Procter & Gamble : Organization 2005 and Beyond

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Authors: Ravi Madapati,
Faculty Member,
ICMR (IBS Center for Management Research).

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Organization 2005 under Lafley Contd...

Lafley singled out progress in oral care, baby care and dish care businesses as one of the best outcomes of the restructuring initiative. All these businesses had struggled and lost market share in the 1990s but posted sales and market share gains in 2002. P&G's fabric and home care business posted 9% sales growth in 2002 on unexpectedly strong gains in case of brands such as Cheer, which recently had been offered in reduced package size and price to combat a similar move by rival Unilever's Wisk.

Sales in P&G's baby and family care businesses grew by 5% despite increasing competition from players like Kimberly-Clark. The company had dropped numerous brands in 2002 including Jif, Crisco and Clearasil that didn't fit with its global strategy. By early 2003, P&G had finished reviewing its portfolio of brands. The sales growth of 6% in 2003 had been the biggest gain since 1996. Another accomplishment for Lafley was enabling Crest to return as the number-one oral-care brand in the US, a position it had lost to Colgate in 1998.

Lafley believed a key enabler for Organization 2005 had been Information Technology (IT). The company's IT spending had reached $1 bn in 2002 and was increasing. Organization 2005 had incorporated several IT initiatives, including collaborative technology to facilitate planning and marketing, business-to-consumer E-commerce, Web-enabling P&G's supply chain, and a data standards and data warehouse project that would deliver timely data to desktops worldwide. The company had decentralized its 3,600-person IT department so that 97% of those employees now worked in P&G's individual product, market and business teams, or were part of global business services, which supported shared services such as infrastructure to P&G units. The remaining 3% worked in corporate IT. Lafley said⁵:

"I have made a lot of symbolic, very physical changes so people understand we are in the business of leading change."

Conclusion

Organization 2005 was expected to be concluded by June 2003. After the ouster of Jager, Lafley had shifted the focus from new initiatives to advancing the market share of big brands in developed markets. Lafley believed that overall, Organization 2005 had brought the much-needed discipline to P&G's global marketing efforts. But he believed a lot of work remained in convincing people that the experience in running the program had a broad application. Lafley believed that P&G could innovate and cut costs while growing profits by double digit margins every year. But Lafley realized the same basic question that had prompted Jager to start Organization 2005 remained: With already dominant market positions in mature markets, how much more growth could P&G really generate?

5] AG Lafley, The Best & The Worst Managers, Businessweek, Special Report, January 11, 2003.