Designed to Innovate — and Grow

We’ve built P&G’s business model around innovation because it’s the primary driver of superior consumer value and profitable organic sales growth in the consumer products industry. The companies that lead innovation are growth catalysts and generally capture a substantial portion of the growth they stimulate. I don’t know of a company that has sustained growth and industry leadership over the long term that has not also been the innovation leader.

Innovation is especially important in tough economic periods. Consumers will continue to buy premium-priced products as long as they’re confident they’re getting value for their money. This is why innovation is so important. Price is an element of value, but the real driver of value perception is relative pricing, not absolute pricing, combined with product performance and brand equity. Innovation drives value. It differentiates our brands in the hearts and minds of consumers. It enables category leadership. It stimulates growth and prevents commoditization of the categories in which we compete. It drives premium pricing and higher gross and operating margins.

This reality plays to P&G strengths as an innovator. We innovate more broadly than any other company in our industry. We invest more in innovation and marketing support. We bring a richer mix of innovation to market with greater discipline and strong leadership. We’ve designed an innovation capability that is unmatched in the consumer products industry.

Most important of all, P&Gers around the world see innovation as their job. They look for opportunities to innovate in every part of the business. Consumer researchers are developing innovative new ways to learn from consumers. Marketers are finding new ways and new places to engage consumers. Technicians operating lines in P&G plants are creating innovative ideas for making products better, faster and cheaper. Innovation has always been at the heart of P&G’s business model, but today it’s not the province of only one or two functions within the Company. Innovation is the focus of our entire organization.

P&G’s innovation capability is stronger and more robust today than at any time in the Company’s history — and this is why I’m confident innovation will continue to be the primary driver of sustainable sales and earnings-per-share growth at or ahead of P&G’s long-term targets.

P&G is designed to innovate, and to grow.