In all the hallmarks of a political election, Procter & Gamble said on Monday that it beat Trian Partners activist-investor-in-chief Nelson Peltz’s proxy challenge by only 0.2 percent of the nearly 2 billion shares voted at the company’s annual meeting on Oct. 11. With such a close call, the activist shareholder disputes the tally and the loss of his board seat, and is demanding a recount.
While it could take several weeks for an independent auditor to confirm the results, the company isn’t ignoring the issues that gave Peltz a foothold into the boardroom in the first place. Besides calling for more streamlining, Peltz believes P&G has lost its innovation mojo and needs to get it back, and quickly, in order to spur greater growth.
P&G countered in a series of letters to shareholders and in its presentation at the annual meeting on October 11 that transformation is in fact well underway, from productivity and cost savings to “delivering meaningful new businesses, e-commerce growth, leadership market shares, and leadership levels of total shareholder return.” The result: innovative new products that extend the halo of its flagship brands.
It was only several years ago that P&G’s innovation chops were acknowledged worldwide, as former CEO A.G. Lafley executed a strategy of new features and products, many derived from existing products and brands, to fuel the company’ s growth in sales and market share across categories.
P&G also became known for a business unit called Connect + Develop that fostered innovations from startups and other outsiders that the company could turn into new products or enhancements for its brands, such as the Mr. Clean Eraser and Crest Spinbrush.
Nowadays, however, Peltz’s critique of P&G boils down to his belief that the company hasn’t moved quickly enough to develop, test and deploy innovative products, features and services in a time when millennial consumers aren’t just automatically using P&G’s iconic brands such as Tide and Pampers the way their parents did—especially not in an era where indie brands with a “natural vibe” like The Honest Company speak to transparency and authenticity, and Amazon’s Alexa voice recognition system may overlook its brands entirely.
P&G CEO David Taylor agrees that the company must move faster but argues that it’s “well into the journey” and that the most effective way to find innovation is through established brands, while Peltz argued that millennials want smaller and previously unknown brands with compelling narratives.
As noted in its letter to shareholders, Taylor and his management team argued that a streamlined “stronger portfolio is enabling us to accelerate our innovation engine. We have built a number of meaningful, new businesses such as Tide Pods, Pampers Swaddlers and Pants, Downy Unstopables, Always Discreet and Radiant, Oral-B Power, and many others. By any measure, P&G is the industry leader in innovation.”
Lean innovation at P&G, the new paradigm, involves rolling out more tests and smaller projects to produce results and generate insights that can be extended to other products. “It’s quite a shift,” Kathy Fish, P&G’s chief technology officer, told Bloomberg.
As Taylor has been noting at investor conferences such as the Barclays Global Consumer Staples Conference last month, P&G can point to the introduction of a new film-based container for liquids that weighs half as much as regular plastic and took only about six months to develop, as well as adding the renowned Downy brand name to its Unstopables laundry scents.
Or the Zevo flying insect trap that was introduced this past summer, or the Treo shaver announced today by Gillette, the world’s first shaver (at right) designed for those who can’t shave themselves.
There also are about 20 concepts in development at P&G’s Ventures unit, which explores new product, brand and service opportunities (and partners with the likes of Innventures, an innovation incubator) , as CTO Kathy Fish told Bloomberg.
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