“We were just blown away” ‒ said Darin Yates, a young P&G brand manager, enthusiastically describing, for his surprise, the consumers’ response about Crest SpinBrush at one focus group at Procter & Gamble Co.
The Yates’ statement gives us some insight into the P&G’s old culture (before Lafley era), and why SpinBrush was considered a very BIG surprise. P&G’s model was invent-it-ourselves, i.e., everything were produced and controlled step-by-step inside the company. This approach had strained the company capability to innovate fast-enough to sustain its high growth (from $25 billion to almost $70 billion in 2000). This fact had led P&G to lose more than half its market cap, stocks lid from $118 to $52 a share. A.G. Lafley was appointed CEO in June 2000, and had challenged P&G to reinvent the company’s innovation model and proposed a new concept for Open Innovation – Connect and Develop model (“proudly found elsewhere”). SpinBrush wasn’t invented inside P&G. It was developed by four entrepreneurs in 1998 with the idea of selling to P&G. They invested $1.5 million and sold it to P&G for $475 million. Three of them even became part of P&G payroll to shepherd the product. Their mission was: “… to not allow P&G to screw it up.” The SpinBrush marked a great shift in marketing strategy and product development for P&G. While most of the electric brush in the market were sold at a premium price starting at $50, the SpinBrush price was set at 10x less, costing to the consumers $5, or just $1 more than a high-end manual brush.
But still, other challenges related to P&G’s culture and processes. And the company ability to quickly adapt to this new competitive environment had posed uncertainty about if SpinBrush would or would not reach its potential once fully managed by P&G – “ … not sure you can teach an elephant to dance,” said the leader entrepreneur behind SpinBrush. Lafley’s goal to acquire 50% of P&G innovation from outside of the company represented his vision to balance internal core competencies on marketing and distribution with the velocity needed to gain market share – swiftly and cheaply – in an increasingly competitive, globalized market of consumer goods. Rightly, as a CEO, Lafley drove the culture change inside P&G to a more externally focused innovation model by promoting openness to external ideas, rewards speed of product development, thus favoring open innovation since it can move more quickly from product concept to marketplace. Examples of Lafley’s laser focus on making P&G externally focused on innovation and encouraging speed to market were an acquisition of a moist toilet paper manufacturer to parry Kimberly-Clark product launch, and negotiations to outsource P&G back-office operation.