The company held an analyst meeting late last year in which it detailed future plans, which included a focus on innovation to drive sales growth.
Innovation - the 'lifeblood' of P&G
During the meeting, company CEO Bob McDonald called innovation the ‘lifeblood’ of the company and referred to its ability to drive long term, sustainable growth.
“While promotions may win quarters, innovation wins decades,” he said, before highlighting the role it had played in grabbing back market share from the company’s competitors in the past.
“In the 1990s we lost our historical lead versus Colgate [in the toothpaste category] as they out innovated us,” he said.
However, during the 2000s P&G accelerated innovation with product breakthroughs such as Crest WhiteStrips, allowing the company to overtake Colgate again in the category, he explained.
The importance of innovation is reflected in investment into R&D, chief technology officer Bruce Brown also explained at the meeting.
“P&G invests $2bn annually in R&D and innovation capabailities…50 percent more than our closest competitor,” he said.
Four innovation categories
The company’s strategy includes four categories of innovation, Brown explained.
The first type is commercial innovation, he said, adding that this exploits current benefits to drive new levels of trial, such as the Olympics or the Old Spice campaign.
Sustaining innovation is the second type highlighted by Brown, who said this included upgrades and line extensions that help grow P&G’s market share in existing categories.
Brown then referred to transformational sustaining innovation, which he termed ‘big breakthroughs on existing brands’."This resets the competitive bar in each category…and generally grows the categories in which we compete,” he said.
Disruptive market innovation is the fourth type and creates new categories or segments, Brown explained. “Many of our million dollar brands were created behind a disruptive market innovation,” he said, referencing Crest Whitestrips and Febreze.
According to Brown, these four types of innovation will be a focus of all P&G businesses in the future.