P&G CEO A.G. Lafley Talks Innovation

Until recently, the opportunities to see and hear Lafley were restricted to the fortunate few. But now that Lafley has written a book, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation, co-written by business consultant Ram Charan, he has become a little more accessible, speaking at more events and granting more interviews. For example, the June issue of CGT will feature a candid Q&A interview between Lafley and AMR Research CEO and President Tony Friscia.

I had the opportunity to see Lafley speak at PDMA and IIR's 5th Annual Front End of Innovation conference in Boston on May 21, 2008, and was pleasantly surprised at how unassuming, down-to-earth and soft-spoken Lafley is. He is a true Renaissance Man from a small town in New Hampshire who studied medieval and renaissance European history and who's original plans included teaching and coaching basketball. 

His talk at the event focused on his approach to innovation, and there were a few key takeaways. First, he talked about defining innovation and the importance of transforming ideas into commercial success - P&G's adoption of the stage-gate system helped them drive new product success rates from 15 percent to 45 percent, and Lafley stressed the importance of following the process exactly. Such discipline allowed ideas and technologies to become concepts of expression or crude prototypes (which cost hundreds of dollars, not thousands) quickly to get in front of prospective consumers. The issue, he said, was not a shortage of ideas, but rather the challenge of getting ideas clarified, sorted and put through the development pipe quickly. 

The need to involve the consumer early in the process dovetails with Lafley's insistence on the consumer being at the center of the business. Most companies talk about being driven by the consumer, but it is at the core of everything P&G does. Lafley talks about the shift from being internally focused to looking outside - at customers and consumers - to truly understand what products will resonate and how. Lafley shared a story about a woman using Tide Powder in a cardboard package, and how she rated the packaging "excellent." Yet, when she was observed in her home opening the box, she used a screwdriver she kept sitting on a nearby shelf to avoid breaking a nail. This vignette underscores the belief that consumers can't tell us what they want, but if they are exposed to a stimulus, they can tell whether they like it or not. So, P&G strives to understand what consumers cannot articulate themselves. They try to involve the consumer in co-creating and co-design in the earliest stages of innovation, thus the need for early prototypes. 

The shift to externally-focused metrics and processes is something that many consumer goods companies strive for, and Lafley shared three things that helped P&G make the switch:
1. Loosen up the structure
2. Get people to be agile yet disciplined
3. Instill a purpose-driven culture

This was a challenge particularly given P&G's strong corporate culture, but Lafley said that they reserved core principles, like integrity and high trust levels, and tried to get employees to become more externally focused by understanding the need for agility, adaptability and flexibility in this fast-changing world. Yet, he stressed the need to keep the processes "Sesame Street simple" with lots of training so they are embedded in the systems and culture of the organization.

Photo courtesy of Hamish Taylor, Consultant, Shinergise