Case Study 2

Corporate New Ventures at Procter and Gamble

Submitted by: Subhabrata Das (A0109984N)

1. Learning Objectives: This particular case study demonstrates the challenges established firms
face when there is a shortage of assistance for creativity and innovation in the workplace. This
puts a huge pressure on the firms growth objectives as they then start to rely largely on
developmental innovations and earning through cost cuttings rather than pursuing disruptive
breakthrough ideas. To deal with these challenges these large, well-established firms tries
kindle the innovativeness in their employees by setting up corporate ventures division to
promote new products and ideas which can help the company to sustain their growth rate in
long run. This is usually done by examining the viability of different methods related to
creative thinking and implementing them to infuse a creative environment in the workplace.
In this case we study Procter and Gamble as an example and learn how they were able to
incorporate new corporate ventures in their structures to maintain their growth and innovative
culture.
Procter and Gamble
The company came into existence when there was a merger between soap manufacturer James
Gamble and candlemaker William Procter in 1837, so that they could buy the animal fats easily
for their respective products. However, with time their company grew many folds to become
an outstanding manufacturer of quality products and one of the largest companies in the world.
Procter and Gamble was incorporated in 1890s and since then the company has been able to
maintain a healthy sales growth rate of 7% per annum. The three crucial factors that drive the
growth of the company are: new product development, global outreach and acquisition. Even
though P&G acquired many companies to expand their product line, their growth was mainly
driven by development of new innovative consumer products, which lead to the creation of
billion dollar brands like Tide (laundry detergent, 1946), Crest (first fluoride paste, 1955),
Pampers (disposal diapers, 1961) and Bounce (fabric softener, 1972). The company have a
stringent hiring process to select the best and brightest for the job and has a culture of up
through the ranks to motivate performers in the company to take up important portfolios. P&G
was the first to introduce profit sharing schemes and employee stock ownership program in
1987 and 1892 respectively. However, in 1930s the company adopted brand management
structure to equip each brand with marketing expertise, management focus and competitive
nature. Each brand manager was responsible for the profitability and overall performance of
each brand and this resulted in internal competitions and an air of secrecy prevailed in the

company. This limited the cross-fertilization of technology within different groups and resulted
in more developmental innovations in the company than breakthrough innovations. However,
with the strengthening of innovative ventures after 1990s the company was able to develop
and nurture new entrepreneurs which helped them to maintain their growth objective of
doubling their sales in every ten years.

Corporate New Ventures: Why was it required?

1. In 1993, P&G went through a major restructuring program called Strengthening Global
Effectiveness (SGE) in order in increase profit margins of the company. But, this resulted
in closing of thirty manufacturing units and reduction of 13000 jobs. This strategy resulted
in only +10% increase in the profits, as it was more focused on cost cutting and little or no
growth in top line innovation. This was not enough to reach the companys long term goal
of doubling the sales every ten years. During 90s the company had around ten billion dollar
brands and to reach their growth objective they had to create more successful new brands.
2. The company was focusing on adding new features to their existing brands to make them
competitive, where the innovation is considered to be incremental in nature. During 1960s
and 1970s the company launched many major brands like Head & Shoulders, Pampers,
Scope and Dawn, but in the subsequent decades their innovation focus shifted, resulting in
gaps in new product development. This was a critical challenge for the company to fulfill
growth objective.
3. The company had the resources and the employees to were developing brilliant
breakthrough technologies, but these innovations were not nurtured properly as they were
beyond the focus of strengthening and developing of the existing brands. Thus these ideas
were not considered by the managers and they remained on shelves as there was no
corporate push to do things other than improving current main brands.
4. There was lack of communications between different groups and categories which limited
cross fertilization due to a competitive environment within internal brands.
5. There was a lack of pace in the innovation of new products as the focus was mainly to
extend new features in existing brands and products, rather than new innovative product
development.

Corporate New Ventures: Steps to rejuvenate creativity and innovation with in P&G
The company realized the lack of new innovative product development process and so the
top management took steps to kindle the creative and innovative mindset of the employees
which has been the major hallmark of success for the company. They created an Innovation
Leadership Team (ILT) to find ways to fasten the pace of innovation of breakthrough
products.

