Q: Being innovative does not mean inventing. It means being open to adapting your business model to a changing environment. What is the “language of innovation” in your view?
Hans Dewaele: Innovation has many aspects to it. The one which comes first to the people’s minds is about something that’s totally new to the world. But that’s the rarest innovation. That kind of innovation doesn’t happen so often, be it in our industry or in other industries. An iPhone is not an innovation, it’s an evolution. Other phones had come before it in terms of smart phones, but it took it to the next level. iPad is also an evolution of the phone, making it bigger.
When we look at P&G, there is a lot of innovation that we brought throughout our history, with new-to-the-world type of inventions. They all had the purpose to try to improve the lives of the consumers, to make them more comfortable and easier to do day-to-day things. One of the first things we came up with was “Ivory” soap. The selling line in the 1890s was: “It’s so pure it floats.” The purity of soap was quite new, as opposed to the soap that was homemade by people in those days.
We’ve also come with detergents. What we take today for obvious because we’ve all grown up with, which is powder detergent, is something that was invented by P&G. When it was brought to the market, it revolutionized how people were doing their laundry. I’ve seen people, in the developing world, who were still using homemade soap to do their laundry and beating it up in water to get the stains out. When you see the hard labor that most of the time women have to go through, you understand the concept of making consumers’ lives easier behind innovation.
Q: How does P&G approach innovation?
Hans Dewaele: Innovation is about identifying a need, developing a new product or adapting something, bringing here something that has worked somewhere else. I was here 16 years ago, to help establish the operations of P&G in Romania. Many of the products we brought at that time were new to Romania, although not new to the world. That’s innovation for Romanian consumers. It’s part of the globalization process.
Innovation goes further than bringing new products. It is also about the systems and the processes that you bring. For example, in the 1930s, P&G was the first company to establish brand management. That has been a revolution for the industry. Every company now talks about brand management. It basically meant putting one single person as a general manager for a brand, responsible for it. He had to own it and drive it. That’s now normal practice, it’s standard.
P&G was one of the first companies to provide shares options to its employees in the US in the early 1900s, to help employees be part of the success of the company. That is also innovation.
Innovation can also be simply adapting something that exists somewhere else successful and bringing it here and making it also successful. As an example, when I first came here, in the early 1990s, I came from P&G in Saudi Arabia. One of the successes we had there was door-to-door sampling: taking small samples of our products, knocking at doors and leaving those samples behind with the consumers so that they could try them and, hopefully, be convinced about their performance and buy them.
When we came here, we did the same. But we had to adjust it to the local environment. We also had to know on doors, but first we left some leaflets behind on the doors because people were skeptic. Bringing that type of flexibility was also innovation.
Q: How has people’s behavior regarding FMCG consumption changed during the last few years?
Hans Dewaele: Consumers’ habits evolve, so our job is to stay ahead of them. They have become more sophisticated, because they are used to using a lot of our products. Therefore, they became more demanding in terms of what they want and of the performance they expect in return. They have also become more sophisticated in terms of the choices they have, as we are not the only player, and more information oriented.
If you look at consumers now, before making a decision, they will research a lot. They will try to get opinions from friends and on the internet, in forums or on Facebook.
That is a very new element that obviously didn’t exist 15 years ago.
Q: How can a company take advantage of this trend?
Hans Dewaele: It’s important to recognize these trends and be there, where the consumer expects you to be. If you look on Facebook, we have specific pages for a number of our brands: Pampers, Gillette, Always. We use these pages as an opportunity for our consumers to go and look for additional information or as a forum to exchange information amongst themselves. If you are not there, they will obviously be disappointed and they will go for information that they can find. And that could be a competitive product.
For us it’s important to recognize those trends and be there. That’s what they expect from us. What has changed a lot over the years is that consumers have become the owners of the brand. If they are not happy with a brand, they will tell you. They will share their opinion. They will give you feedback. They feel like they own the brand. It’s almost like it’s gone out of your own hands.
You have a successful brand if the consumers start caring so much about it that they come back to you and say: “We like that”, “We don’t like that”, “We want this to change” and so on.
Q: Has P&G used clients’ feedback to adjust its strategy on certain products?
Hans Dewaele: There is a continuous feedback cycle that goes on. Some of the feedback we use is to adjust, for example, the sizing. If you come with 2Kg detergent and people want bigger sizes because they don’t want to run to the store every so often, this is something we will take into account.
When it comes to product improvements, we like to listen to our consumers to understand, for instance in hair care or in beauty care, what are kind of variants they use today and what they would much rather have in terms of in terms of product improvements or performance delivery. In the old days, we used to do this is through consumer research. We used to knock on doors and ask consumers a list of questioners. We still do that now, but we have discovered this opportunity to get direct feedback from a much larger audience through those internet vehicles.
These are very powerful tools. In terms of communication, the most powerful tool still remains television advertising. But it’s not the only one anymore. Now internet is becoming very important as a medium, more so among younger people. Younger people spend more time on the internet for information sharing and searching on data. That’s why we need both, because they are complementary. Television is just feeding information to a viewer. Internet provides for interaction, it goes both ways.
Q: Has the faster-changing environment forced P&G to change itself and take quicker decisions? How?
Hans Dewaele: The pace of change has changed at a global basis. It used to take us three to four years to roll out an initiative. In the early 90s, it would take us four years to launch a brand like Pantene shampoo on a global basis. Now we can do it in less than one year. That’s how fast it goes. Everything is much more standardized in terms of product, packaging and sometimes in even in terms of advertising.
