P&G’s Case in India: Aligning Strategy with Innovative Management

Aspiration driven consumption is unfolding with gusto in the rural markets of India.

For instance, take baby diapers. Today, rural sales of baby diapers are in excess of Rs 200 crores. Over the last two years, rural category sales have grown by over 150%, with rural diaper sales accounting for 15% of total value sales of diapers, which is Rs 1300 crores.

A key reason that could be driving such “aspiration driven consumption” is the lowest price of Rs 10/- offered by Procter and Gamble India.

Pampers (P&G’s diaper) has the greatest share of the baby diaper market across India and has also been growing value share consistently. It is a clear sign that rural consumers are choosing to buy branded diapers for their babies”, said a P&G spokesperson.

On the other hand, sale of rural sanitary napkins grew by 74% over the last three years, with sales now at Rs 366 crores.

In this case too P&G’s ‘Whisper’, which is the market leader across India, including rural markets, has also been made available at the lowest priced SKU of Rs 25 for a pack of 8s, which turns out to be Rs 3/- per unit.

(source of all figures & quotes: The Times of India, Kolkata, Friday, March 29, 2013)

The important thing to notice here is the deep relationship between company’s strategy, product design, manufacturing practices and marketing. They are all in sync. Else market leadership isn’t possible.

It does not come as a big surprise when we understand strategy formulation process of P&G.

In the book Playing To Win the former Chairman and CEO of P&G, A. G. Lafley describes the strategy formulation process as answering five important questions, which are the following:

1. What is our aspiration?

2. Where do want to play?

3. How do we play to win?

4. What resources we must have?

5. What management systems must be in place?

Answering these questions did three things for P&G in India:

1. The company matched their aspiration to the aspiration of their consumers.

2. The different management functions that generally run in silos were aligned and were in sync.

3. Helped them to be a market leader in a very short time.

It possibly serves as a clear case where strategy and innovation work together.

While strategy provides the direction and the energy of a vision, innovative management paves the way for achieving the aspirations of both producer and their consumers. And these must be in sync with the aspiration of their customers. Else efforts meet with inauthentic constraints to make operation meaningless.

What do you think about it? Do you think this should be the way to go in such tough economic times?

Other references:

1. Happiest People Pursue the most Difficult Problems:  http://blogs.hbr.org/kanter/2013/04/to-find-happiness-at-work-tap.html

2. Playing to Win: A.G. Lafley, Roger L. Martin, Havard Business Review Press, 2013

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4 thoughts on “P&G’s Case in India: Aligning Strategy with Innovative Management

  1. P&G is a fascinating example on the global scale. Their problem is that a potential market has to be huge to make a difference to them. Smaller organizations do not have this problem. For a local or regional company they can stay with the local or regional market. It brings to mind the wonderful story you told about the hospital. Rather than understanding the end user, they focused on making their organization “more efficient” without understanding the deleterious effects on their most valuable resource – their staff.

    I found it interesting that P&G maintains a richly sourced full time department whose only purpose is to understand the user’s behavior. They tell a story about modifications they made to Gillete razors after they learned that in India running hot water is not a normal part of the shaving experience.

    Also interesting is that they see their deep systems of “knowing the customer” a significant sustainable advantage. P&G, like Wal-Mart and Amazon, keep a very powerful notice on the total costs of use. Cost of delivery and channels is a major cost center, although it is “separate” from the organization. Wal-Mart maintains their prices by using their pricing power to continuosly drive costs from their supply chain, Amazon is doing very well with “Prime” which eliminates the cost of delivery for customers that pay a $70 per year fee. They’ve found that a “Prime” user spends over 50% more on average than a regular customer.

    Many miss that opportunity as they take “logistics” as a given as it tends to be outside the purview of an organization.

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    1. Thank you Michael for your deep comments. I think their system of ‘knowing the customer’ triggers innovation. The interesting thing to notice is the dialectics they are engaged in – the ‘loose-tight’ phenomenon as described by Tom Peters and Bob Waterman in their 1982 book, ‘In Search of Excellence’.

      What is so admirable about them is their combination of impeccable operations (tight) with flexible innovation (loose) to bring out a formidable winner.

      I tend to believe that this concept of dialectic movement through contradiction is supposedly lost on most organizations. Most aim for either this or that forgetting that it is ‘both and’ and not ‘either or’

      Organizations are continuously communicating their preferred choices in society or marketplace thereby creating their brand image, loyalty, market leadership through differentiation and relevance. This, I think, should be our fundamental theme of ‘Communication Engineering’. What do you say?

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  2. I think it might work best for CE to look at the patterns of communication in an organization. P&G is able to have highly structured and “tight” communication that underlies their execution. At the same time they have an operation with “loose” communication as they face their customers.

    What I am trying to get to with “loose” communication is demonstrated by the story of razors in India.

    First thought was for researchers to visit the Indian disapora in London. The final decision was to send a team of people to India. Visit homes. Watch how men shave. Then design to enhance that experience. They didn’t know before hand what they would find. Rather the team worked as Trained Observers to see what there was to see. Once they reflected on what they saw they integrated possible designs with the expertise and scale they have in manufacturing and logistics.

    The recent McKensey piece on “The adaptable corporation:
    To survive, organizations must execute in the present and adapt to the future. Few of them manage to do both well” https://www.mckinseyquarterly.com/Organization/Strategic_Organization/The_adaptable_corporation_1757 Focuses on just the issue you raise in your comment. Well worth the read…

    From what I think I see is they do not focus directly on the frequency, amplitude, damping and constraints or loose and tight communications. Lots of people have many words that point to “silos.” So far I have not seen a combination of business acumen connected to emerging patterns of communication as precisely as I think we can..

    Back to you.

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    1. Thanks a lot for your comment. There is lot of food for thought and action in that lovely comment.

      First the communication patterns that you talk about. Yes, the ‘tight’ communication patterns are needed for brilliant execution. The ‘loose’ communication patterns have more to do with improvements, customers interfacing, facilitating personal mastery, creating platforms for membership and inclusion and helping people in the organization to create meaning in and from their jobs. While the ‘tight’ communication patterns help execution the ‘loose’ help to adapt to changing circumstances.

      However, the two are linked to form the overall pattern (stable, unstable and emerging) of an organization that defines their mindset, behavior and actions.

      This as you pointed out can be directly seen through frequency, amplitude, damping and constraints with reference to the RGB waves, where the G and B are visibly driven by the invisible R wave, which might be stated in various ways as purpose, intent, aspirations, hidden motives or unexplored patterns residing in the subconscious of individuals etc…

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