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Feeding The Pipeline


Procter & Gamble uses IT to nurture new product ideas

By Stephanie Stahl and John Soat
InformationWeek
February 24, 2003 12:00 AM (From the February 24, 2003 issue)

They're spoken of in almost reverential tones as the Two Moments of Truth: That moment when a shopper decides what product to purchase, and the one when the consumer first puts that product to use.

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We caught up with CEI's CEO D. Raja to talk about the state of the custom development market, what CEI's role in it is and also about the entrepreunerial nature of the Pittsburgh PA market.
Robert Dixon takes the Two Moments very seriously. "They're our primary reason for being," he says. Which would make sense if Dixon were in sales or marketing. But he's VP of IT for Procter & Gamble Co.'s baby, feminine, and family-care business. And he's talking about the role of business technology at the $40 billion-a-year consumer-products manufacturer. Around here, the test of IT is whether it helps build a better diaper.

Somebody at P&G is doing something right. For its fiscal second quarter, ended Dec. 31, the company reported a 15% increase in earnings, to $1.5 billion, on a 5.8% increase in revenue, to $11.0 billion. While company watchers ascribe much of that increased profit to P&G's aggressive restructuring, including layoffs, the company cites "double-digit growth in the health-care and beauty-care businesses, as well as very strong results in the baby and family-care business." Now that's a good reason for being.

Despite its stodgy Midwest image, Procter & Gamble has long been a leader in the innovative use of IT. Still, its technology reputation is built on having killer supply-chain optimization, rather than on driving another key aspect of its business: new product development. In fact, creating new products and getting them quickly to market had been a weak spot for the company, something CEO A.G. Lafley has made a top priority in recent years. As its latest financial results show, P&G's application of IT to product development is paying off.


Steve David, Procter & Gamble's CIO. Photo by Jim Callaway.

Technology people have to be brand managers, CIO David says
Procter & Gamble's IT department has about 4,500 employees, 4% of the company's population. Some 2,800 work in the shared-services group. But 800 IT staffers are assigned to the company's four business units -- health and beauty, baby, snacks and beverages, and fabric and home care -- a deliberate strategy meant to serve the Two Moments. "We've got to take tech people out of IT, make them responsible for brands or marketplaces, then bring them back to IT," CIO Steve David says.

He's talking about people such as Marta Foster, manager of IT for the global beauty-care and health-care unit. Like Dixon, Foster is responsible for the technology and strategies of her business unit's interactive marketing, from Web sites to E-mail newsletters to in-store kiosks. "We use virtual tools and capabilities from ideation to the store," she says.

One such tool is Club Olay, an online community built around the company's venerable skin-care lotion, which Foster says has about 4 million members. The Web site collects information on who customers are and how -- and how much -- they use a product. In return, the site offers beauty tips, coupons, and special offers. Foster says participants in Club Olay are 20% more loyal to the brand and that Club Olay has been "skewing younger." That prompted the company to start a beauty line, called Ohm, specifically for a younger generation that thinks of Olay as something their grandmothers used. "If we can get teens early, we keep them for life," she says.


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