Case Study: Corporate New Ventures at Procter and Gamble

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Corporate New Ventures at Procter and Gamble
Case Study: MBA601 – Group TA

Executive Summary

CNV, an already very effective team, needed to address concerns raised by its very own success, and to define its success in different ways. This case study identifies its relationship to the other business units, within the silo-like culture of P&G, as the final hurdle to clear, and suggests that the unit clarifies and integrates itself more into the other business units to achieve even greater success.

Introduction

The Corporate New Ventures unit was created specifically to solve a problem of innovation within P&G. The corporate structure of P&G has enabled incremental innovation within the specific business unit, but there were no breakthrough innovation (new brands of differentiated products, in this case). The requirement for a unit to increase the cross-pollination of ideas, and to increase the possibility of such innovations resulted in CNV in 1994.

We will quickly establish the effectiveness of CNV, and give ideas to increase its effectiveness, within the scope of this essay.

Establishing the Effectiveness of Corporate New Ventures

Before any recommendations are given to increase the effectiveness of Corporate New Ventures, we must first comment on the manner of effectiveness we are looking at.

1. Are we discussing how effective the team is at discharging its task?
2. Are we discussing how effective the team functions together?

We must first note that CNV itself is already a very effective team in both areas.

Discharging its task

These were the goals of CNV (1):

a. Developing ideas that did not fit neatly into the sector category of business.
b. Make the process of innovation more scientific, predictable and efficient.
c. Gain a better understanding of pre-market predictors of product success.

All these have been fulfilled to a great extent within CNV.

a. Handed five projects to the business sectors. (2)
b. Ultilised the three-step assessment procedure for new products. (3)
c. Created the P&G Brand Database. (3)

Team Function

What are the signs of an effective team (4)?

a. Meet their objectives.
b. Stay on schedule.
c. Produce quality work.
d. Work well together.
e. Think the workload is fairly distributed.
f. Know they are all working towards the same goal.

There were strong signs that the team is highly functional.

a. It discharged its task and fulfilled its goals, as mentioned.
b. The case did not give specifics but we may safely assume that the team was on schedule.
c. The quality of their work was so good that sectors they did not hand projects to began to show an interest as well. (2)
d. There were no signs that the team did not work well together. In fact, morale appeared to be high, and team members appeared to value their involvement in the group, as evidenced by their “enthusiasm” and the results of the survey. (5)
e. The distribution of workload was made according to the members’ preference, which definitely created a situation where the members believe the workload is fairly distributed. (6)
f. Members were culled from other parts of the company, but the process appeared to be mostly voluntary, and members appeared to understand what they are in for, as quoted from members like Chorman. (7)

Increasing the Effectiveness of Corporate New Ventures

What steps, then, should be taken within the Corporate New Ventures to increase its effectiveness? We must understand, in answering this question, that we are trying to increase the effectiveness of an already highly functional team. It’s akin to trying to get a person who had scored 95% to get 100% or even close.

In this case, we should treat the additional 5% for “perfection” as process loss. “Process loss” refers to the time a team spends attending to non-task-related issues, such as developing team norms and relationships, correcting communication errors, and solving interpersonal problems (4). It results from seven common conditions (4).

1. Individual dominance.
2. Social loafing and “free riding”.
3. Team procrastination.
4. Team conflict.
5. Groupthink.
6. Minority opinions ignored.
7. In group/out group.

It should be noted from the case study that there were no evident signs of 2, 3, 4 or 6.

Individual Dominance

There were certain signs of individual dominance within the group. If so, it appears to be slight and limited only to the appointed leader of the group – Craig. The slight dominance appears to be healthy and advantageous to the group, however, as evidenced by how he could steer the group to function according to CNV’s task and goals, setting initial groups norms8. Any tampering with the formula may actually be detrimental to the effectiveness of a group drawn from disparage sources.

Groupthink

There were certain signs of groupthink within the group. There appeared to be no questioning, and full acceptance, over the formula to success developed by Craig. His personality and ability to create a strong environment for innovation appeared to have won over the group completely to his way of thought.

His distrust of “Eureka” style of innovation is evident9. Interestingly, he was still able to create an environment where exchange of ideas was possible, creating sparks of “Eureka” moments (“They talk to each other, they share ideas, and that is how it happens.”(10)). Still, we believe he could give more moments of such control over the running of the team.

Interestingly, we understand that the team was able to come up with 5 major innovations which have since been passed to the various business units. This is good evidence that the only groupthink applies to the manner in which innovation is viewed in CNV. We feel too, that this is only a minor portion of the inner workings of the group, but would be a step towards “perfection” in the effectiveness of the group.