Consumers are more demanding in terms of the improvements they want. At the same time, we also try to localize more. When we have a menu of products, we don’t bring everything. Because some products make sense for some parts of the world and may not make sense here. Out of the menu we will choose what’s relevant here.
Speed has really improved through the fact that we are standardizing more. The industry has evolved like that over the years. That’s part of the globalization in general, it’s not just in the FMCS business. I suspect the speed will increase even more. If you want to stay competitive, you will have to be able to stay ahead of your competitors in terms of what they are bringing, or in terms of the ever changing needs of the consumers.
Q: How does P&G organize its teams with respect to innovation?
Hans Dewaele: I think innovation is pretty much engrained in P&G in how we operate in general. We try to stay very close to our consumers, but also to our customers, the retailers. To understand how they are evolving by continuously talking to them. We want to understand how they see the dynamics of the market and how we can help them. The same goes with consumers.
We have that to a degree in our DNA. We have teams that are focused on customers, on retailers, and we have teams focused on how consumers evolve. Their role is to look at the market, at the environment they operate in, to talk to consumers. Very often we do “shop along.” We ask consumers if we can follow them when they do their shopping, so that we understand how they look at the shelf, what they do when they see packaging: do they read it or not?
This is something that we do at all levels. Even I do it. I go out there, stand by the shelf and I observe and I ask people questions. Because that’s how you learn if something that you have is working or not and needs to be improved.
Q: How would you advice other managers to organize their teams in order to obtain the most innovative products/services from them?
Hans Dewaele: Innovation is the responsibility of everyone. You can’t dedicate somebody to just innovation, except for fundamental research and development (R&D), like in the pharmaceutical sector. That’s really very different and it happens in P&G as well. We have people who are working in laboratories and who are researching the technology behind our products and see how we can things technologically better.
It all has to meet a consumer need. You can come up with the greatest invention. If the consumers have no need for it, it will not be successful.
The innovation has to be sourced by everyone, primarily by going and asking, learning or observing what’s important for your clients. I’m talking about FMCG. For me, what’s important is the end consumer that goes and uses my product. If you are in a logistics services, obviously your customer is a different person, which implies a different setup. But I still argue that the best way for innovation is to go and talk to the people that you want to serve. They are the ones who want to see improvements in the way they get serviced.
Q: How do you motivate your employees to be innovative?
Hans Dewaele: Innovation is part of the success of your business. The motivation comes from the success. People who have been able to bring innovation and execute it in a superior way will have a successful business. That success will be obvious to the people around them, to their management, and they will be awarded for it. First of all, they will feel good about the fact that they win and their management will consider to either promote them or to give them an international assignment where they can learn even more.
There are various ways of motivating people by rewarding them for how they grow their business. At least in our field, a lot of the growth will come from the way you bring innovation to the business.
Q: What funds does P&G allot for innovation?
Hans Dewaele: The R&D department is managed through our headquarters in Cincinnati, where the company is based. When we come with new marketing ideas and new product launches, the amounts that we dedicate depends on understanding in detail how much advertising we need for a certain brand. Depending on the level of innovativeness that we bring with a product, we know what financial effort we need to make.
Q: How does P&G manage its cross-border teams?
Hans Dewaele: We have organizations like ours, which are very much in tune with the local market, with understanding our local consumers and customers. We also have teams that are more centrally located, in our case in Geneva, who have a more regional responsibility for brands and for categories. They try to bring learnings from other regions to us. They are bringing innovations and ideas from the other end and try to marry what consumers tell us with what they see as solutions that have worked in other countries.
It works collaboratively. That can only be successful if you have teams that are very international. Our teams in Geneva consist of people from pretty much everywhere in the region. We also have Romanians working in Geneva on a number of categories and brands, with a regional responsibility.
We try to have this international diversity within teams because it enhances collaboration and openness of thinking. Everybody looks at a problem in a different way, depending on our background and history. Through discussing it, you always end up with unique solutions that a single person or a group of people from a single background could not necessarily have come up with.
We are in contact with these teams on a daily basis. The means of contacting are multiple: email, telephone, video conferencing. We also have teams coming to visit us almost on a weekly basis, mostly from the headquarters in Geneva, but also from other countries. They come to see is things are working here like in other locations or if something can be improved.
P&G has become much more international. Every country used to be like an island on its own some 15 years ago. We had an MDO – market development organization – which was almost like an individual unit. Everybody was developing their own plans and not really talking to each other. Now, with globalization, there is much more centralization in a positive way. It’s centralization of learnings and of expertize.
If we face a problem in Romania, the first question is: have we checked if the solution is somewhere else within our company? Before we would have tried to sort it out by ourselves, often through a trial and error process.
Q: Which are the particularities of Romanian consumers?
Hans Dewaele: They are very conscious about value. They appreciate brands and the trust behind those brands. They have also become more conscious about the price they are willing to pay for the degree of value they receive. They are becoming more value-conscious and therefore they are more willing to take risks and try newer products.
That is something evolving with the Romanian consumers, more than it had before. They are less risk averse. Consumers in Central Asia, where I was before, were still very much hung up to certain brands and not taking any risks. The trust element was overriding. Here consumers have evolved, it’s part of developing sophistication.
Consumers in the Balkan countries are fairly similar. Bulgarians also have a very low threshold when it comes to trying something new.