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Case Title:

P&G’s ‘Design Thinking’ Initiative: The Innovation Lessons

Publication Month and Year :  July 2009

Authors: C.V. Chiranjeevi

Industry: FMCG

Region:Global

Case Code: MM0025

Teaching Note: Available

Structured Assignment: Available


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Abstract:
The case study enables an insight into how Procter & Gamble (P&G) succeeded in turning the tide of product commoditisation with ‘design thinking’. The case analyses how the maturity of innovation during 1970s brought forceful changes in business models and how P&G’s application of design in the organisational DNA led to double its sales growth from $40 billion in 2000 to $83.5 billion by 2008. The timely replacement of Durk Jager (Jager) with A.G. Lafley (Lafley) turned the tables for P&G with renewed ‘customer-centric innovation’ and application of ‘design thinking’ in its corporate DNA, which served the purpose of bringing the company back into the game.

Early 20th century marvelled the consumers with new products that rolled out every year and eased the lives from the usage of complex utility products. Electric bulbs eliminated the need of candles, automobiles replaced horse carriages and it went on and on. P&G is one such consumer-focused company, which amazed the consumers with its wide range of successful products like Ivory (Soap), Pamper (Diaper), Crest (Dentifrice), Pringles (Chips), etc. By the mid-1970s, product innovation reached a maturity stage, leaving Consumer Product Goods (CPG) companies in a dilemma of new product development and profit generation. Not immune to this trend, P&G’s innovation too suffered from brand extensions and line fillings with saturation of ideas in product development.

The dilemma of product commoditisation and new product development forced CPG companies to shift from closed business model to open business model by outsourcing ideas across borders. Most of the premium priced brands struggled to survive amid an ocean of ‘me-too’ type of products. The company passed through difficult times during the reign of the then CEO Jager in 1999, with shrinking marketshare, missing financial goals, lossing grip on successful brands and organisational misalignment.

Pedagogical Objective:

The case study can be used to analyse and discuss:

  • To understand the traditional business innovation model of P&G and discuss its merits and demerits
  • To examine all the challenges before Lafley when he took over the reins of P&G in 2000
  • To understand how Lafley drove innovation culture into P&G’s organisational DNA
  • To discuss how ‘design thinking’ has been embedded into P&G’s new product development process
  • To discuss and debate organisational capabilities required to operationalise organisation-wide initiatives.

Keywords : New product development; Innovative learning methods; Consumer adoption; Open-business model; Design Thinking; Procter & Gamble (P&G); Customer-centric innovation; Brand Management; Product differentiation; Opinion-sampling technique; Closed innovation; Closed Business model;, Marketing Management; Marketing Mix; Market Segmentation; Product Life Cycle; New Product Development; Consumer Behavior; Marketing Case Studies; MBA; Marketing Course for MBA Marketing Course Case Map; Course Case Map; Case Map

Contents:

  • P&G's Innovation Culture and A.G. Lafley’s Challenges
  • P&G's Challenges in New Millennium
  • Design Thinking Initiative and the New Corporate DNA
  • Design Thinking: Defending at all Costs

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