Innovator Interview: Mark Hausfeld, Procter & Gamble

Mark Hausfeld Innovation Manager, Global Business Services Procter & Gamble the innovator’s interview The Innovator’s Interview highlights unique innovations from a wide range of industries, and is an opportunity for futurethink and some of today’s leading innovations to share insights and ideas. May 2009 Turn innovation into action | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

the innovator’s interview 2 Mark Hausfeld the background This Innovator Interview series highlights leading innovators at Fortune 500 companies. In contrast to past interviews, focusing on a single innovation, this series examines the state of innovation at global organizations. We spoke with both innovation leaders and practitioners, within varying business units and organizational structures, across a broad range of industries both for–profit and not–for–profit. The interviews offer a unique insider’s view into the world of innovation—what makes it work, what holds organizations back, and what critical advice new innovators need to know to be more successful with innovation overall. the interview Mark Hausfeld is the Innovation Manager within Global Business Services at Procter & Gamble. He shared with us thoughts on how ‘innovation inside’ is as critical as external innovation, why nails are more important than hammers, and what metrics really matter. Tell us a little bit about your role at P&G. Where do you sit in the organization? P&G has four main business units or groups. One group consists of Global Business Units (GBUs). This organization basically owns our brands and the development of products that we sell externally and commercially. Next, there’s the Market Development Organization (MDO). That’s basically the on-the-ground sales organization which sells to our various retail customers, such as mass merchandise retailers, drug chains, etc. Then, we have Corporate Functions, which encompasses our corporate support areas such as legal, tax, audit, accounting, external relations, etc. Finally, there’s Global Business Services (GBS), which is where I sit. GBS was created in the late 1990’s as part of the larger, company-wide reorganization called “Organization 2005.” This critical reorganization shifted the company from a country-by-country hierarchy to a more holistic, globally structured organization. So, instead of having Pampers managed differently in each country, we began managing Pampers as one global brand. And with this reorganization, we now had to create – and support – global information systems for our different brands across the countries we operate in, and provide shared services throughout the organization. And that’s how Global Business Services (GBS) was started. Within GBS, I lead the Solutions-Space Network, which is a network of innovation labs within the GBS group. These labs are actual physical spaces designed to inspire and encourage ideation and innovation. We have one here in Cincinnati, one in Geneva, Switzerland, and there are also several mobile Solutions-Space versions, which we ship as needed around the world. Anticipate. Innovate. | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

the innovator’s interview 3 Mark Hausfeld So your function is to facilitate and support – through the use of technology – innovation on the inside of P&G. Essentially, you’re building an innovation capability internally in order to allow the other “Some organizations say: business units to do their job. ‘Let’s find all the cool Yes and no. Yes, in that most of the consumers of our GBS services are internal P&G employees – that’s 130,000 strong. But, we also take technologies and ideas out clear direction from the from the GBUs and MDOs on what they’re there, and then we’ll go find seeing in the market, and how they want to get closer to the consumers to drive the first moment of truth (the reaction to a P&G product on a problem that they solve.’ shelf) with them. So, we don’t build commercial products, but we help simplify the process in the other organizations to help them get We take that and we reverse innovation done. it. We say: ‘Let’s have a clear What is the biggest challenge in making innovation happen? How understanding of the problem do you help the various business units connect with customers and come up with innovative products? we need to solve.’” One of the key things you need to be innovative is to get clear on what the unmet needs of your consumers are, or of the organization that you provide services for. We constantly challenge ourselves to understand what the big opportunities out there are, and then articulate those needs in a way that can help us really drive innovation around that opportunity area. There are a couple of different schools of thought out there on this. Some organizations say: “Let’s find all the cool technologies and ideas out there, and then we’ll go find a problem that they solve.” We take that and we reverse it. We say: “Let’s have a clear understanding of the problem we need to solve.” For example, we explore: is there a way that our consumers are not interacting well with our products on the shelf? Or, is the employee being overloaded with too much complexity in the way we get things done? We make sure the problem is well-defined first, and then come up with the innovations to solve those problems. The example we use here a lot is the hammer and nail analogy. We go out and identify what the nails are and then identify and use the right type of hammer. Is it a jackhammer or a ball-peen hammer? What kind of hammer is it? Innovation happens better not with just any tool, but when you have the right tool to do the job. If the CEO were to request a progress report on innovation, what metrics would you report on and why? There are a lot of internal metrics you can use, such as how many items are in the innovation pipeline, or how many ideas have been generated. But, those metrics don’t necessarily say whether those ideas are good ideas, or ideas that’ll be taken forward. One milestone we look at closely is if an idea has passed several approval gates and made it into the portfolio. This means, “Hey, we’re going to do this and align the resources and the funding to take this all the way through to commercialization.” Anticipate. Innovate. | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

