The Game-Changer

How You Can Drive Revenue and Profit Growth With Innovation by AG Lafley & Ram Charan

Chapter One:

How and Why Innovation At P&G Changed Its Game

What We Had To Do

Put the consumer at center of everything we do Opened up Made sustainable organic growth the priority Organized around innovation to drive sustained organic growth Began thinking of innovation in new ways

What We Had To Do

Put the consumer at center of everything we do

consumer is boss standard Spend more time with consumers

In stores In their homes Consumer testing centers When they buy When they use

Delight our consumers at two moments of truth

Opened up

Seek out innovation from all sources, inside and outside the company Innovation is all about connections; everyone involved

Connect & develop More Connections, more ideas, more solutions

Goal set that half of new product and technology innovations come from outside P&G

What We Had To Do

Made sustainable organic growth the priority

Innovation enables expansion into new categories Allows us to reframe mature business & transform them into platforms for profitable growth Creates bridges into adjacent segments Emphasis on organic growth

Less risky than acquired growth More highly valued by investors

Organized around innovation to drive sustained organic growth

Innovation as a strategy Regular business strategy that focuses on innovation Regular innovation reviews for every global business unit Careful selection and use of the right metrics Evaluating, development and promotion of outstanding business and innovation leaders Allocation of resources to outstanding innovation

What We Had To Do

Began thinking of innovation in new ways

Run innovation like we run a factory Broadened way we thought about innovation

Not just products, services but to include business models, supply chains etc. Not just disruptive, but also incremental Learned how to pinpoint the risks Developed tools and the know-how to manage them

Innovation is risky

How We Did ItFirst Things First

1.

Improve our execution

we were trying to do too much, too fast and nothing was being done well. Growing the core Laser-sharp focus on current consumers, current retailers, wholesalers, and distributors

2.

Pricing

Too high, find pricing sweet spot better value for consumers, gave retailers a fair profit, and would drive P&G to improved market share, net sales, and margin performance. Key to winning medium and long term Strategy of differentiation Brands are promises of something different and better in terms of performance, quality and value. Brand are guarantees of consistent quality, performance, and value.

3.

Innovation

Critical Questions on Innovation

How could we put innovation at the center of everything we do? How could we turn innovation into a more consistent, more decisive, and more sustainable competitive advantage? How could we manage the risks associated with our allin and full-on commitment to innovation? Could we identify and take advantage of the opportunities innovation might offer us?

Drivers for Customer-Centric Game Changing Innovation

Inspiring Leadership Courageous & Connected Culture Motivating Purpose & Values

Consistent & Reliable Systems

Customer-Centric INNOVATION Game-Changing

Stretching Goals

Enabling Structures Unique Core Strengths

Choiceful Strategies

Drivers for Customer-Centric Game Changing Innovation

Motivating Purpose & Values

Companies centered on innovation are inspiring places to work and the people who work there are turned on by a higher purpose Purpose inspires; Values unite

Stretching Goals

A few critical goals creates clarity in focusing on strategies that win and align everyones energy Stretching but achievable, yet cannot be reached w/o sustained innovation; driven by leaders who see it as game changer

Drivers for Customer-Centric Game Changing Innovation

Choiceful Strategies

Choices that result in wining with consumers and customers and against competition Focus on four core businesses, ten leading brands Enabled where not to play (exited most food & beverage)

Unique Core Strengths

Focus on how to win by building on, enhancing and deploying our unique core strengths Effectively leverage global learning Immersive research living, shopping and being part of consumers lives

Drivers for Customer-Centric Game Changing Innovation

Enabling Structures

Unique core strengths require design of organizational structure that supports innovation at the center Era of open corporation (end of internally focused, vertical integrated
organization)

Need to be comfortable designing structures and processes that bring in and commercialize outside ideas

Consistent & Reliable Systems

Innovation is creative but not chaotic Systematic way of moving from concept to commercialization Has well-defined success criteria, milestones, and measures

Drivers for Customer-Centric Game Changing Innovation

Courageous & Connected Culture

Culture is what people do day in and day out without being told No fear of innovation = know-how to manage risk Employees are more connected to:

Consumers whose lives committed to improving Customers and suppliers who are important innovation partners Each other based on open-learning culture that applies and reapplies with pride

