There are few companies with more powerful global brands than Gillette, and there are even fewer companies that have so successfully used innovation to increase the market strength and consumer appeal of their brands.-James M Kilts, Chairman and CEO
Gillette presents the classic example of innovation as product extension. Gillette used to make razors with one blade, then it made them with two blades, and now it has razors with three blades. That is the all-too-typical view of innovation. And there is nothing wrong with it, except at some point adding another blade is not going to make a substantial difference to how customers perceive the product. More important, this narrow view of innovation is very unlikely to create new markets and new wealth. In today’s economy, it is only radical innovation that will lead to significant growth. -Gary Hamel
Mr Kilts did the smart thing by selling his company to P&G. At the rate at which the blades on the razor were increasing they would have soon run out of space on a man’s face. With one of the strongest brands in the FMCG arena and with a proposition like “The best a man can get”, it is a pity that all they could drum up over the years was more blades, better blades, blades that move around the chin , blades that vibrate . Of course, they also have foams, gels, after shave, deo etc as an afterthought.
The Gillette approach to innovation (which started with the SENSOR in late 80s when they faced the threat from the BIC disposable razor) to me is a classic example of big bucks R&D leading to a blockbuster product. This approach is getting outdated. In sharp contrast is P&G’s connect + develop program which is actively seeking technologies and ideas from the outside world , which are relevant to its categories /consumers and which can be successfully commercialised. This is not a covert corporate effort. There is dedicated website for it. There are already 5-6 big hits which have come out of this program and come to think of it P&G with over 1000 Phd scientists has perhaps the largest in-house R&D strength within the FMCG world. This is more than a subtle shift. Every consumer goods company realises that to stay ahead of the game (in an environment of media fragmentation and big retail squeeze ) they don’t just need to Innovate faster and cheaper , but also have REAL innovation , which the consumer values enough to pay a premium for and which the retailer values enough to list it ( without asking for bank breaking listing fees) in his outlets. Imagine going to a WALMART buyer and asking for Shelf space because you are launching a new extension of an established XYZ brand, called XYZ with Aloe Vera.
So coming back to Gillette . If Gillette was truly an innovative company it would have not missed the boom in the Male grooming segment. They stayed focused on just one aspect of the male grooming regimen (shaving) while Nivea for Men, in the mass market and Clinique for Men, in the premium segment took the lead and are laughing away to the bank. Gillette’s belated attempt -the “Gilette Complete” range launched in 2004 in US -is still to hit UK ( so must have been a dud , I suppose). Meanwhile L’Oreal has last year launched its own range (L’Oreal Men expert) which is doing quite well.
So what is the big point! It’s about consumer centricity vs brand /product centricity (this is not a new concept /idea .Ted Levitt raised it as far back as in 1964 in his famous article in HBR , “The Marketing Myopia”). By narrowly defining its brand around shaving Gillette missed a huge opportunity. There was no other brand in a man’s toilet kit stronger than Gillette and they blew it up. If they were spending time researching evolution of the male grooming habits (instead of tracking the rate at which the facial hair grows), Nivea a brand focussed on skin care with a largely female franchise till 2000 which successfully extended its skin care equity via its Men’s range would not have been the market leader in UK (and perhaps Gillette could have got even a higher price from P&G for the sale).
Will be interesting to see what P&G does with the Gillette brand ?
Another legendary company which made the same mistake is Coke . While Coke stayed focussed on Carbonated drinks and on shipping more cola concentrate , Pepsi quietly retreated from the Cola wars and built a thriving non-carbonated beverage business – juices (Tropicana) , energy drinks (Gatorade) , water . Coke overlooked ( perhaps in its corporate hubris )the massive shift towards “well being” through-out the world . They perhaps thought the huge growth opportunity for colas in emerging markets will offset the slowdown in western markets . However even in developing markets like India per capita cola consumption hasn’t increased significantly despite bucketfuls of money and aggressive pricing over the last 10 years . In todays connected world consumers are leapfrogging product adoption cycles and latching on to the latest trend ( think of how entire countries in Asia and Africa bypassed the landline and moved straight to mobile connectivity) . Coke has woken up belatedly to the “total beverage opportunity” but is struggling with Minute Maid (doing well in developing markets, but struggling in the western markets) and Powerade . Take a look at the stock performance of the two companies starting Jan ‘2003 and the point is clear.
And think of it- Gillette and Coke -were 2 of the key stocks which made Warren Buffet rich. How times have changed!!! .
In summary ,
- Brands /companies exist to meet consumer needs ( have always been so, no profoundity here )
- The balance of power between consumers and brands has changed irrevocably (even for the #1 brand in the world), enabled by the connectivity and information revolution.
- Brands need to deliver REAL innovation to stay relevant to consumers and maintain their listing /shelf space at the big retailers. Incremental innovation (like XYZ with Aloe Vera) can deliver short-term growth but is not a sustainable source of growth as competitors can copy it quickly.
- The old approach to generating “Innovation” is slow and in-efficient. Collaborative innovation is the way forward.
- Laggard consumer good companies will need to catch up by acquiring companies with innovative brands/products ( eg Coke buying Glaceau Vitamin Water drinks; Why haven’t they bought Red Bull yet ?)
Communication partners (espl planners ) need to acquire new competencies (beyond communication and media strategy ) to be true business partners assisting and driving product concepting based on superior consumer insights ( driven out of high quality ethnographic research ) .
We need real Innovation in consumer goods and we need it faster and cheaper!