When it comes to business innovation and speed to market, size is not always the enemy.
Robert Scott, vice-president of innovation and architecture at Procter & Gamble Company (P&G), says that with the right business model and personnel – a gargantuan global company can demonstrate as much spark and sizzle as a Silicon Valley start-up – on a very different scale, of course.
He cites his own company as a case in point.
At the recent CIO Assembly conference held at Niagara-on-the-Lake, Ont., Scott recounted P&G’s “remarkable success” in creating a culture of innovation anchored on “shared services” and “smart alliances.”
CIO Assembly was produced by CIO Canada in co-operation with the CIO Executive Council that seeks to give CIOs a united voice on technology matters, and enables them to act as resources to one another.
Fostering innovation across the company and its diverse brands required dealing with huge issues of scale and complexity, said Scott.
In the case of P&G, he said, this was a daunting task given the size and scope of the company’s operations – “140,000 employees, 300 plus brands, sold in 160 countries to five billion consumers, and operations in more than 80 countries.”
So a few years ago, he said P&G launched a global initiative to restructure the entire company into strategically connected global business units (GBUs), and market development organizations (MDOs).
While the GBUs develop brands in three key focus areas: beauty care, healthcare and home care, the MDOs’ mandate is to foster local understanding and create effective marketing campaigns.
And supporting both, he said, is a multi-functional organization dubbed Global Business Services (GBS).
This was a tremendous change for a company that previously operated as most multinational companies do – with global headquarters, and scores of small, largely independent brands and business units scattered around the world, most supported by their own local HR, IT, accounting and payroll services.
Now, following the reorg, the business units and market development organizations no longer need to worry about work processes. “That’s the job of Shared Services,” said Scott. “It takes all that back-office functionality and brings it to bear on company transactions.”
P&G’s GBS organization provides key business support and solutions to 140,000 P&G employees in 80 countries.
GBS been recognized, for three consecutive years, as one of the Ten Most Admired Shared Services Organizations by the Shared Services and Outsourcing Network, a global body that researches current trends and developments and promotes best practices in shared services.
Last year, P&G CIO Ron Passerini, who also heads up GBS, expanded the organization to include P&G’s IT department, which was renamed Information & Decision Solutions.
According to Scott, that’s more than just a name change, it represents an entirely new perspective on the role of IT and the CIO.
Innovation, said the P&G executive, involves “turning big ideas, into products that scale, that can be commercialized successfully, and that create value.”
Traditionally, IT people aren’t really good at commercialization and creating value, he observed.
“We have this ‘if we build it they will come’ attitude. We stop once something has been adopted. No one checks whether value has actually been created.”
At the restructured P&G, though, “creating value” is a big focus of the IT teams.
As part of GBS, these teams work directly with the business units on key projects. According to Scott some of these are internal – for instance, new technology applications that make employees more effective, better connected with one another, and outside stakeholders (partners, customers, consumers).
Likewise, IT works with upper management via strategic engagement sessions to match the business needs with what technology can deliver.
Once areas of significant potential are identified, the teams embark on the prototype, design and qualification process. Again, as part of the shared services organization, IT plays a key role in facilitating quick implementation and adoption.
The company has selected SAP enterprise apps to integrate key business operations – from finance and accounting to product development and paying employees.
This end-to-end suite of apps – along with the “shared services” model – has proved very effective in the integration of new acquisitions, such as Gillette.
The Venus-Mars fusion is the way some have referred to the acquisition – given P&G’s focus on feminine beauty products and Gillette’s mainly masculine portfolio.
Others, more skeptical, preferred the term “confusion” – and predicted the effective integration of Gillette – a $54 billion acquisition – would be a near impossible proposition for P&G.
They were wrong, says Scott – noting that in less than two years “96 per cent of Gillette’s operations have been fully integrated into P&G.”
He cited a few numbers to provide some idea of the magnitude of that accomplishment.
The Gillette acquisition, he said, brought to P&G: 144,000 new customers; 113 new distribution centres; 68,500 new products; 12,000 additional PCs; 23,000 new employees; 4,600 employee relocations and 112 office consolidations.
Scott attributes at least part of the success of the integration – in a remarkably short time period – to a well-designed enterprise architecture, and a clear definition of platforms.
“This was an acquisition, not a merger. There wasn’t a debate about which technologies or architecture we were going to use.”
The fact that – in the years prior to the acquisition – P&G had already consolidated, standardized and linked most of its key global business operations – made the integration that much quicker.
Yet another cornerstone of innovation, according to Scott, is the “outsourcing partnerships” P&G’s IT organization has forged with three companies – HP, IBM and Jones Lang LaSalle.
While HR services have been outsourced to IBM, and facilities management to Jones Lang LaSalle, IT infrastructure management – including network management, desktop support and applications development – has been turned over to HP, Scott said.
However, P&G has retained areas it considers critical – intellectual property, including data management and enterprise architecture.
The company signed a 10,000-page, 10-year, US$3 billion partnership contract with HP. “When we cough,” said Scott, “HP gets a cold, and we think that’s wonderful.”
Months after the massive HP contract, P&G forged separate alliances with IBM and Jones Lang LaSalle, and signed yet another deal, expanding its relationship with HP by also having the latter provide transactional accounts payable services.
Within a year P&G had entered into four contracts collectively worth nearly US$4.2 billion.
Company executives emphasize that win-win alliances have been part of the P&G’s culture from it’s very inception.
As Passerini pointed out in an article, a smart alliance, 169 years ago, between a candle-maker and a soap-maker on the banks of the Ohio River in Cincinnati, was the start of the company that has now grown into the largest manufacturer of packaged consumer goods in the world.
Scott says these alliances are directly tied to the company’s vision to foster innovation. “Our CEO, A.G. Lafley has declared that moving forward P&G will get at least 50 per cent of its innovation from outside the four walls of our company.”