Inspiring Leadership

Link all the drivers together, energize people, and inspire them to new heights Leaders are instigators Passionate about knowing about consumers, immersing in finding insights about consumer needs In time they develop confidence, how to deal with risk and inherent risk in innovation

Drivers for Customer-Centric Game Changing Innovation

Inspiring Leadership

Courageous & Connected Culture

Motivating Purpose & Values

Consistent & Reliable Systems

Customer-Centric INNOVATION Game-Changing

Stretching Goals

Enabling Structures Unique Core Strengths

Choiceful Strategies

Chapter Two:

What P&Gs Innovation Transformation Means For Yo

What P&Gs Innovation Transformation Means For You

P&Gs managerial breakthrough was to conceive of and implement innovation as an integrated process based on the idea of customer is boss Continual innovation process can change the landscape of the business P&G change form technology-push innovation model to a customer-pull one Other companies:

General Electric (under Immelt) Nokia HP (personal computer unit under Bradley)

What is real Innovation?

Differences between invention & innovation:

Invention is new idea that is often turned into a tangible outcome. Innovation is the conversion of a new idea into revenues and profits.
Innovation without a customer is nonsense; its not even innovation. --Jeff Immelt

Innovation is not complete until it shows up in the financial results

Real innovation can change the context (market space, customer space,
competitive space, societal space)

Innovation enables you to be on the offensive

Commoditization drive down prices; differentiation from innovation carries an economic premium

Why Innovation Matters

Key to shaping corporate life, helping leaders conceive previously unimagined strategic options Enables you to potential acquisitions through a different lens Provides an edge in being able to enter new markets faster & deeper Puts companies on the offensive

Innovation Leader Skill Set

Effective at evoking the skills of others to build an innovation culture Collaboration is essential Failure is a regular visitor Comfortable with uncertainty and have an open mind Receptive to ideas from very different disciplines Have organized innovation into disciplined process that is replicable Have tools and skills to pinpoint and manage the risks inherent in innovation

Myths of Innovation

Its all about new products

Functions, logistics business models and processes can also benefit greatly through innovation

Toyotas Global Production Systems Wal-Marts Inventory Management

Innovation is for geniuses

Waiting for the eureka moment will be fatal True innovation matters for the present, not for centuries hence Anything that wont sell, I dont want to invent. Its sale is proof of utility and utility is success. --Thomas Edison

Size matters

Innovation can happen in companies as large as P&G, GE, DuPont or as small as Ram Charans fathers shoe store in India

Innovation is a social process

When people do that simple, profound thing connect to share problems, opportunities, and learning
Anyone can innovate, but practically no one can innovate alone

To prosper, companies need to do four things:

Develop leaders of the future

Improve productivity Execute strategy Create innovation

To create an innovation culture, you need,

A strategy
Ideas A process that moves these ideas to market

An organizational structure that supports innovation (and protects and rewards innovators) up and down the line.

Chapter Nine: Innovation Is A Team Sport

Total Immersion

Co-location Released from usual duties Discouraged from emailing colleagues Constantly accessible to each other Deeply concentrated Multiple disciplines, demographics Outsiders Full-time staff for immersion (brand strategy, description of product and category, introductions, etc)

Breakthroughs

Knowing the consumer

Teamwork

Building an Innovation Team

Idea Generator Push beyond plausible to create provocative ideas Project Manager Ensure all pieces come together Executor make things happen Team Leader pragmatic dreamer
The Key is intellectual diversity!

Building an Innovation Team

Risk Diversity No like thinkers Deadlines can spur creativity and it is a business after all 5-12 people on the team Communication Say No to bad ideas Team connectedness Interdisciplinary T Shape

Changing Culture requires Changing Behavior

Clearly defined business and personal development expectations Change the consequences that follow success and failures reward entrepreneurial behavior Start small and focus on four important elements: Courageous, Connected, Collaborative, Curious, and Open.

