CEO David Taylor explains how a focus on innovation is driving the company’s growth and shaping its sustainability strategy.
This interview was conducted in April 2021 as part of a joint report by PwC and the Consumer Goods Forum, “What’s next: How consumer goods leaders envision tomorrow.”
During his four decades at Procter & Gamble (P&G), David Taylor worked his way up from the factory floor to the corner office. He started at the company in 1980 after graduating from Duke University with a degree in electrical engineering, managing plant production and operations. Before being named chairman, president, and CEO in 2015, Taylor, now 63, worked in brand management and led two of P&G’s core categories: the beauty, grooming, and healthcare business, and the family and home-care business. (It was announced on July 29, 2021, that Taylor will step down from the CEO role in November, and will become P&G’s executive chairman.)
Under Taylor’s leadership, the consumer products giant—which reaches 5 billion consumers in 180 countries with leading brands that include Crest, Pampers, Gillette, and Tide—has delivered consistent profit and sales growth. Operating income climbed from US$5.5 billion in 2019 to $15.7 billion in 2020, on net sales of $71 billion. During the pandemic, P&G pivoted smoothly by realigning supply chains and factory lines to keep store shelves stocked with the products consumers needed. The company also saw 40% organic sales growth in e-commerce in FY20.
In a recent conversation, Taylor talked about the premium he places on research and innovation—funded with an annual R&D budget of $2 billion—and the startup mindset that has reinvigorated the 180-year-old company’s culture. It’s a mindset that has supported P&G in maintaining its competitive advantage and creating value while enabling the company to identify creative ways to mitigate its environmental impact and enhance sustainability.
S+B: You’ve talked about the idea of “constructive disruption.” How does that influence your approach to innovation?
TAYLOR: We’ve learned a lot from Silicon Valley about how entrepreneurs operate. If you can take the speed and curiosity you see in the startup community, and combine it with the technical depth, breadth, and systems of a Procter & Gamble, you bring together two really powerful forces. But it has to be done constructively, because disruption can destroy value. What we want to do is find a constructive disruption that creates value for our consumers, our communities, and other stakeholders—to build our company and empower our people.
For example, in P&G, we have traditionally had a bias toward consensus. So much time was spent negotiating internally, we weren’t as effective as we could be. We said, “Let’s talk about where the frustration points are,” and for the first time, we changed the reporting structure. We moved thousands of people’s reporting lines. We’ve changed the axis of the whole company to be focused around the operating business. If you’re close to a consumer, a customer, or you make something in a plant or you build it in a lab, you’re one of the people working where value is created. The rest of us are here to help, and we want to minimize the number of people who are managing and maximize the empowerment, development, and unleashing of talent.
For R&D, instead of big project teams that are staffed with multifunctional resources—which is how things were run ten years ago—I now have more than 150 small groups working on all kinds of exciting ideas that they can fast-cycle learn. This means we have many more bets being placed.
S+B: What results have you seen from this approach?
TAYLOR: We’re already seeing the benefits. The last two years have been our best results in a decade, in very challenging times. And just in the last six months, we’ve seen incredible growth. Our people have been amazingly resourceful in keeping our plants open. We had container loads on the ship that was stuck in the Suez Canal, and we had raw materials waiting to go through, but you didn’t see our plants shutting down. People reformulated and rerouted. Some of this had been anticipated in business continuity plans, but there’s just been an incredible level of resourcefulness.
S+B: What has the impact of P&G’s innovation strategy been on the company’s efforts to mitigate environmental harm?
TAYLOR: There are many things that we can do with formulas. Consider fabric and home care. By far, the biggest environmental footprint of washing your clothes is heating up the water, so if you can find a way to use a short cycle at a low temperature and still get the same cleaning results, then you can take a tremendous amount out of the environmental impact while still giving consumers what they want. We’re already at zero waste to landfill in our plants, and we’re using renewable energy for many of our plants or credits if we can’t get all the way there. But then the question becomes, “How do we bring our Scope Three [value chain] emissions down?” That’s when we start talking about chemistry and new formulations.
For example, what if instead of just saying that the task is to clean the garment, you adopt a broader objective and say that you want to extend the life of the garment? With the rise in popularity of fast fashion, people are throwing away massive amounts of fabric. If you can extend the life of a garment by making sure it doesn’t pill or separate, and you keep it clean and stain-free, you can make a meaningful impact. If we focus not only on reducing the carbon footprint of our factories but also on taking carbon out of the task that the consumer has, we can achieve much more. We currently have hundreds of Ph.D.s working in our upstream R&D organization using enzymes, polymers, chelants, and other formulations to extend garment life.
Another way we can reduce our Scope Three emissions is by making things lighter and reducing plastic packaging. We’re very close to converting some of our plastic packaging in some categories to paper. The concept we have now is “built in, not bolted on.” Instead of making something and then trying to reduce the waste, you design from the outset to reduce waste—even going down, in some cases, to the molecular level. In other words, part of the design brief, along with product performance, is the environmental impact. In an ideal world, first you reduce waste, then you go to no waste. And then the vision for many of us is to get to regenerative solutions, which means using life-cycle analysis to find solutions that are much more holistic than just the task at hand that we typically would design a product for.
Read the full interview at https://www.strategy-business.com/article/Procter-and-Gambles-path-to-constructive-disruption.