P&G adapts R&D model

31 January 2012

CINCINNATI: Procter & Gamble, the FMCG giant, now partners with third parties in over 80% of its innovation activity, as part of a wide-ranging transformation of the company's activity in this area.

The owner of Tide and Pampers spends more than $2bn on research and development every year, a figure it suggests doubles that of its nearest rival, alongside £500m on generating consumer insights.

One key aspect of P&G's activity in this field has been the Connect+Develop platform, set up in 2000 with the aim of gathering 50% of ideas from outside sources, be it individuals, firms or universities.

"In fact, today, over 80% of our innovations have some kind of external partner. We even have joint development laboratories with our suppliers," Bob McDonald, Procter & Gamble's CEO, said on a conference call.

To further enhance its credentials, P&G runs an innovation and technology committee on its board of directors, with McDonald arguing it is one of "few companies in the world" boasting such a body.

Alongside allocating R&D resources based on metrics like category sales and competitor expenditure, the firm tries to source "cross-platform" technologies which can be applied to numerous brands.

In evidence of this, P&G's expertise in the bleach and laundry sectors led to the roll out of Crest Whitestrips in the dental care segment and to Clairol's Perfect 10 hair colouring extension.

"Those platforms become very critical to us to being able to get more for the $2bn in R&D spending than our competition, which may be more singularly focused on an individual category," McDonald said.

McDonald also pointed to Downy Unstopables, the in-wash scent booster, Olay Smooth Finish facial hair remover for women and the new Febreze air freshener for cars as areas where P&G is reaching into new categories.

"Discontinuous innovation is important to grow categories in developed markets," he added. "Even though you're premium priced, if you're offering a superior value to consumers, they will continue to buy it. So innovation becomes very critical to the future."

Turning to marketing, the firm also plans to shift greater resources into new media going forward, reflecting the better value this channel provides.

"We're quickly moving more and more of our businesses into digital," he said. "In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient."

Today is the closing deadline for the $10,000 Warc Prize for Innovation, seeking to find best example of innovation in communications worldwide. For more details about the Prize, click here.

Data sourced from Seeking Alpha; additional content by Warc staff