May 06, 2015
The Game-ChangerHow You Can Drive Revenue and Profit Growth With Innovation
by AG Lafley & Ram Charan
How and Why Innovation At P&G Changed Its Game
Chapter One:
What We Had To Do
Put the consumer at center of everything we do
Opened up
Made sustainable organic growth the priority
Organized around innovation to drive sustained organic growth
Began thinking of innovation in new ways
What We Had To Do Put the consumer at center of everything we do
“consumer is boss” standard Spend more time with consumers
In stores In their homes Consumer testing centers
Delight our consumers at two moments of truth When they buy When they use
Opened up Seek out innovation from all sources, inside and outside
the company Innovation is all about connections; everyone involved
Connect & develop More Connections, more ideas, more solutions
Goal set that half of new product and technology innovations come from outside P&G
What We Had To Do Made sustainable organic growth the priority
Innovation enables expansion into new categories Allows us to reframe mature business & transform them
into platforms for profitable growth Creates bridges into adjacent segments Emphasis on organic growth
Less risky than acquired growth More highly valued by investors
Organized around innovation to drive sustained organic growth
Innovation as a strategy Regular business strategy that focuses on innovation Regular innovation reviews for every global business unit Careful selection and use of the right metrics Evaluating, development and promotion of outstanding
business and innovation leaders Allocation of resources …to outstanding innovation
What We Had To Do Began thinking of innovation in new ways
Run innovation like we run a factory Broadened way we thought about innovation
Not just products, services but to include business models, supply chains etc.
Not just disruptive, but also incremental Innovation is risky
Learned how to pinpoint the risks Developed tools and the know-how to manage them
How We Did It…First Things First1. Improve our execution
“we were trying to do too much, too fast and nothing was being done well.”
Growing the core Laser-sharp focus on current consumers, current retailers,
wholesalers, and distributors
2. Pricing Too high, find pricing “sweet spot”“sweet spot” “…better value for
consumers, gave retailers a fair profit, and would drive P&G to improved market share, net sales, and margin performance.”
3. Innovation Key to winning medium and long term Strategy of differentiation Brands are promises of something different and better in terms
of performance, quality and value. Brand are guarantees of consistent quality, performance, and
value.
Critical Questions on Innovation
How could we put innovation at the center of everything we do?
How could we turn innovation into a more consistent, more decisive, and more sustainable competitive advantage?
How could we manage the risks associated with our all-in and full-on commitment to innovation?
Could we identify and take advantage of the opportunities innovation might offer us?
Courageous& Connected
Culture
Consistent &Reliable Systems
EnablingStructures
Unique Core
Strengths
Choiceful Strategies
Stretching Goals
Motivating Purpose &
Values
Inspiring Leadership
Customer-CentricINNOVATIONINNOVATION
Game-Changing
Drivers for Customer-Centric Game Changing Innovation
Drivers for Customer-Centric Game Changing Innovation
Motivating Purpose & Values Companies centered on innovation are inspiring places
to work and the people who work there are turned on by a higher purpose
Purpose inspires; Values unite
Stretching Goals A few critical goals creates clarity in focusing on
strategies that win and align everyone’s energy Stretching but achievable, yet cannot be reached w/o
sustained innovation; driven by leaders who see it as game changer
Choiceful Strategies Choices that result in wining with consumers and
customers and against competition Focus on four core businesses, ten leading brands Enabled where not to play (exited most food & beverage)
Unique Core Strengths Focus on how to win by building on, enhancing and
deploying our unique core strengths Effectively leverage global learning Immersive research living, shopping and being part of
consumers’ lives
Drivers for Customer-Centric Game Changing Innovation
Enabling Structures Unique core strengths require design of organizational
structure that supports innovation at the center Era of open corporation (end of internally focused, vertical integrated
organization)
Need to be comfortable designing structures and processes that bring in and commercialize outside ideas
Consistent & Reliable Systems Innovation is creative but not chaotic Systematic way of moving from concept to
commercialization Has well-defined success criteria, milestones, and
measures
Drivers for Customer-Centric Game Changing Innovation
Courageous & Connected Culture Culture is what people do day in and day out without being told No fear of innovation = know-how to manage risk Employees are more connected to:
Consumers whose lives committed to improving Customers and suppliers who are important innovation partners Each other based on open-learning culture “that applies and reapplies with
pride”
Inspiring Leadership Link all the drivers together, energize people, and inspire them
to new heights Leaders are instigators Passionate about knowing about consumers, immersing in
finding insights about consumer needs In time they develop confidence, how to deal with risk and
inherent risk in innovation
Drivers for Customer-Centric Game Changing Innovation
CourageousCourageous& Connected & Connected
CultureCulture
Consistent &Reliable Systems
EnablingStructures
Unique Core
Strengths
Choiceful Choiceful StrategiesStrategies
Stretching Stretching GoalsGoals
Motivating Purpose &
Values
Inspiring Inspiring LeadershipLeadership
Customer-CentricINNOVATIONINNOVATION
Game-Changing
Drivers for Customer-Centric Game Changing Innovation
What P&G’s Innovation Transformation Means For You
Chapter Two:
What P&G’s Innovation Transformation Means For You
P&G’s managerial breakthrough was to conceive of and implement innovation as an integrated process based on the idea of customer is boss
Continual innovation process can change the landscape of the business
P&G change form technology-push innovation model to a customer-pull one
Other companies: General Electric (under Immelt) Nokia HP (personal computer unit under Bradley)
What is real Innovation?
