Last year, I conducted an interview with CEO, Dave Morgan, who essentially suggested that the large CPG companies would struggle in a non-distribution constrained environment (i.e., Direct to Consumer). He had a provocative view. In response, I recently talked to Leigh Radford, Vice President and General Manager who heads a newer division at Procter and Gamble called P&G Ventures. Below is insight into how P&G is blending the best of big and small firms to create new, innovative business models, products, and solutions for consumers.
Kimberly Whitler: What is P&G Ventures?
Leigh Radford: P&G Ventures is a startup studio designed to fuel P&G growth by creating brands and businesses to solve consumer problems in categories where P&G does not currently exist. Working internally and externally, with experts, innovators, and entrepreneurs from around the world, we identify and develop technologies and business models in a fast-learning, startup-like, lean environment. We are developing a portfolio of startups focused on creating new brands and businesses in new categories to the company or to the world.
Whitler: P&G has been creating new products for over a century. At one point, I saw that the company had created 23 $1 billion brands, more than any other company in the world. First, is this true? And second, if so, why did you create P&G Ventures?
Radford: Yes, P&G has had a 180-year plus track record of being able to innovate and develop brands that become global successes. The story behind P&G Ventures shows not just how the company thinks about business management, but also about development of its people. About 3.5 years ago, P&G’s CEO at that time, A.G. Lafley, developed the idea after coming back for his second stint as CEO. Over the years, he would mentor me and talk to me about his vision for my career. One day, he came up and said “I want you to look at a couple of businesses. What would you do with them? How would you think about them?” After I reviewed the new businesses and had a discussion with him, he said that he wanted me to do “this” full-time—to essentially review and develop smaller businesses that might not meet our hurdle rates yet. Essentially to begin to incubate promising new businesses and new categories for the company. At the time, I wasn’t sure that it was what I wanted to do. When you typically think about corporate innovation centers, they are the “go to” places in the company. The challenge at P&G is that that hasn’t been the case. Most people come to P&G to run big businesses, billion-dollar businesses. Historically at P&G, the major innovation sat in the current business units. So if you develop a new brand or innovation outside of the business units, there becomes all sorts of challenges. P&G’s leadership really believed in the idea and A.G. said, “the company needs this, and this is good for you.” In true P&G leadership fashion, A.G. put me on the hot seat by asking “what needed to be true” for this to work.
I thought about it and indicated I had four key requirements that would be important to get the business going: 1) needed to recruit top talent (I needed to be able to pick and retain top talent for at least a 3.5 year period before they rotated off the business), 2) the position needed to report into the CEO and have full-line of sight to the board (sometimes corporate innovation is fleeting and this often happens if it doesn’t have appropriate sponsorship), 3) it needed to be highly visible so that it showed the company that we were committed, so I asked for a GO-based (headquarter) innovation center (now located on the 11th floor next to the executive suite), and 4) we needed the flexibility to stay out of the cross hairs of the businesses.
A.G. agreed that this made sense and so the P&G Ventures group was born. I have my own budget and a different mandate. The disruption of DTC was biting on our heels. How consumers are discovering new brands is different than how we grew up. This gives us a more nimble, agile way to get closer to the consumer. We are building a studio within P&G that is initially launching brands in DTC.
Whitler: People assume that big companies like P&G are slow. How do you create a startup-like, lean environment within a large company?
Radford: First, we have a flat organization. Our group is very senior and very lean. I needed people who had enough business experience to be able to make decisions with little oversight. I also needed a senior group who would have the confidence and skills to take smart risks. I don’t have any Assistant Brand Managers in the group—all more senior. On top of it, the team is outside facing, doing deals, and needed to be independent.
Second, we augmented our internal experience with needed skills from outside. Everything we are working on is DTC – digitally, native brands. The people with these skills are not necessarily senior folks from P&G, or frankly, senior folks from any company. We use a lot of external expertise to supplement our internal group. Also, we are now able to find Brand Managers within P&G who ran DTC businesses before coming to P&G.
Third, because we are lean, we tend to make much faster decisions than you’d think for a large company. We do the appropriate level of due diligence, but the experience of the team enables faster assessment and decision making.
Whitler: How big is your portfolio right now?
Radford: We have between 13-20 projects in our portfolio, and a lot more seedlings. The exact number is in constant flux. Every day we get data that supports passing on businesses we are evaluating, and we are in constant conversations with partners creating new businesses to be tested.
Whitler: What products and projects are you working on that you are excited about now?
Radford: As one example, Opté Precision Skincare which we debuted at CES in January. We have talked a lot about how we are partnering externally, but when we started P&G Ventures we shopped internally too to look for businesses and technologies that just didn’t fit within the business unit where they were developed. Opté is one of these finds. It’s an internally created technology that was developed over 10 years and has filed already over 40 patents. It is truly a technology breakthrough. Opté combines the best of optics, proprietary algorithms, printing technology and skincare in one device. It scans, detects and instantly visibly corrects skin tone. What we found is that women and men want to look as good as they feel, and skin tone is one of the primary factors on how we judge age, health, youthfulness and attractiveness. But current solutions to cover skin spots have trade-offs and really don’t solve the need. Opté precisely only covers the visibility of spots so the natural radiance of your skin can be revealed. Opté delivers true transformation.
Whitler: How are you marketing it?
Radford: This is an example of how differently we are approaching the business. We wanted to establish Opté as high tech and get into the conversation so we shared the technology at CES a full year before it will be available for sale. We are currently are exploring several go-to-market models and pricing options all which will have a direct-to-consumer element. It’s about learning early and learning fast. That means not having everything buttoned up.
So this provides an example of one of our new launch models. We are going small, pivoting, learning, reapplying. It’s a very different journey. Traditionally, you’d have a call center managing customer comments. Not on this business. We have all levels of leaders and functions doing the early phase of customer care. The team in charge of the startup business actually take turns taking the customer calls. This is about hearing and learning from consumers. Additionally, most of the product design and brand creative is done in-house. This is about being hands on, fast, nimble, and fluid.
Whitler: You suggested earlier that P&G isn’t good at the DTC model. How are you learning and growing in a way that benefits P&G?
Radford: This is important. One thing we are really clear about is what we are good at and what we aren’t. We are good at creating and scaling brands. We aren’t as good at building a DTC business. We just don’t have a lot of experience in DTC. Until that skill grows, I’m actively out looking externally for CEOs to spin those companies out. We haven’t finalized what the exact business relationships would be, but we believe it is a unique way to continue to grow the businesses we are developing and learn.
To help us learn in this startup-like ecosystem I created an advisory board. I brought onto the board really smart and experienced people like the CEO of Madison Reed and the former CEO of Match and current CEO of ShopRunner, among others, who are Silicon Valley founders and entrepreneurs. We also invested heavily in capability training. We brought in General Assembly, a training company that teaches practical technology skills like data analytics and SEO training so that we could continue to learn and have the skills to be more hands on. We also did an assessment of P&G Ventures’ leadership team and identified ways to upskill their talents and took seven people to the Executive Digital Marketing class at Wharton. Lastly, I have been really surprised to find the generosity that exists in the startup world. It’s a lonely world because it’s hard. They all help each other. I will set up a meeting with one person and then they introduce me to four more people. It is exponential. That is the new business ecosystem. The generosity is crazy.
While Dave Morgan indicated that P&G was being challenged by DTC brands, P&G Ventures appears to be addressing this by creating a division designed to both drive innovation and thrive in the DTC space. Perhaps this nearly 200-year-old company is more agile than some think.
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