In/Out Group

This appears to be the biggest weakness in the functioning of the team – the fact that it has created for itself such a strong inner culture different from the rest of P&G, that it began to be viewed as a separate part of the bigger team. This could be evident from the complaints about the “enthusiasm” of the group (10), the fact that the business units were often not ready to accept their products immediately (2), and finally how the other groups erroneously view CNV as the unit for product innovation (2).

The following section will describe how the CNV can further increase its effectiveness in this area.

The Relationship between CNV and the Rest of P&G

The weaknesses in P&G (and consequently, what sets CNV apart from the rest) are many.

a. The innate non-transparency of work within the company.
b. No cross-functional interaction.
c. Unhealthy internal competition between brands (even in the same category) leading to sharing of information only on a need-to-know basis (13).
d. Not recognising the versatility of employee innovation (limited to the same sector).
e. Empowerment limited to the specified work area (14).

CNV has essentially solved three of these problems.

c. CNV shares all its information with the other parts of the company, especially with the detailed reports that comes with their innovations, and other sector venture groups approaching it for help (2).
d. CNV invites other parts of P&G to its ‘penthouse’ to communicate and talk, and in the process create cross-pollination of ideas (10).
e. CNV R&D is constantly gaining access to all sector’s technologies (apparently with strong sponsor support and understanding that they have the right to do so) and their engineers are encouraged to think of how it can be used across sectors (6).

Improving the Relationship between CNV and the Rest of P&G to Increase the Effectiveness of CNV

The Innate Non-Transparency of Work within the Company

We see the culture of not sharing with other departments continue in CNV too. Five managers from Brand, R&D, PSS, Finance and MRD led the team. It was a cross-functional team comprising of people with different competencies but it did not keep the other departments in the loop, not even kept them informed of the approach CNV was working with. This has resulted in business units not ready to take on the new projects that were handed over and to market it immediately.

Wehling himself hit the nail on the head when he spoke of the solution to this issue. The CNV would do well to include the various business units as an advisory council, and keep them informed of new developments at all times. This would create a situation where the Heads have a share and ownership over the development that would ultimately be handed by them, and allow them to prepare budget and assign manpower in advance for the project (2).

No Cross-Functional Interaction

CNV came up with an effective way of working together cross-functionally. Yet, it still kept one aspect of P&G – lack of cross-functional interaction (11). CNV has become the new unit, operating out of the traditional hierarchy, reporting directly to the top executives of the company. Its own function of working cross-functionally has, in effect, made it a function in itself. And in so doing, made it fall into the same trap of being treated as such, and being placed in a position of non-interaction.

We can tell how other units are looking to them as a function in itself, requesting for advice on how to make their own projects more successful, instead of passing ideas to CNV (2). Internal politics dictated that other business units wanted to be seen as centres of innovation as well.

Again the solution to this was hinted by Wehling. CNV has to be seen as a support function, rather than a function. Ultimately, all the innovative products would be to the benefit of the various units to which they are handed to. To this end, it should handle the following ‘propaganda’ properly.

1. Clarify the purpose of the establishment of CNV, that it was not to bring up a separate entity in the company or create internal competition but to identify unmet consumer needs (12). The CNV was there to develop the good ideas that could not be taken up due to resource limitations and, to make the process of innovation more scientific, predictable and efficient.

2. Make people realize that the company aimed to get back to P&G’s roots thirty years back, where the focus was on new products and new categories while in the recent yrs, focus was on global expansion, brand extensions and acquisitions to fuel its growth (11). This needed to be done without leaving any effect on the existing business of P&G, and CNV was the perfect vehicle for such an endeavour.

Conclusion

The CNV begun with strong leadership, strong sponsorship and team members committed to its cause. Its main concerns were external, caused partly by its very own strengths themselves. With both internal and external concerns ironed out, CNV would be able to play an even stronger role in the revitalisation process of P&G, making its target of doubling sales every ten years a possibility even as the company grows even bigger.

References

1. Whitney, D 1997, Corporate New Ventures at Proctor and Gamble, Harvard College, p. 6
2. Ibid, p. 13
3. Ibid, p. 12
4. Universitas 21 Global Pte Ltd 2004-2006, ‘Organisational Behaviour: Managing Groups: Teams’ p. 20 of 27, PDF course material for MBA601 Organisational Behaviour
5. Whitney, D 1997, Corporate New Ventures at Proctor and Gamble, Harvard College, pp 9-10
6. Ibid, p. 11
7. Ibid, p. 8
8. Ibid, pp 8-10
9. Ibid, p. 6 and 10
10. Ibid, p. 9
11. Ibid, p. 4
12. Ibid, p. 7
13. Ibid, p. 3
14. Ibid, p. 5-6