the innovator’s interview 4 Mark Hausfeld The other big one is, did it make it to market? So, did we actually commercialize it? And did we commercialize it all the way into the market, or just to a pilot test or small launch? “Corporate sponsorship and Metrics are a work in progress, but we’ve become very good at it. We leadership around innovation have a finance organization that works with us very closely to look at our measures in a variety of ways – to go beyond the obvious (such as is key. If you don’t make sales generated or ROI) and measure the attractiveness or the value [innovation] a strategic part of this opportunity. That could be measured by level of simplification or productivity savings for the employee, or for the company. Or, it of your business plan and you could be from a growth standpoint. Success along these measures increase the probability of closing the sale with the consumer, and other don’t drive that into the culture, important factors. I don’t think you’ll have a What is the importance of metrics in innovation? Should you strong innovation pipeline.” employ a lot? And at what point in the innovation process do these measurements come into play? Metrics bring discipline to the way we manage innovation and so, yes, we believe they’re extremely important. There are definitely two schools of thought on how to approach this, though. One is, “let’s measure everything.” So, let’s measure how many ideas are created, how many ideas are passed at each little gate, how many ideas have different elements. Our management wants to know which ones are we really going to get behind and we’re going to put into the portfolio, and which ones have been commercialized. At the end of the day, our CIO and corporate GBS officer is basically saying, “I want to know what you’ve commercialized and what we’ve been able to take to market, and what was the value of that to the company.” So, you can measure any number of things, but those are the main things we care about. What advice would you give to a company that doesn’t quite have the experience of P&G and is just building my innovation program? Would you approach it any differently? I believe you would. We were lucky in that we had a starting point when our group was formed. We took the methodology that we had in the product R&D space from an innovation standpoint and reapplied it for the business technology side to drive business transformations, both internal to P&G and external with our partners, along with both technology partners and our partners as far as retail customers. You always hear P&G leaders say, “Innovation is our lifeblood.” I think that key corporate sponsorship and leadership around innovation is key. If you don’t make it a strategic part of your business plan and you don’t drive that into the culture, I don’t think you’ll have a strong innovation pipeline. Anticipate. Innovate. | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

the innovator’s interview 5 Mark Hausfeld It seems that at P&G, innovation is driven both from the top down and from the bottom up. How do you get leadership committed to making sure that innovation is trickling down to the 140,000 “With this tough economic employees on the ground? time, one area where you You’ve got to put your money where your mouth is. If you look at what we invest in innovation corporately it’s very strong; and even within don’t want to decrease your an internal group like GBS, it comes to a substantial amount. So, you have to have dedicated resources and funding to allow for innovation spending is in innovation. to happen and to allow that to happen within all the employees within In fact, this is the time the company. that P&G can drive a better But you also have to allow that time within everybody’s work plan to say, “Okay, I’m empowered to make a difference. It’s up to each person marketplace for when the to be part of innovation, and we drive that culturally by keeping it front and center…in leadership communications, in the processes we set economy picks back up... up, and in our reward and recognition systems. ,. For example, the Our CEO looks to us and importance of innovation was shared right alongside our PVP (Purpose, Value and Principles) our Bible for how we behave as employees. says, ‘How can we continue to simplify and reduce cost? Given our current economic climate, there are a lot of organizations that are scared of innovation, or of investing resources in the How can we innovate in this unknown. What would you suggest as some quick wins, or easy ways for them to build momentum and show success? space?’ We use these cost With this tough economic time, one area where you don’t want to savings to continue investing decrease your spending is in innovation. In fact, this is the time that P&G can drive a better marketplace for when the economy picks back in innovation on both the up. We’re investing at the same level, or more, in innovation so that, we’re in a better position of strength, we have larger market share, we business transformation side have higher volumes, etc. And it gives us an opportunity to simplify our and on the product and in-house processes. R&D side.” But, if you’re a smaller company, it is a matter of getting that one success story and really commercializing and driving it into the organization. And we do that pretty well in GBS. If we pilot something in a small region or a small country or organization successfully, we get that in front of the leadership and say, “Hey, look at the value this is driving.” You’re focused on really simplifying and identifying areas to drive efficiency. GBS is one of the largest drivers of cost reductions for the company. Our CEO looks to us and says, “How can we continue to simplify and reduce cost? How can we innovate in this space?” We use these cost savings to continue investing in innovation on both the business transformation side and on the product and R&D side. How do you maintain energy around innovation? How do you make sure that everyone is involved and excited about it? I think part of it is the culture. One way we build culture is that we continually get the message from our corporate sponsors and our corporate leadership that innovation is important to the company. And we continually get strong messages that it is the lifeblood of how we Anticipate. Innovate. do business. It’s part of being open. It’s part of driving change. We | Future Think LLC © 2005–09 Reproduction prohibited continually ask why do we do this, how do we do this? Can we change | New York NY www.getfuturethink.com

