P&G's Connect and Develop Strategy for Innovation

Reinventing P&G's innovation business model

P&G's old strategy for innovation was based on the invention model where innovation comes from within the company - 'invent it ourselves' model. Earlier, innovation at P&G meant building global research facilities and having the best talent in the world develop unique products or inventions. But with the times and technology changing and P&G growing enormously, the old model was not working. P&G needed a new approach.

New innovation model - Connect and Develop

P&G knew that for every researcher it had, there were many others who existed outside the organization. So, rather than sourcing for innovation from within, P&G wanted to identify potentially good ideas throughout the world and apply its own capabilities to them to develop better and cheaper products, faster. The model was called "Connect and Develop". The new model allowed P&G to shift its centralized approach to a globally networked internal model.

Nokia's three-way strategy to capture the mobile music segment

• Launching devices with advanced multimedia capabilities and that stimulate consumers’ imagination.
• Using the Internet, adding value to devices with innovative services like the Music Store and Comes with Music. These services offer the best possible mobile music experience to the customer.
• Providing the customer with the best updated/dynamic local content with suitable partnerships.

McDonald's Pricing Strategy in India

McDonald's in India

McDonald’s began operations in India in 1996. The fast-food chain started making profits after it broke even in 2008. Reports suggest that McDonald's two subsidiaries in India, Connought Plaza Restaurants based in New Delhi and Hard Castle Restaurants in based in Mumbai posted accumulated losses of Rs 189.19 crore and Rs 119 crore in fiscal 2008. A total of Rs 211.41 crore of accumulated losses for fiscal 2008 for the company. India and China continue to be high-growth markets for McDonald's. The top management felt that McDonald's had achieved tremendous brand success in India and there was nothing extraordinary about accumulating losses and that McDonald's India was not a unique case as the company was making losses similarly in many other markets.

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What McDonald's is doing to increase the footfalls and increase the store utilisation?

McDonald's menu is recognized world over for its affordability. A McDonald's store gets an average of 3,000 walk-ins every day in each of its 165 restaurants in India. Typically, a customer visits a McDonald's store twice. The key is to make that customer visit the McDonald's store a third time so that the existing store space and rent can be leveraged further. Earlier attempts by McDonald's to do so included adding breakfast to its menu, longer hours of service, setting up of kiosks etc. Eventhough breakfast was on its menu globally, it was on launched on a trial basis in India.

However, McDonald's had a 'snack joint' tag in India. To overcome this McDonald's added a lunch and dinner menu.

McDonald's Pricing Strategy in India

In September 2009, McDonald's announced reduction in prices by almost 25% for its lunch and dinner menus. Prices for its extra-value meals like McVeggie and McChicken were reduced to Rs. 85 and 95 respectively from Rs. 110 and 120 respectively. Typically a meal consists of burger, French fries and soft drinks. This strategy was surprising as it came at a time when food prices were increasing by the day. Cutting prices in such times did not make sense. But the management in India was convinced that tweaking the prices of it combo meal offering would help customers prefer McDonald's as a lunch and dining destination as well.

P&G’s Leadership Case Study – ‘Build From Within’

Succession Planning at P&G

"If I get on a plane next week and it goes down, there will be somebody in this seat the next morning,” - A.G. Lafley, P&G’s CEO as quoted in Fortune magazine.

Lafley took over Procter & Gamble (P&G) as CEO in 2000 and since then has been very successful in increasing sales by 110% and tripling profits. Does he have a succession plan? If he does he has not disclosed it yet and is certainly not overly concerned judging by his above statement. What is the reason? Does P&G have a strong leadership development program

P&G’s Leadership Program and Proctoids

P&G’s leadership program is called “Build From Within”. The program helps track the performance of each manager in a very detailed manner. The program ensures a manager is ready for the next level. According to CEO Lafley, “Each of the top 50 jobs already has three replacement candidates lined up.” Lafley himself oversees the development of the top 150 employees.

At P&G, a business school graduate is recruited at an entry level position. This position offers him/her a major window of opportunity for becoming what's known in the company as a Proctoid (less than 5% of hires come from the outside at a later stage). Proctoids discuss their business goals, their ideal next job, and what they've done to train others during monthly and annual talent review sessions. The recruits select a career track depending on his/her goals and P&G's needs. They are then trained to work in different countries and businesses. This helps build deep bench strength. So when a position is open, P&G has a pool of employees who are ready to move in to the new position in a particular country or region. According to Lafley, "We can fill a spot in an hour, that's the beauty of the system."