1. They looked through various innovative ideas which were not perused due to the structural
limitations of the company.
2. They developed a Corporate Innovation Fund (CIF) to provide seed money to investigate
new ideas. As a result of this, teams with innovative ideas were able to get funds to work
on projects which were completely different from their current brand they are working on.
They were evaluated based on their milestones achieved as they progressed which resulted
in the development of new product ideas in different sectors.
3. To increase the pace of innovation many new venture groups were established in different
sectors. They had the job to identify the competencies of different sectors and provide
necessary funding for product development in each of the sector with the available sector
knowledge and expertise.
4. With the depth and breadth of knowledge available in P&G, the objective of the new
venture groups was to make the process of innovation more scientific, predictable and
efficient. They tried to achieve this by following systematic and sophisticated steps to
develop creativity and innovation. They relied more on structured approach for innovation
with the availability of huge data, customer base, knowledge and history rather than
scampering for ideas out of the blue.
5. The ILT team in mid-1944, proposed for corporate new ventures (CNV) group that would
assemble members from different sectors to develop a system which will structure the new
product development. This will formalize their process, develop infrastructure, and
monitor the funds making innovation and creativity a systematic process. This will reduce
the chances of repeating mistakes and increase the pace of innovation. This led to the
establishment of CNV groups.

Corporate New Ventures: Inception, goal and environment

The CNV started with only Craig Wynett, who started his career as an assistant brand
manager for Pepto-Bismol and his assistant Joyce Grothaus. The major challenge face
during the inception of CNV was finding the best people for the job, due to the companys
reward system. However, the executives promised a faster growth for individuals joining
the CNV groups and within a year key members of CNV got promotions to director levels
for managing major brands. CNV provided the individual the freedom to create something
new which will develop into a new brand in future to maintain the growth rate of the
company. To develop the creative mindset, the group was provided with reading materials
and they went through a three-day workshop, where they interacted among themselves and
explored new innovation possibilities, shared team building sessions, and working towards
their aim. This helped a lot.
1. From this we could understand the importance of interaction for the development of
new ideas. Interaction among the group members resulted in the increase of cross-

fertilization of technical ideas which is a critical aspect of new product development

strategy.
2. The workshop also gave important information of developing an innovation process
strategically which would increase the pace through less repetition of mistakes during
an innovation process
The CNV team had a simple mission of developing one major new business idea per year
for the company. To establish that they at first developed a set of criteria of structurally
develop a new product. This will then help each of the member in the team identify a
specific role and overall the project team with all the resources of the company will develop
new product initiative.
1. The major components required for systematic product development are: clear
definition of goal and idea, resources required, major milestones and decision points,
accountability, and outlining the reasons that could possibly sabotage the project.
2. These set of steps are very important for systematic product development.
3. This will help fix the job of each team members, which will provide accountability and
also will help in the process during product development. With crossing of each
milestone during the process, the team will gain confidence and will build the team
stronger and will also earn the faith of the management and executives, a more
structured approach.
The working environment during product innovation and breakthrough idea development
is very important. People working during this process have to have the freedom for
innovation. The sense of trust and bonding among team members is extremely important.
As team members assemble from different sectors of company, regular team building
sessions and reviews can help the process to pace up faster. This will create a conducive
environment successful product development, where there will be no judging or criticizing,
rather there would be cooperation, mutual respect and collaboration.
Corporate New Ventures: Overall process
The main structure of the team for a CNV should comprise of members from different sectors
like, Brand management, R&D, Finance, Market research, Product supply and Support. This
provides the best diversity which is extremely essential for the development of new product.
The group should be able to meet regularly to discuss on the progress to address the potential
hurdles in the process.
1. Idea generation in a systematic approach was the philosophy of P&Gs CNV group under
Craig. An idea can be developed from two aspects, one from the technical side by analyzing
the resource potential of a company like P&G and another from the consumer side by
performing a through market research.

