For Procter & Gamble, those cloths are important, because that is where P&G makes its money; the mop itself is just a delivery system for the cloths. The idea of constant sale of disposable attachments is a golden one, used long ago by IBM with its computer punch cards and still used today by Gillette with its razor blades. Gillette will happily give you a razor, because you cannot use it without purchasing the blades. Those blades, which can cost a dollar apiece, need to be replaced every week or so. No matter how bad the economy, everyone wants to look good, so they will buy razor blades.
Every industry looks for punch cards and razor blades. Swiffer has found them. Despite all the competitors in the marketplace, and despite the fact that all the cloths are interchangeable, Swiffer is still the category’s leader. People Swiffer their floors, they don’t Pledge them. Swiffer is a great product. It is also a great brand.
Procter & Gamble is a company that, through its history, has understood strategic growth. By strategic growth, we mean a balance of external growth and internal organic growth. To be strategic, every external purchase and internal development needs to be consistent across the company’s core mission. In 1837, William Procter and James Gamble founded the company in Cincinnati, ohio, by making candles and soap. As the company has grown to be a $51.4 billion company in 2004, almost every product it produces finds its roots in candles or soap. Oddly enough, Swiffer, Pampers, and Pringles all evolved from candles and soap. Candles and soap were natural companion products due to common ingredients—lard and beef tallow from the meat-packing industry.
Oil was used in the manufacture of soap, and in 1901, P&G set up the Buckeye Oil Company for its oil, primarily cottonseed oil. It began selling Crisco in 1911 after acquiring U. S. rights to a hydrogenation patent from Wilhelm Normann. The fibrous material left over after the oil was extracted ended up as the basis for the cellulose sponge. Its absorbent qualities were later extended to Charmin toilet paper. Diapers were an extension of the absorbent and soft qualities of Charmin, and thus came the internal innovation in diapers with Pampers disposable diapers in the 1950s. Toilet paper is a type of thin and absorbent paper for use on the body, so Bounty paper towels were another extension. The absorbent qualities of Bounty combined with some innovative chemistry became the basis for the Swiffer cloths.
At times, Procter & Gamble has purchased outside expertise by acquiring other companies. For instance, P&G bought the William T. Young Company, which made Big Top peanut butter. P&G had already been a supplier of oil stabilizers to peanut butter companies and already had part of the expertise needed for its production, but its acquisition gave P&G additional expertise and machinery to produce its peanut butter brand Jif, which it has sold since. An obvious extension from its use of oil for food is the development and production of potato chips. In 1968, P&G introduced Pringles potato chips, a product that was developed in-house. A less obvious direction was the 1999 acquisition of Iams dog food. Again, P&G already had related expertise, because dog food includes fat. The purchase of Iams was strategic; P&G noticed it could use that domain for additional product introductions that would use expertise it already owned for human products, like tartar-control dog food.
Over its more than 160-year history, P&G has developed innovative brands and purchased other established brands based on analysis that stems from the initial core products of soap and candles. During times of acquisitions, P&G has not been immune to or afraid of growth through purchase of other companies or product lines. While Westinghouse was buying CBS, leaving its core instead of reinventing it, a path to its eventual demise, P&G stayed true to its mission.
P&G also has developed new products from within its extensive and talented R&D group. In recent times, in particular, under the direction of CEO A. G. Laffley, the drive for internal growth has been dominant. Laffley and P&G recognize that innovation is today’s differentiator.
This commitment by Laffley to holistic “360-degree innovation” and complete system delivery has led P&G in recent years to develop a strong internal industrial design team, thus adding industrial design to its already strong marketing and engineering groups. The company still uses industrial design, brand identity, and product development firms for the majority of its form and interface work and even some full product development. However, the growth of an internal design team allows the company to develop and keep internal expertise on critical project initiatives with a better connection to the internal understanding of the corporate brand identity. The internal design commitment sends a clear message that the interface and communication of the product as a system are a critical aspect of innovation, a core of the company’s future. The balance of internal and external expertise is a current challenge facing many companies and is discussed further in the next chapter.