Differences between invention & innovation: Invention is new idea that is often turned into a tangible outcome. Innovation is the conversion of a new idea into revenues and
profits.“Innovation without a customer is nonsense; it’s not even innovation.” --Jeff Immelt
Innovation is not complete until it shows up in the financial results
Real innovation can change the context (market space, customer space, competitive space, societal space)
Innovation enables you to be on the offensive
Commoditization drive down prices; differentiation from innovation carries an economic premium
Key to shaping corporate life, helping leaders conceive previously unimagined strategic options
Enables you to potential acquisitions through a different lens
Provides an edge in being able to enter new markets faster & deeper
Puts companies on the offensive
Why Innovation Matters
Innovation Leader Skill Set
Effective at evoking the skills of others to build an innovation culture
Collaboration is essential Failure is a regular visitor Comfortable with uncertainty and have an open
mind Receptive to ideas from very different disciplines Have organized innovation into disciplined
process that is replicable Have tools and skills to pinpoint and manage the
risks inherent in innovation
Myths of Innovation
It’s all about new products Functions, logistics business models and processes can also
benefit greatly through innovation Toyota’s Global Production Systems Wal-Mart’s Inventory Management
Innovation is for geniuses Waiting for the “eureka” moment will be fatal True innovation matters for the present, not for centuries hence“Anything that won’t sell, I don’t want to invent. Its sale is proof of
utility and utility is success.” --Thomas Edison
Size matters Innovation can happen in companies as large as P&G, GE,
DuPont or as small as Ram Charan’s fathers’ shoe store in India
Innovation is a social process
When people do that simple, profound thing – connect to share problems, opportunities, and learning
Anyone can innovate, but practically no one can innovate alone
Develop leaders of the future
Improve productivity
Execute strategy
Create innovation
To prosper, companies need to do four things:
A strategy
Ideas
A process that moves these ideas to market
An organizational structure that supports innovation (and protects and rewards innovators) up and down the line.
To create an innovation culture, you need,
Innovation Is A Team Sport
Chapter Nine:
Total Immersion
Co-location Released from usual duties Discouraged from emailing colleagues Constantly accessible to each other Deeply concentrated Multiple disciplines, demographics Outsiders Full-time staff for immersion (brand strategy,
description of product and category, introductions, etc)
Breakthroughs
Knowing the consumer
Teamwork
Building an Innovation Team
Idea Generator – Push beyond plausible to create provocative ideas
Project Manager – Ensure all pieces come together
Executor – make things happen Team Leader – pragmatic dreamer
The Key is intellectual diversity!
Building an Innovation Team
Risk Diversity No “like” thinkers Deadlines – can spur creativity and it is a
business after all… 5-12 people on the team Communication Say No to bad ideas Team connectedness Interdisciplinary – “T” Shape
Changing Culture requires Changing Behavior
Clearly defined business and personal development expectations
Change the consequences that follow success and failures – reward entrepreneurial behavior
Start small and focus on four important elements: Courageous, Connected, Collaborative, Curious, and Open.