2. To develop high quality ideas, it is extremely important to read materials which help to
develop the new innovations. Apart from a great team and a philosophy, resources are
critical for idea development too. For this reason, the CNV team was provided different
resources like magazines, study materials, to develop ideas in science and consumer
behaviors. By developing strong relationship with educational institutions, innovative idea
development becomes easier and effective as education institutions have a pool of new
ideas which can be tapped to develop a new product. Plus, with the use of new information
technology we can improve and refine our ideas too.
3. It is extremely important to examine the ideas on different fronts such as demographics,
cultures, technologies, government, politics, manufactural capabilities, society. It is
extremely important to find the interaction between these trends and this can be done if the
surveys and research is done by the team itself.
4. However, the ideas were evaluated by looking into three things, business opportunity,
technical background and consumer demand. These are very important as they determine
the success rate of a brand.
5. A systematic approach would then help to identify the best idea and product which can
achieve a good response from the consumers, technically sound and have a good profit
making opportunity. This was done by creating a P&G Database which contained a
comprehensive information of almost 100 P&G products. The database is important to
learn the reasons for success and failure of a product endeavor to train the CNV groups to
follow a systematic path for faster product development.
6. By following systematic method for creative thinking and building a conducive work
environment for new product development, the CNV group of P&G was really successful
in their first year. They handed over five projects to the business sector and this increased
the fame of the CNV members and other sectors also started to approach them for
innovative solutions and products.
Corporate New Ventures: Challenges
The major challenges the CNV groups faced during their early days of operations were:
1. The major problem in this kind of cross sector collaboration, which had no prior operating
division was the implementation of the ideas. The ideas developed by CNV groups had to
be transferred to a specific group which could process the idea and develop the product due
to the presence cross-sector technology in the product. Another challenge was that
potentially raised ill-fitting into a sectors type of business. This meant changes needed to
be incorporated again.
2. There was less accountability on the part of the CNV groups as they mainly focused on the
idea development and innovation, however the final product development and
manufacturing was not taken up seriously.

3. Growing politics in the workplace, as the CNV group had a direct access to the executives
while other sectors had to develop their innovations through traditional routes. This created
barrier among CNV and different sectors too.
4. With the success of CNV after inception, there was a huge inflow of funds and resources,
which made it difficult for Craig to manage. He became more of resource manager than an
innovator.
Corporate New Ventures: Learning outcome
Through this case study we learned that the key to keep a healthy growth rate of a large, wellestablished company is to focus on breakthrough innovation and new product development.
By coming up with disruptive technologies these companies can achieve their objective of
doubling their sales every ten years. However, with time the innovative and creative mindset
changes to incremental improvements of successful brands. This happens mainly due to the
brand management structure in large well established companies, where the responsibilities of
a manager are to develop an existing brand by adding more features to it. However, this reduces
the top line innovations which is responsible for the development of disruptive products and
major profit yielding brands for the company. To change this culture P&G came up with CNV,
which is an inter-disciplinary group pulling members from different sectors of the company
(R&D, Brand management, finance, marketing, manufacturing and sales) for coming up with
great innovative ideas. The group was provided with necessary freedom in the workplace and
sufficient seed funding to carry out their idea development for innovative product. The
philosophy of the group was to develop a structured and systematic method which will guide
product development. It was identified that problem definition, resource identification, market
knowledge, technical know-how and key hurdles that can kill the project. After structuring the
idea, the developed product model needs to be evaluated by the group based on three aspects:
technical aspect, consumer aspect and business aspect. The challenges arising needs to be
addressed on every meeting to achieve key milestones. The innovators should utilize all the
available resources of the company and external sources to make their idea viable and
profitable. After due diligence, the developed idea need to handed over to the respective sector
for final manufacturing and development. In this way CNVs can become a systematic method
for infusing creative and innovative thinking in a well-established firm. This is made possible
by systematic approach of incorporating entrepreneurial activities with a large firm through
radical innovation and fostering open and free work environment. But, this can have its
drawbacks too. As in this case, since CNV did not have a manufacturing division, the idea
passed to the respective division encounter lot of challenges due to their inter-disciplinary
nature which did not align to that sectors mode of operation. This can be addressed by either
developing a manufacturing center for CNV itself or by involving the sector during product
development to make the transition of innovative idea into a feasible product easier and
sustainable.

