Procter and Gamble Co., or P&G, better known in India for its health and hygiene products that include the Vicks line of throat lozenges, balm and inhalers, launched Olay Total Effects, a skin care product, in the country last August. The launch helped strengthen P&G’s beauty care portfolio, which has largely been confined to hair care brands such as Pantene, Head and Shoulders and Rejoice.
The decision to position Olay Total Effects as an anti-ageing cream was the result of intense consumer research, almost four years before the launch. Olay Total Effects is regarded as yet another example of the consumer-driven innovation model that yielded the consumer products company global revenues of $76.48 billion (around Rs3.29 trillion) in 2007.
In India, P&G is intent on furthering its open innovation model, termed the “Connect + Develop” programme. This includes strategic partnerships with research organizations such as the Council of Scientific and Industrial Research (CSIR) as well as with suppliers, vendors and other partners.
Spearheading the initiative in India is Shekhar Mitra, global head of research and development for beauty care, Gillette, and materials development, P&G. Mitra, who helped establish P&G’s global technical centre in Beijing, is credited with leading the development of several “game-changing” technology platforms and innovation strategies at P&G. These include oral hygiene products such as Crest Whitestrips and ProHealth, non-prescription medicines such as Aleve and Prilosec, skin care products such as Olay Regenerist and Olay Definity and the skin care range marketed under the Hugo Boss brand name. Several of these products—such as Crest Whitening Expressions, Olay Regenerist and Prilosec—figured among the Top 10 consumer product innovations in the Industrial Pacesetter Awards over the past few years.
In India to deliver the keynote address at the Confederation of Indian Industry India Innovation Summit in Bangalore recently, Mitra took time out to speak to Campaign . Here, he explains why India and China will be the driving forces for the open innovation model in the coming years. Edited excerpts from the interview:
Getting consumers involved in innovation and product creation has given P&G several new products in global markets; for instance, a single-rinse fabric softener developed in tandem with Mexican consumers. Are there any such initiatives in India?
An example of this platform, which emerges from a deep relationship with consumers, from talking and listening to them, is a product we just launched in India—Olay Total Effects. We, of course, have ongoing biotechnology research where we understand what chemical compounds are in the skin, or what the skin is losing due to exposure to the sun, ageing and pigmentation. We had already done that biotechnology work, testing ingredients from plant and other sources to help with anti-ageing, or with hyper pigmentation. This technology led to the isolation of a compound, VitaNiacin, but none of this research had made it to the market. That is, until we found out from consumer research in India that while the consumer who would use Olay Total Effects is someone who is buying a moisturizer, what she really wants is a product that offers an anti-ageing solution.
Once we saw this, we realized what the customer is actually saying. While she will pay for a value moisturizer, what she really wants is for the moisturizer to help her with the first signs of ageing. But a premium moisturizer will not do that.
We realized that VitaNiacin, with our technology, can help with anti-ageing—so, it is no longer a simple glycerine-based moisturizer. (The) VitaNiacin technology could finally be used, and we could meet the hidden needs of this consumer in a meaningful way. I share this example to show how deep consumer insight leads to a real understanding of how it can be used. Otherwise, a technology already developed would have been just sitting there if I hadn’t found a need to put it in a product.
Is this an example of a product specific to India, or is this a global trend?
We have done thousands of interviews with this consumer and we are finding that this consumer profile exists in China, in North America, in Mexico, in Russia and, of course, in India. It is the same group of consumers saying ‘my real need is for a good moisturizer that will take care of my anti-ageing concerns’.
In India, we have done the clinical studies with our thought leader panel that includes S. Sacchidanand, who is based in Bangalore and is the president of the Indian Association of Dermatologists, Venereologists and Leprologists. One of the things we want to do is bring credible, meaningful and noticeable innovations to the consumer. Because we want complete objectivity in our technology, the clinical studies are run by very well-known thought leaders around the globe
As you look at consumers around the globe, premium or mid-tier, rural India or rural Mexico...the consumer has similar needs. It is the same with a consumer in Bangalore, Shanghai or New York. It is amazing that consumers have the same needs, so one can develop technology that is global.
How important is the process of innovation in today’s highly competitive business environment? Is there a direct connect between innovations and profits?
Absolutely, and I will tell you why. I think there are a couple of reasons. Consumers or customers are becoming more discriminating and more demanding. They are making us really think through, develop breakthrough ways to reach out to them and meet their needs in a superior way. Otherwise, they are not going to be loyal to our brands. There is also a lot more competition, entry of multiple brands, and the consumer herself is very demanding.
