Jun 25, 2018
The One Decision P&G Made That Transformed Their Industry Forever
When the first boxes of P&G’s Tide detergent went on sale in 1946, it was the first synthetic detergent that could deep-clean clothing—removing mud, grass, and mustard stains “without making colors dull or dingy.”
Before Tide was introduced, all soaps were “natural” and made by heating animal or vegetable fats with water and an alkali base. The benefits of a synthetic detergent that makes “white clothes look whiter” were so apparent that Tide outstripped all brands in the market and became the number one detergent in 1949. In the wake of Tide’s entry to the market, P&G would “no longer be a soap company” but “would become an industrial corporation with its future based on technology,” with the number of technical staff tripling that of the pre-Tide year of 1945.
But inside P&G, a convulsive worry over research on synthetic detergent had historically been pervasive. Managers feared that the new products might cannibalize their much-cherished Ivory soap.
Yet, Chairman William Cooper Procter, the last family manager of P&G, was a staunch supporter of the work on synthetic detergents. In a memorable remark addressed to his staff, he said, “This [synthetic detergent] may ruin the soap business. But if anybody is going to ruin the soap business, it had better be Procter & Gamble.”
Management doubled down on its investment, and the technical center at Ivorydale effectively became one of the first analytical labs in the field of consumer goods. A family firm whose founders stirred cauldrons by hand had now become an enterprise built on three knowledge foundations: mechanical engineering, consumer psychology, and organic chemistry. And it was that combination—the totality of three knowledge disciplines—that had created the unstoppable Tide.
To an outside observer, one form of managerial behavior that was salient throughout the long history of P&G was apparent: the willingness to embrace self-cannibalization.
Resistance to this counterintuitive strategy is natural. Managers often fear that a company’s new products and services with lower profit margins may directly cut into the sales of existing products.
Money should be invested in products that are clearly most profitable without lowering overall profitability. But to reference a Steve Jobs almost cliché, “If you don’t cannibalize yourself, someone else will.”
As I argue in the book copycat competitors who are more than happy to take on the challenge., from P&G to Novartis, from Apple to Amazon, forward-looking incumbents recognize the need to cannibalize their own products rather than leave them to
Originally published on Quora.
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