Retail's Big Show 2012

Procter & Gamble CEO Bob McDonald is pushing the consumer goods giant for more "discontinuous innovation," meaning products or technologies that create entirely new brand categories or new capabilities, rather than just improve an existing product.

McDonald discussed his innovation outlook after announcing that Procter & Gamble would sell its Pringles business to Kellogg Co. in a $2.7 billion all-cash deal. The sale ends a bid to sell Pringles to Diamond Foods, a proposed deal that was scuttled by the accounting scandal and executive shakeup at Diamond Foods.

McDonald stressed that the company will continue to innovate its products with refinements and extensions of existing brands. The most recent example is Tide Pods, which the company will begin shipping this month. Tide Pod puts detergent in a single-dose, disposable plastic pack that dissolves in the laundry bin, an approach that has been successfully used for dishwashing detergent.

But asked where P&G needs to improve its innovation capability, McDonald pointed to what he calls "discontinuous innovation." That could be an entirely new product, or it could be a new technology that spans products--for example, a bleach that could be used in various forms for detergent, teeth whitening, and other products. Discontinuous innovation is "something we began investing more in and reorganizing more for three years ago," McDonald said. "It takes time, but we'd all like to see more discontinuous innovation."

[ Want more on P&G innovation strategy? Read our chief of the year profile of CIO Filippo Passerini. ]

P&G won't lose innovation capacity with the sale of Pringles, McDonald said, because Pringles is the last of P&G's food businesses, so it wasn't contributing a lot to the collective knowledge from which other businesses could draw. "Pringles in many was more a receiver of ideas and technology for P&G than a giver," McDonald said.

The kind of cross-pollination of ideas that McDonald envisions across products and brands isn't easy for companies to do. Companies need to have the right culture and technology to enable that kind of innovation. P&G's IT team has worked on collaboration systems including extensive video conferencing for executives in order to enable collaboration under CIO Filippo Passerini, who was named InformationWeek's Chief of the Year in 2010, and it's looking to expand its videoconferencing capabilities to more people.

P&G spends more than $2 billion a year in research and development. It also spends nearly $500 million doing consumer research. McDonald said that R&D spending has been increasing and that spending won't be cut as part of its recently announced cost cuts.

McDonald is having lunch on Wednesday with China's vice president, Xi Jinping, who's seen as the likely future leader of the country and who is in the United States meeting with political and business leaders. P&G has relied heavily on emerging markets for growth of late as developed markets have stalled.

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