Second is the economic environment—disposable incomes are higher. However, because of the externals, say rising petroleum prices or inflation, the consumer has to make some choices. However, this is the time when we cannot give up on breakthrough innovation because this always brings superior value to our consumers. For instance, in our industry, we say the consumer is boss, but how does she evaluate value? When she walks into a store, we call it the first moment of truth; it is the packaging which is all-important. Then, she takes it home (and) uses it. But, after 8-10 weeks, if she does not get all that is promised, that is the second moment of truth. In tough economic environments, when she has to make a decision, the consumer will become more discriminating and only go for a repeat purchase of those products and brands that provide not just the first moment of truth but, most importantly, also deliver on that second moment of truth.
That, basically, is a key driver of innovation for companies across economic cycles, particularly in this environment, when consumer spending is under tight pressure.
Is there an example of such innovations that address the needs of consumers in tight economic cycles?
It is not so much pricing as much as what is the right price for the right value that is important. We will not compromise anything in terms of product performance. For instance, with Olay Total Effects, consumer research told us the unique pump package is very attractive and signifies a masstige (mass prestige) kind of product. Yet, the pump package that we came up with originally was just too expensive. We decided not to compromise on it as consumers across the globe love this packaging. So, we worked with a very well-known, competent packaging supplier and our packaging engineers to simplify the package. We cut out a lot of metal parts and thinned the package to such an extent that it now has 23% less polyethylene. Thus, we have reduced the cost and made the product environmentally sustainable. This change has led to a cut in plastic consumption by a million tonnes globally. Imagine what innovation can do, by simplifying the production process without changing product performance. Key consumer insights can give you sources that drive innovation.
The other way to drive innovation is the confluence of ideas. In China, consumer research showed the need for spot reduction, in an age where people are conscious of high definition TV images. That inspired us to develop technology that can cause changes in spot profile or pigmentation profile across all races. We did this by collaborating with a laboratory in Cambridge, England, that has discovered imaging technology that shows you the condition of the skin below the surface. That is what I mean by noticeable innovation that works in tandem with consumer insights.
Do you do this across your portfolio or is innovation required for top-end and premium products only?
In the beauty business, we are only in the premium and mid-tier segments. But we do it across segments.
Is that a sustainable model?
Yes, it is very sustainable. One of the principles we have laid down is not to compromise on product performance and to bring affordability to the consumer, to the premium as well as mid-tier consumer. For the affordability challenge, we can actually use innovation to address different segments—it comes down to understanding the consumer in that particular segment.
What are the trends in consumer behaviour that you have tracked in India?
We have identified very interesting trends. The Indian consumer, in terms of personal care, is becoming extremely cognizant and sophisticated. Many of our consumers, depending on the strata of society they belong to, are going to spas and accessing information on the Internet. They are willing to spend more on personal care, on skin and hair care. This is a tremendous leap from a decade ago. That is why we want to be at the forefront of this.
You know, one of the assumptions about the Indian woman was that she was always looking for whitening products. But, we realized that her hidden need is an anti-ageing product. We came up with the seven signs of ageing—we were among the first to address that need, in a moisturizer. That is why the consumer piece begins much before the product piece, the technology piece and the credibility piece, all of which are required before we launch a product.
So, how long is the product development process?
It depends on the technology and on what the consumer wants. There is no fixed time, it can take anywhere between four to eight years.
Connect + Develop contributes to 50% of P&G products globally. How does the model work in India?
That is our target for India. But, it differs across various categories. In the beauty business globally, we are very close to target. Close to 40% of our global beauty and skin care products are coming out of collaboration and strategic partnership.
Is the partnership with CSIR part of this model? What are the developments that consumers can expect from this?
Yes, it is a part of the Connect + Develop programme. We have a number of collaborations—one is for super-absorbent materials. We have developed materials in-house too, but because CSIR has top-notch chemists, they have come up with several ideas. But I cannot get into details because of confidentiality.
Another area that we are looking at is botanical sources for perfumes. Globally, we are the creator for a number of well-known perfume brands, such as Hugo Boss. Lavender is one of the compounds used in the manufacture of perfumes. However, much of it is derived from chemical sources that set off skin problems. In collaboration with CSIR, we have found a plant in Himachal Pradesh which is a natural source of lavender and does not cause skin irritation.
How advanced are these projects?
We are at the mid-stage now.
You have also set up an innovation hub in Bangalore. What kinds of projects are expected to come from there?
In Bangalore, we will be adding a full-fledged laboratory for all P&G products. It started as an open innovation hub—to find strategic partnerships, suppliers and collaboration for the beauty care business—but we will now have a full-fledged laboratory with 55-60 scientists and engineers across all levels focusing on all P&G products, across the different lines of business.
How much do you plan to invest in India?
I cannot comment on that other than to tell you that we invest $2.2 billion globally on innovation across business segments. The investment in India will be a part of that global spend.
How significant is India’s contribution to innovation?
India is probably one of our most important sources of innovation. India and China are perhaps the fastest growing centres of open innovation globally. We also like to be very close to our consumers, and India and China are also significant consumer bases, making them naturally very important sources for open innovation.