Training and Internal Reputation

P&G has a training center near to the CEO Lafley’s office where all executives teach and hold weeklong "colleges" for employees entering new levels. An executive’s willingness to train others ultimately determines who advances. Moheet Nagrath, head of human resources at P&G believes, “If your direct reports aren't ready, neither are you. A manager who isn't good at developing others doesn't attract the best talent [to be on his team]. Internal reputation is crucial.”

Advantages and Success Factors for the program

• Loyalty
• P&G rarely hires from outside, promoting talent from the inside
• At P&G, less than 5% of hires come from the outside at a later stage
• P&G maintains a comprehensive database of its 138,000 employees. An employees’ performance (stars) are tracked carefully through monthly and annual talent reviews.

Disadvantages

• Promoting from within can build well oiled teams that act quickly but at the same time builds an insular culture where most people think in similar ways. This can hinder innovation.

Related Case Study:
Download Business Strategy Case Study on Restructuring at Unilever - Path to Growth Strategy (PDF)

Corporate Social Responsibility (CSR) and McDonald's

The chief electoral office of Delhi, India decided to launch a series of advertisements in April 2009 at McDonald's retail outlets to encourage young voters for the Lok Sabha elections - the largest ever democratic process in the world. McDonald's which has around 155 restaurants in India (including 35 in Delhi) is keen on the idea and considers it as its social responsibility to make people aware and encourage to participate the democratic process.

McDonald's in India

McDonald's was launched in 1996 in India and has established itself as the family's favorite quick-service restaurant. According to estimates, McDonald's stores have an average of 2,750 walk-ins in each of the 155 stores. India counts itself amongst the top 10 per cent of the busiest markets for McDonald’s anywhere in the world. In India, McDonald's had decided not to launch its beef-based core product - the hamburger - so that it didn't hurt religious sentiments of the Hindus.

The Strategy - Building awareness among citizens

The strategy is simple. Delhi has approximately 40 lakh electors between the age group of 18-29. McDonald's is popular among the younsters and catchy slogans and messages will encourage them. McDonald's India wants to support the task of building awareness amongst citizens and remind them of exercising their right to vote.

Related Reading:
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Restructuring challenges at electronics giant Sony

In December 2008, Japan's Sony Corp. - the world’s second-largest consumer electronics maker - announced a few restructuring measures primarily aimed at changes in management and manufacturing. These include:

• A $1.1 billion savings plan in its electronics division
• Cutting 16,000 jobs
• Pulling out of businesses and limiting investment for savings of almost 100 billion a year

Analysts believe the company needs more and bigger restructuring measures to improve its slowing sales and inventory pile-ups. Another challenge Sony has been facing are cultural clashes between its Japanese, US, and European operations. Restructuring moves would imply changing many of its long-established business practices (the Japanese business culture which is so deeply connected to its social culture). The restructuring plans include shutting down of some of its major divisions in its Japanese domestic operations. How Sony would go about facing these challenges and are more restructuring moves imminent amidst the financial crisis and lower consumer demand? Sony's first non-Japanese CEO, Sir Howard Stringer sure has his task cut out.

Nokia's new Brand campaign and Manufacturing in India

Nokia in India - New Brand campaign

In October 2008, Nokia, the world's largest mobile phone maker launched a brand new campaign with the tagline 'It's not just a phone, it's who we are'.

Nokia selected Priyanka Chopra, former Miss World and current Bollywood actor, as the Brand Ambassador. The company believes the young actor's brand association will create a deeper connection with its young and style-savvy consumers and the new ad capmpaign featuring her will represent style, modernity and individuality. The TV campaign would be integrated with other consumer touch points like print, outdoor, radio, online and digital media.

Nokia's other brand ambassadors include Bollywood's leading actor - Shahrukh Khan. The company has already planned to bundle exclusive content featuring the actor for handsets sold in India. His movie 'Om Shanti Om' movie was recently bundled in Nokia N96.

New Indian factory

In October 2008, Nokia Siemens Networks, the second-largest network gear provider in India after Ericsson, announced that over three years it will invest $70 million in a new Indian factory in Chennai (south of India). The unit will make and distribute mobile communication equipment. Nokia Siemens already has a manufacturing facility in Kolkata in eastern India, where it makes fixed network equipment.

Also, in October 2008, Nokia’s handset manufacturing unit in Tamil Nadu (with over 8,000 workers) reached production volume of 200 million handsets within just three years of starting operations. Around 50 per cent of the production is sold domestically and the rest is exported. Nokia has two manufacturing units in China.

Nokia has a 62.5% market share in India while Samsung, the second major player with Aamir Khan (lead Bollywood actor) as the brand ambassador, has a 8% share.

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