The Optimization Imperative: Understanding Procter and Gamble’s New Strategy
The story of how Procter and Gamble became one of the most profitable consumer goods companies is a perfect case of a strategy aligned with execution:
- Conduct extensive market research to determine consumer problems
- Use the research to develop everyday products that solve the problems
- Manufacture the products at scale
- Support the new products with significant marketing and brand investments
- Command a premium price
There’s more detail, like how P&G engineers leveraged existing technologies to extend into adjacent categories (most notably paper towels into said diapers), or how salespeople pioneered joint business planning with Walmart, or how its brand teams worked with advertising companies to build iconic brands.
This article won’t focus on those stories.
Instead, it’s going to look at the path ahead.
In November of 2022, Procter and Gamble unveiled a new corporate strategy. Officially it’s unnamed. Unofficially, I’m calling it the Optimization Imperative because, at its core, it’s about using information technology to optimize all aspects of an already best-in-class organization.
But let’s back up a bit. Let’s quickly talk about how P&G got to where it is.
A Refocused Procter and Gamble
In 2007 P&G was successful but bloated. It manufactured and sold everything from its iconic Tide Detergent and Head and Shoulders Shampoo to Folgers Coffee and Duracell Batteries. The company owned 170 different brands in 16 separate categories. The grab bag assortment generated around $76 billion a year in sales. That was great, except the lack of specialization meant it earned middle-of-the-road profit margins.
At 2007’s Investor Presentation, Procter and Gamble announced a new strategy. Management wanted to refocus. Instead of selling a whole bunch of everything, it would concentrate only on premium everyday categories. The company sold off over 100 brands in the next decade.
Equally important was the decision to redesign the organization. Management closed manufacturing sites and reduced the platforms it had to maintain. Operationally, the company overhauled what executives called the “thicket.”