Innovation Culture Elements and Interventions
Courageous Connective &
collaborative Curious Open
Innovation Culture Elements and Interventions:CourageousCourageous
What it looks likeWhat it looks like No fear Learn from failure Knows how to manage risk based on measures
Expectation InterventionsExpectation Interventions Use innovation portfolio to manage risks Qualify few, meaningful broadly applied measures Establish there’s no bad idea Test prototype, and iterate
Consequence InterventionsConsequence Interventions Limited human and financial resources are sufficient to support in well-
managed portfolio Capture learning from failed innovations and share with other teams Broadly reward and recognize teams who fail Assign talent from a failed innovation to a new high-profile innovation
project
Innovation Culture Elements and Interventions: Connected and CollaborativeConnected and Collaborative
What it looks likeWhat it looks like Works effectively and productively with others—inside and outside
the company Works seamlessly across business, functions et al Uses personal and professional networks to seek out information
ideas
Expectation InterventionsExpectation Interventions Creates in-house communities to foster knowledge exchange Select team leaders who facilitate connections and expect
collaboration Establish ways to employees to leverage their external networks
Consequence InterventionsConsequence Interventions Include in performance evaluations Be prepared to change the leader and/or team members Continuity of team members builds trust
Innovation Culture Elements and Interventions: CuriousCurious
What it looks likeWhat it looks like Remains childlike, naïve Looks for obvious patterns Explores and likes to discover Looks for analogies and metaphors Asks “Why? and Why not?” “What’s Possible?” “How does that
work?” Uses “Columbo” approach to solve; focuses on solutions
Expectation InterventionsExpectation Interventions set an expectation of ongoing learning Brainstorming Consumer, shopper and customer immersion External connections and diverse experiences
Consequence InterventionsConsequence Interventions Challenges the team’s thinking Keep asking “Why? and Why not?” again
Innovation Culture Elements and Interventions: OpenOpen
What it looks likeWhat it looks like Open-minded to new ideas Open to learn to assumption that others’ ideas will make the product or
service better Open to empathy to consumer/customer Open to suspend judgment
Expectation InterventionsExpectation Interventions Institute an open architecture Establish and communicate clear goals Eliminate “not invented here”; encourage “apply and reapply with
pride”
Consequence InterventionsConsequence Interventions Reward and recognize those who seek out/commercialize innovation
opportunities from outside Reward and recognize those who reapply others’ success to their
business Include open-mindedness in performance evaluations
Emphasize Out of the Box IDEAS
Inclusive: Reaping benefits of diverse thinking and ideas needed to foster innovation
Decisive: Eliminating organizational swirl, debate, and over analysis - faster innovation, development, qualification, and commercialization
External: Externally focused to stay in touch with clusters, consumers, suppliers – honest and objective
Agile: Quickly reacting to changing conditions, forward thinking – taking calculated risks
Simple: Ongoing streamlining and simplification of structures and processes
Rules of brainstorming
Get a facilitator Be prepared Relax Ladders should follow Get everyone to contribute Keep track of ideas Think ahead Use props Outside the lines Follow the rules.
Questions for Leaders
What are you doing to encourage and eliminate fear of failure?
How are you fostering a culture of curiosity and openness? How are you eliminating unnecessary bureaucracy? How are the team leaders and members chosen? What are you doing to encourage open communications
within the innovation team? How well do you manager the development of an
individual’s innovation skills? How do you enable individuals to reenter more traditional
assignments in the most productive way? Do you use special approaches to enable teams to
immerse themselves in customers? Do you use co-location to help business units build
innovation?
New Job of the Leader
Chapter Ten:
Developing Leaders of Innovation
Performance Evaluations Early Identification Job experiences Reward and recognition Clear sense of purpose / inspiring
them
Leaders need to be good at…
Drawing people out Synthesize ideas Facilitating debates getting the group to be decisive and
action-oriented
How innovation Leaders Dream
See the world as it can be not as it is
View the external landscape in a new way
Imagine possibilities that elude others
Responsibilities of an Innovation Leader
Hone Critical Skills
Provide UniqueValue-added Roles
Role Model Behavior ofinnovation Culture
Model the 4 C’s and O
Integrate member tasks
Courage
Balance IQ and EQ
Inspire
Set the Vision
Deal with the killer issues
Integrative Thinking
Building the Pipeline
Performance Evaluation Power of Minds, People, Agility
Start them from day one Personal Coaching Support systems and training Intentional assignments Reward and recognition
How Jeff Immelt Made Innovation A Way Of Life At GE
Conclusion:
GE Case StudyHow Jeff Immelt Made Innovation A Way Of Life At GE
Put innovation and productivity on Your personal leadership agenda
Give innovation a seat at the table Find and follow up on the best ideas Shift the focus to customers and the longer term Rethink Leadership Build capabilities you are lacking Architect the social process of innovation Create the resources you need to fund growth Open up to learn from others Reorganize or restructure to get close to
customers Reinforce the culture you want Let Innovation spread