2. Model of Corporate Entrepreneurship

P&G in this case followed the Producer model for encouraging breakthrough idea and product
development.
The producer model has a tick on both the aspect of corporate entrepreneurship. The companies
following this model provide both organizational ownership and resource pool for the
development of new breakthrough business model for innovative products and services. In this
model the organization designates a group of mentors who actually trains the employees or
provides technical and managerial support to help them develop their business idea. Once the
idea is formulated, the business unit or the program managers screen the projects depending
on their potential and then fund the most exciting and sustainable project, which they believe
to align with the companys vision and also has the potential to generate huge revenue for the
company. During the innovation process, the developed ideas are diligently worked upon by
business developer wing of the company. Then the project approval is seeked from the board
of directors of the company for finding and supervise projects growth. Finally, the project is
validated by testing on real consumers.
The strategic goal for the producer model is to capitalize on breakthrough innovation by
providing full support of organizational funding, coaching and accountability. In this case the
executives who wanted to create a suitable environment for breakthrough innovation created
Innovation Leadership Team (ILT) to explore the steps to increase the pace of innovation. They
also set up Corporate Innovation Fund (CIF) for providing the monetary help for the
innovators. Later on they decided to set up CNV under the leadership of Craig who was
assigned to gather a group of innovators from different sectors of company. Their job was to
come up with feasible business ideas and breakthrough products. In the process the group went
through workshops, relevant study materials, all the knowledge and resource of P&G. The
group received the support of executives and reported directly to them. The employees
received the guidance from well-established and successful veteran company leader to
formulate their business models and also got sufficient funding to build prototypes and proper
nurturing to commercialize the product.
3. Application of CNV to my organization
Phillips Carbon Black Limited (PCBL), part of the RP Sanjeev Goenka Group, pioneered the
carbon black industry in India. It is now the leading producer of carbon black in the country.
PCBLs trade name is Orient Black. Phillips Carbon Black has come a long way since its
inception in 1960. PCBL started production from December 1962 by the oil furnace technology;
the most widely accepted manufacturing process of carbon black patented by its then
collaborator and world carbon black leader, Phillips Petroleum Company, USA. The company
is not only the largest exporter of Carbon Black from India but also one of the largest in Asia in
its field. It is a part of RP-Sanjeev Goenka group, pioneered the carbon black industry in India.

RP- Sanjeev Goenka is one of the Indias top five industrial houses with annual turnover of US
$1.6 billion. It is the ISO-9001 certified, and is the only carbon black manufacturer in Asia to
achieve the distinction.
The company ideally follows an opportunist model of corporate entrepreneurship, where no
organizational accountability for the corporate entrepreneurship program, neither any specific
funding or resources is set aside by the company for new business models. There is no dedicated
team in the company looking into new ventures. Most innovative idea came from the senior
management, and employed a top-down approach. Employees did not feel the urge to come up
with innovative ideas to improve processes or products, and did not take the initiative to suggest
new ideas out of their scope of work. But, as we learnt in our previous case study, the firms
operating under opportunist model can evolve beyond this model to create more innovative
product and bring new business to market.
The two factors which decides which the type of corporate model followed by the company are:
organization responsibility and resource allocation. I presume the transition from an opportunist
model to a producer model we need to look into two aspects in the company. Firstly, the
executive body of the company and resource availability. The product this company deals with
is carbon black. Currently, this product has lot of application in different industries. One major
sector is tire industry, and rubber industry. However, with the development of Nano-science
there is a growing demand of pure Nano-carbon in different shapes and structures (eg. graphene
sheets, single carbon, carbon nanotubes). Each of them have huge range of application starting
from electronics, catalysis, energy, water treatment, etc. However, these products are difficult
to manufacture in bulk and product development requires research and development. But, a
breakthrough in the manufacturing or product development would mean huge profit generation
for the company as they can patent the process too. This can be a huge driving force for changing
the focus of the company from an opportunist model to an advocate model first. However,
another key aspect of the company is the current executive board. The company underwent a
transition, where the board of directors and the executive body passed from the father to his son.
A young and energetic executive board have undertaken lot of major steps to improve research
and development of the company. This can be a positive aspect towards the inception of a CNV
group in the company, where the executive board fully support the groups freedom for
innovation in an attempt to enter into a profitable market of Nano-carbon manufacturing.
However, this will also depend on the managers, and supporting board members who will allow
the formation and operation of this kind of CNV group in Phillips Carbon Black Limited
(PCBL).