Innovation Culture Elements and Interventions

Courageous Connective & collaborative Curious Open

Innovation Culture Elements and Interventions: Courageous

What it looks like

No fear Learn from failure Knows how to manage risk based on measures

Expectation Interventions

Use innovation portfolio to manage risks Qualify few, meaningful broadly applied measures Establish theres no bad idea Test prototype, and iterate

Consequence Interventions

Limited human and financial resources are sufficient to support in well-managed portfolio Capture learning from failed innovations and share with other teams Broadly reward and recognize teams who fail Assign talent from a failed innovation to a new high-profile innovation project

Innovation Culture Elements and Interventions: Connected and Collaborative

What it looks like

Works effectively and productively with othersinside and outside the company Works seamlessly across business, functions et al Uses personal and professional networks to seek out information ideas

Expectation Interventions

Creates in-house communities to foster knowledge exchange Select team leaders who facilitate connections and expect collaboration Establish ways to employees to leverage their external networks

Consequence Interventions

Include in performance evaluations Be prepared to change the leader and/or team members Continuity of team members builds trust

Innovation Culture Elements and Interventions: Curious

What it looks like

Remains childlike, nave Looks for obvious patterns Explores and likes to discover Looks for analogies and metaphors Asks Why? and Why not? Whats Possible? How does that work? Uses Columbo approach to solve; focuses on solutions

Expectation Interventions

set an expectation of ongoing learning Brainstorming Consumer, shopper and customer immersion External connections and diverse experiences

Consequence Interventions

Challenges the teams thinking Keep asking Why? and Why not? again

Innovation Culture Elements and Interventions: Open

What it looks like

Open-minded to new ideas Open to learn to assumption that others ideas will make the product or service better Open to empathy to consumer/customer Open to suspend judgment

Expectation Interventions

Institute an open architecture Establish and communicate clear goals Eliminate not invented here; encourage apply and reapply with pride

Consequence Interventions

Reward and recognize those who seek out/commercialize innovation opportunities from outside Reward and recognize those who reapply others success to their business Include open-mindedness in performance evaluations

Emphasize Out of the Box IDEAS

Inclusive: Reaping benefits of diverse thinking and ideas needed to foster innovation Decisive: Eliminating organizational swirl, debate, and over analysis - faster innovation, development, qualification, and commercialization External: Externally focused to stay in touch with clusters, consumers, suppliers honest and objective Agile: Quickly reacting to changing conditions, forward thinking taking calculated risks Simple: Ongoing streamlining and simplification of structures and processes

Rules of brainstorming

Get a facilitator Be prepared Relax Ladders should follow Get everyone to contribute Keep track of ideas Think ahead Use props Outside the lines Follow the rules.

Questions for Leaders

What are you doing to encourage and eliminate fear of failure? How are you fostering a culture of curiosity and openness? How are you eliminating unnecessary bureaucracy? How are the team leaders and members chosen? What are you doing to encourage open communications within the innovation team? How well do you manager the development of an individuals innovation skills? How do you enable individuals to reenter more traditional assignments in the most productive way? Do you use special approaches to enable teams to immerse themselves in customers? Do you use co-location to help business units build innovation?

Chapter Ten: New Job of the Leader

Developing Leaders of Innovation

Performance Evaluations Early Identification Job experiences Reward and recognition Clear sense of purpose / inspiring them

Leaders need to be good at

Drawing people out Synthesize ideas Facilitating debates getting the group to be decisive and action-oriented

How innovation Leaders Dream

See the world as it can be not as it is

View the external landscape in a new way Imagine possibilities that elude others

Responsibilities of an Innovation Leader

Model the 4 Cs and O Integrate member tasks Balance IQ and EQ Provide Unique Value-added Roles Hone Critical Skills

Inspire Deal with the killer issues

Set the Vision

Integrative Thinking

Courage

Role Model Behavior of innovation Culture

Building the Pipeline

Performance Evaluation

Power of Minds, People, Agility

Start them from day one Personal Coaching Support systems and training Intentional assignments Reward and recognition

Conclusion: How Jeff Immelt Made Innovation A Way Of Life At GE

GE Case Study
How Jeff Immelt Made Innovation A Way Of Life At GE

Put innovation and productivity on Your personal leadership agenda Give innovation a seat at the table Find and follow up on the best ideas Shift the focus to customers and the longer term Rethink Leadership Build capabilities you are lacking Architect the social process of innovation Create the resources you need to fund growth Open up to learn from others Reorganize or restructure to get close to customers Reinforce the culture you want Let Innovation spread