Lafley’s strategy for P&G had been to focus on its big brands, including Pampers, Tide, and Crest to drive earnings. He had also focused on acquisitions closer to P&G core capabilities in hair and oral care than previous CEO who targeted diverse business opportunities outside P&G core competencies, including lams pet food, PUR water-filter, and proposals to acquire two large pharmaceutical companies. The SpinBrush product was indeed an unexpected success for P&G that usually charges its products at a premium. But SpinBrush reversed that thinking and helped P&G quick dominance of the (newly created) lower-tier market of electric toothbrushes. One main reason was SpinBrush being aggressively priced at $5 while most of the electric toothbrushes were sold at $50. This gap in the market was noticed by the entrepreneurs (who were external to P&G bias) and had shown that “not all great ideas originate at P&G.” They also knew that the timing was right for sell SpinBrush to P&G. In 1998, P&G had lost its market leadership to Colgate and would be very hungry for a new product to help them regain market leadership. SpinBrush had added $200 million in global sales for P&G and helped Crest return to its position as the No. 1 oral-care brand in the U.S., after two years losing the position to Colgate-Palmolive. Validation of SpinBrush in the marketplace was done diligently by the entrepreneurs. They closed a deal to sell the business to P&G in January 2001, after successfully sold 10 million units, i.e., 3x more than existing U.S. electric toothbrushes. SpinBrush typifies an implementation of discovery-driven planning as discussed in the articles: Innovation Killers, HBR January 2008 and Discovery Driven-Planning, HBR July 1995. They have committed themselves to make the SpinBrush costs $5 if it ended up costing $7.99 they wouldn’t have gone forward. It is also illustrative to think about the Kittyhawk case (HBS 9606088, October 2008) where HP was struggling to find a valid and profitable application for Kittyhawk, their new 1.3-inch hard drive that “leapfrogged ahead one generation beyond the 1.8-inch form factor.” They had traded everything to meet an aggressive schedule to launch Kittyhawk on time (12 months, from start to finish). They ended up with an expensive 1.3-inch driver costing $250 instead of an affordable driver that the market wanted for about $50. They should have used discovery-driven planning to revise their first assumptions and do a course correction on the project schedule and milestones. I believe that Kittyhawk would be better off if the venture had spun off from HP, and had followed similar steps done by SpinBrush’s entrepreneurs, including:

Validate the marketplace
Develop an exit strategy (e.g., sell the venture)

The SpinBrush was valuated at $475 million – $165 million (4X its prior sales of $43 million) was paid up-front with an “earn-out” payment in three years based on financial performance. The three also agreed to join P&G during the earn-out period to ensure the business stays entrepreneurial.