CIO Priorities: Procter & Gamble
By Guest Author Narayanan Raman
In this post I speak with Filippo Passerini, CIO of Procter & Gamble (P&G), one of the most reputed global consumer goods firms. Filippo discussed two salient aspects of his approach. First, he said that ideally, any IT endeavor should start from the IT strategy layer of the IT stack, as this is the layer that maximizes business value. If you do not have an IT strategy that is in alignment with the overall business strategy, then the lower layers of the IT stack, such as like applications and infrastructure, do not even matter. Second, Filippo said that deciding what is core and non-core to an organization and innovating on the core, value generating initiatives are key to formulating a good IT strategy.
For this very reason, P&G outsources most of its infrastructure management to leading players in this field. Doing so helps P&G in two ways: by lowering costs and improving service. For example, P&G outsources most of its data center management to Hewlett-Packard (HP) and network management to British Telecom. In addition to outsourcing infrastructure management, P&G is making strategic investments in this layer. Over the years, Filippo has focused on a video collaboration strategy through high-quality video collaboration rooms, not only to lower costs, but also to enable global teams to be more collaborative and work faster and better.
Having taken care of the infrastructure layer, a non-core area for P&G, primarily through an outsourcing strategy, Filippo uses digitization, visualization, and simulation capabilities to create value in one of the core areas of P&G’s business, product leadership. A typical new product development cycle consists of mock-up creation, gaining customer feedback on the product mock-up, its packaging and other attributes, and incorporating the feedback into the next iteration. Each iteration could take about seven weeks, with the product mock-up being built physically. After going through several iterations, the product is finalized, built, and taken to market. Customers are then invited to give input after-launch aspects such as placement of a product on a supermarket shelf. This process is typical and has been in place for decades. In order to make this process more effective and efficient, P&G is now harnessing the power of virtual reality, using virtual product mock-ups and virtual supermarket shelves. This helps to reduce iteration cycle times from seven weeks to days or probably hours. This approach not only helps to decrease the iteration cycle times, but also helps to evaluate various permutations and combinations of mock-up attributes. The ability to run various permutations and combinations helps the company to understand customer requirements better, which leads to better product development and product positioning strategies, which is of course core to P&G’s business.
Filippo discussed three trends that he is seeing in the consumer packaged goods industry. First, consumers and employees are expecting more one-on-one connections, and technology is helping enable better consumer interaction and employee collaboration. Second, virtualization (which in this context refers to virtual reality and product simulations, not the virtualization of IT infrastructure) is becoming fundamental to gaining a competitive advantage, increasing the speed of product innovation, and decreasing time to market. This trend means that some of the the physical work processes in the consumer packaged goods industry must be remodeled and virtualized. Finally, there is in general an increased push to use newer technologies and tools to increase P&G’s efficiency and effectiveness.
To sum up, Filippo discussed the concepts of IT–business alignment and IT strategy and the importance of differentiating core and non-core activities in formulating an IT strategy, points that could be applicable to any industry. For the consumer packaged industry specifically, Filippo helps us to understand the importance of harnessing virtual reality to decrease time to market and gain competitive advantage through product leadership.
This segment is part 8 in a 8 part series
Jump to part: Accenture, Deloitte Consulting , MindTree, Burger King, City of Miami, BMC, Xerox Corporation, Procter & Gamble
Using virtual reality is really an innovative approach to compress “New Product Development” lifecycle.
However, am curious on implementation. Some thoughts are – Do companies invite consumers to such virtual store? What is incentive for them to participate? Also, are there any success stories of usage of virtual shelves in the industry?
Regards, Rajesh
P&G invites customers to their innovation centers, which house digitized, simulated versions of their new product offerings, for their feedback … But my gut feel is that such simulations (well, at least some parts of it) could soon take place over the web as well, once we are even more confident of the security and speed aspects of the internet …
Regarding incentives, I believe there are many ways to incentivize customers … product giveaways, coupons, etc … Not sure of the exact route being followed by companies today …
Success stories … I believe P&G, with their ability to reduce new product development cycles from weeks to probably even hours, is a great success story … New product development and its time to market could have never been so fast without virtual reality …
With respect to virtual shelves, I do not have specific data on how much they contribute to success of a product launch … But I am sure they would be very crucial to a successful product launch …
For example, Product packaging and placement strategy may be totally different in a mom-and-pop store, a supermarket store and a wholesale store. How should a product’s packaging be? What size? What color? What shape? Where should a product be placed? Is it safe to place it against a competitor’s product?
Using virtual reality to try out these permutations and combinations would definitely help come up with a better strategy, faster …
It’s interesting that P&G is embracing virtual representation to model products, though this is a logical extension to time-honoured clay modelling or dummy pack approaches. I notice though that there’s no mention of running simulations of product manufacturing, distribution or retailing. The focus stays on customer reception – and it’s hard to argue with that. But P&G may be missing a trick here.
It’s not too difficult to transition the statics of business (ie goods) to the virtual realm, but I don’t find many people outside of finance and public transport using virtuality to explore the dynamics of business (ie services and service). If we’re serious about matching IT strategy to business strategy, then let’s hope that leaders like P&G start to make more use of simulation for the process side of life.
There is so much more to do in using virtual vehicles to connect better to consumers, but P&G is already doing some, using both central locations (virtual homes and labs) and through web platforms. I am not sure that the company is leading the pace on this front, but certainly taking advantage of such technologies to avoid both unpleasing and overpleasing consumers with elements that they are not willing to pay for.
Good article, Narayanan!
Great article Narayanan!
I have been a simulation practitioner for 19 years now and was researching how P&G is using simulation. The extent of their use is very broad: from the physical properties of their product design, to the layout of their facilities and equipment operation, to the design of their supply chains and business rules. The virtualization of the customer experience in retail environments as a means of shortening the product design to shelf life cycle makes a lot of sense. I might ask the question, how long will it be before we dress our avatar up to go out shopping only to drive to the grocery to pick up our pre-selected groceries?