the innovator’s interview 6 Mark Hausfeld it? Can we make it easier? I think the other part is that our people are proud. P&G hires some of the greatest people out of the universities. And when you have those types of people and they’re an A-type person in their DNA, they want to their innovation initiatives to be successful. And so, visibility of those ideas and those innovations to their senior leaders is something that excites everyone. Would you say that Connect & Develop (your external partnership effort to drive innovation) is similar to crowdsourcing in a sense that it lets a large group of people on the outside shape ideas, or is it more in terms of having a solutions network of experts out there ready for different problems that may eventually arise? It’s a little bit of both, because if you have an idea for P&G as just a consumer, you can go to the Connect & Develop site and suggest it. On the GBS side, we allow a lot of our key partners to help us shape what the solutions look like. What would be your single biggest piece of advice you’d have for another – either an individual or an organization that’s trying to get an innovation effort going? It still has to start at the top, I think. It’s imbedded in the corporate culture and it’s very visible. Rather than a behind-the-scenes discussion, it’s an outward discussion of innovation within the company – and to the street. If you don’t really have that top sponsorship and support, it’s going to be very tough to get an effective innovation organization off the ground. Second is getting those quick wins, making sure they’re visible to the leadership, and making sure they’re commercialized well so that they are adopted well within the organization. Just what makes someone good at innovation? Do you think that having this framework and having this organization allows anybody to build the right skills and build the right mindset? Or do you think that innovation is something that just some people are good at and others are not? It’s a hard question, because my background’s accounting, and I’m in innovation now. So, you can’t get more different than that! We define innovation broadly in GBS…IT innovation, innovation to make our workplace more sustainable, innovation to help us “reinvent the way we work.” With a scope this broad, you need people with different personalities and with expertise in different areas to make things happen. If you have people who are just left-brain thinkers or who are just right-brain thinkers, you’re probably not going to get much done. I think any person can be a valued contributor to an innovation organization. It’s just a matter of knowing your role within that group. Anticipate. Innovate. | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

the innovator’s interview 7 Mark Hausfeld What can you learn from successful innovators like P&G? • ‘Innovation inside’ is as critical as external innovation: How much time are you spending on internally- focused innovation vs. externally-focused innovation? Are all the groups in your company – even traditional ‘cost centers’ – innovating? • Find the nails, then get the right hammer: How much time do you spend understanding the root causes of the problems you’re trying to solve vs. simply brainstorming and coming up with new ideas? • Establish metrics to monitor results and areas of improvement: Do you have a set of established metrics for innovation? How do you see these metrics evolving or improving over time? To learn more about the research, tools and training you need to better anticipate change and move innovation forward, visit us at getfuturethink.com. Anticipate. Innovate. | Future Think LLC © 2005–09 Reproduction prohibited | New York NY www.getfuturethink.com

Innovator Interview: Mark Hausfeld, Procter & Gamble

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