The Myths about P&G strengths:
P&G is not a marketing company. Its strengths are not Brand Management or Product Management. P&G’s roots go back to R&D, technology and innovation, started at the Ivorydale Technology Canter (see below):
Through 2000 breakthrough new products (e.g., Dryel, Fabreze and Swiffer) were driving P&G’s top line and gross margins. Swiffer’s first year sales in 1999 (I think) were 41 million units and $355 MM in revenues.
It worked for 9 years but?:
By 2009 there were no breakthrough products, organic growth was falling beiow 4%/annum, gross margins were eroding, corporate R&D was broken up and the BU’s had their own R&D organization. AG retired. Bob McDonald was called upon to sort out the spiraling mess. It was an impossible job to sort out, McDonald retired 4 years later and AG was brought back. The problems had not been solved and P&G was back on the wrong track again.
It’s now 2015. What must P&G do?
- Stop listening to Wall Street and the analysts. The results they report are not good but they don’t know why, or what P&G should do.
- Task those who invest $2B in R&D to drive meaningful outputs! Starting NOW! Where are the next Swiffers? Swiffer was introduced 16 years ago
- Stop listening to AG. Retire him now. You don’t grow P&G by ignoring P&G’s core strength (R&D), cutting the number of brands you acquired, and reducing costs
- Rethink the appointment of David Taylor as the new CEO. Gillette is dying! (see below)
- Hire a COO who will light the fires of innovation NOW! Bring the Innovation Machine back!
R&D ruled the roost at P&G and did so until the appointment of AG Lafley as CEO in 2000. To learn what happened and why, you need to review Bill James and Nabil Sakkab’s paper published by CIMS (see below).
Major storm clouds on Gillette’s immediate horizon:
We don’t have the real numbers but we estimate Gillette’s razor sales are $4 to $5B per annum and gross margins are North of 50%, much higher than P&G’s average.
But there are disruptors offering high quality razors and blades at far lower prices than Gillette:
Dollar Shave Club:
Micro Touch’s Tough Blade
Advertized by Brett Fave on TV at an annual cost of $24.99:
I’ve ordered the product but it’s not to hand.
We were not aware of Harry’s until a reader of this Weekly Blast brought them to our attention on July 31. Check out their website: https://www.harrys.com/auto-refill but after you’ve read Bill James and Nabil Sakkab’s report below.
The days of high priced Gillette razors and blades are over and the Gillette Shave Club may dupe some people, some of the time, but this is not a viable solution…..and David Taylor, the new CEO has been watching this business unravel.
Bill James and Nabil Sakkab’s CIMS P&G Report:
Bill and Nabil, both lifers at P&G, were part of the Innovation Machine led by Gordon Brunner, P&G’s CTO. The centralized R&D organization was the heart and soul of this Innovation Machine. Read what they did and why P&G today is “Innovation Rusty,” Go to:Want to up your innovation game? Want to up your organization’s innovation game? Attending one of our Mastering Value Innovation Workshops is a great place to start. In 2016 we are going to change our approach. We will work with you to develop your own custom workshop that addresses your problems and you define the length and location. More information can be found in the Workshop Brochure.