Procter & Gamble

William Procter and James Gamble might never have met had they not married sisters – Olivia and Elizabeth Norris – whose father convinced his two sons-in-law to become business partners. In 1837, a humble but bold new enterprise called Procter & Gamble was born. What began as a small, family-operated soap and candle company today represents one of the world’s strongest portfolio of consumer brands. 

For most of its history P&G was content to stay out of the limelight, communicating instead with its customers through its brands.  Traditionally that communication was one way with P&G spending billions of dollars a year to tell consumers through bold, persistent advertising about the products that their hair needed or their stomach craved. While the company had made the use of focus groups and test markets into an art form, it had kept such interaction with customers tightly under wraps. The basic model: Research secretly, and carry a strong brand.

Then in 2000 came a shock.  R&D productivity had leveled off and innovation success rate had stagnated.  Squeezed by nimble competitors, flattening sales, lackluster new launches, and a quarterly earnings miss, P&G lost more than half its market cap when its stock slid from $118 to $52 a share.  It was clear that the “invent-it-ourselves” model was not capable of sustaining high levels of top-line growth the market had become accustomed to.

Under new CEO A.G. Lafley the company regrouped and a new spirit of openness was fostered.  It has since become an icon for how the internet can transform approaches to branding and innovation.  From the one way communication that characterized P&G’s marketing in the 20th century, the 21st century has seen the company focus on listening to and acting on the ideas of its customers. 

Lafley made it a goal to develop 50% of innovations outside the company and the company shifted its attitude from resistance to innovations "not invented here" to enthusiasm for those "proudly found elsewhere."  It was against this backdrop that P&G created its connect and develop innovation model. With a clear sense of consumers" needs, it could identify promising ideas throughout the world and apply its own R&D, manufacturing, marketing, and purchasing capabilities to them to create better and cheaper products, faster.

With the company also using the web to offer its customers valuable content and expert advice on family, household and personal care, together with opportunities to create test and market its brands, P&G has become the new model for how to market and innovate in this open and interconnected era.

In Numbers

$83.5billion - Revenue 2008
$42.8billion - Gross Profit 2008
138,000 employees
#20 in Fortune 500