Managing Innovation with Discipline

The next factor that sets P&G apart as an innovator is discipline. We don’t rely on “Eureka!” moments; we take a systematic approach to innovation.

For example, we’re highly systematic about how we organize for innovation. We don’t take a “one-size-fits-all” approach but we’re deliberate about creating the right structure for different kinds of innovation work. Our Corporate Innovation Fund, for example, specializes in high-risk, high-reward ideas; it’s essentially an in-house venture capital firm that does initial concept, design, engineering, and qualification work and then hands over successful ideas to the appropriate business units. The FutureWorks team focuses exclusively on innovations that can create entirely new businesses. There are new-business development teams in every global business unit focusing on opportunities to create adjacent categories. Innovation centers help us solve tough innovation challenges by providing simulated in-home and in-store environments where P&G teams can isolate themselves and interact with consumers and shoppers for days or even weeks at a time.

Once an idea is qualified and begins moving through our product launch system, the innovation team continues to face go/no-go gates at every critical milestone. At each gate, we make decisions about which initiatives are ready to progress, which need further work, and which should be stopped. Every decision is grounded in maximizing the productivity of innovation investments and generating shareholder value.

This disciplined approach is essential to innovation success. It builds accountability into both the creative and executional aspects of innovation. P&G’s Family Care business is a good example here, as well. Family Care is one of P&G’s strongest value-creating businesses. They’ve innovated broadly across brand platforms — Bounty, Charmin and Puffs — while delivering industry-leading, double-digit total shareholder return for the past one-, three- and five-year periods in a highly capital-intensive category. They’ve increased gross margins 7% and have delivered free cash flow well above the Company’s 90% cash productivity target for the past five years, despite investments in innovation and in new manufacturing capacity to support growth.

There are similar stories in Fabric Care, Feminine Care, Baby Care, Beauty Care, and Health Care. These are the results of disciplined innovation.