Over on Quora, Tristan Walker asked me to answer the question of “What will it take to build the next Procter & Gamble?” It is a fun question when you think about what it will take to turn one of today’s technology darlings into a company that can last over 100 years. Given the positive response I received on the post, I thought I’d repost my answer as a blog post here:
— tristan walker (@tristanwalker) August 5, 2012
What will it take to build the next Procter & Gamble?
Of course there are many ways to interpret this question but I’m going to take the stance that building the next P&G refers to building a company with the following characteristics:
- Market leadership in multiple product categories
- A global footprint
- A reputation as a top company for business leadership
- Ability to be over 100 years old and still thriving
I think there a few core things that have helped P&G to become such a company:
Innovation Based On Expertise: Today P&G competes in categories as far reaching as diapers, laundry care and cosmetics. But one thing most people don’t realize is that P&G’s history is based on 1 Degree Innovation. There is even a diagram at headquarters in Cincinnati that shows this principle. P&G started in soap and candles, which were based fat based products. Each product was innovation that was one degree away from a technical or scientific ability that P&G had from an existing product. For instance, P&G’s entry into Oral Care (Crest, etc) in the 1950′s was driven by experience in Laundry Detergent. And that holds true today where Swiffer was launched based on technology from Pampers (Swiffer Wet is basically a diaper on a stick).
A Talent Development Pipeline: While P&G’s promote from within culture has been questioned, there is not denying the ability of P&G to develop world-class business leaders. In recent years, 15% of Fortune 500 companies were led by a CEO who had started at P&G (a few examples include Steve Ballmer of Microsoft, Meg Whitman of eBay / HP, & Steve Cook of Intuit). P&G invests a tremendous amount of resources in training and developing their people and they prefer to start with a clean slate with 90% of people joining P&G at entry level. This approach creates a consistent culture of leadership that provides stability in even in difficult times. It also provides loyalty that is rarely seen in today’s business environment. People will stay at P&G for decades because of the opportunities, something that isnt exactly a hallmark of Silicon Valley.
A Consumer Is Boss Mindset: P&G has always put the consumer first and basically invented market research in order to drive many of their product decisions. The mindset of understanding the consumer is also a reason P&G has always called Cincinnati home because it gives their employees a front row view at the lives of their consumer. Its also why they opened office in New York City to understand the Prestige Beauty consumer and why their Skin Care and Baby Care divisions are establishing major presences in Asia.
Competing With Itself: P&G is an expert at tiered marketing, launching brands in the same category in order to meet diverse consumer needs (back to the Consumer Is Boss mindset). In Baby Care, they have both Pampers on the premium side and Luvs on the value side. In Laundry, they have Tide, Era, Cheer, and Gain all in the same market. These Brand Managers might only sit 20 feet apart at the office but they are competing fiercely with each other instead of letting a competitor beat them. This is part of the reason that P&G has been able to develop over 25 Billion Dollar brands.