May 21, 2008

Procter & Gamble's IT Organization

I just wrapped up this morning's last keynote at Forrester's IT Forum. Marta Foster discussed the transformation of Procter & Gamble's IT organization at her keynote entitled "Bringing IT from the Back Office to the Boardroom."

Procter & Gamble was founded in 1837 with headquarters in Cincinnati and $76.5 Billion annual sales. P&G has 23 billion-dollar brands. Between 1985 and 1999, P&G expanded from a US-focused company to and international company, entering 55 new markets and increasing operations to 86 countries.

During these 15 years, P&G expanded IT capabilities around the world, resulting in duplication and inefficiency. In 1999, P&G underwent a major re-organization to address some of the inefficiencies from the period of growth. P&G created global business units (e.g., Laundry) with global P&L, market development organizations, and Global Business Services.

At the time, most of the business leaders considered IT to be a cost, but the IT group wanted to become an innovation agent for the company. At a company level, P&G commits to 4%-6% annual growth to its shareholders. IT wanted to find ways to contribute to this top-line growth.

P&G’s Approach

  • Unite IT and core Business Services. Current Global Business Services consists of 8500 employees, of which 4000 are IT.
  • Drive shared services across Business services.
  • Shift thinking from “technologies” to “solutions.”
  • Change the back office to become a business driver.

P&G organization: Global Business Units, Market Development Organization, Global Business Services, Corporate Functions. IT was renamed to Information & Decision Solutions (IDS) to reinforce the change in mission and vision.

Three structural drivers: global organization (3 data centers), think holistically across business processes, orgs, and technologies), grow the partnerships. (HP, IBM, Jones Land LaSalle for facilities). Narrowed down from dozens of partners to 11 global partners.

Three core strategies for how they work

  • Run as a business: changed approach from being a cost center (focused only on cost reduction) to (cost, service levels, value creation, service management, “total user experience”) aligned to P&G approach (P/L, market share, sales volume, brand management, consumer benefits).
  • New IT strategy aligned to business needs: virtualization (replace physical product mock-ups with virtual reality applications), personalization, and real-time decision-making. (decision cockpits that can be personalized by employees – 20,000 cockpits now, growing to 35,000. Goal is for employee not in manufacturing to have their own cockpit – about 70,000 in total.). Virtual Solutions are now used on 79% of all P&G initiatives. Personalization: began as support for one site. 49 countries, 26 million visitors/year.
  • Measure for success. For every service, measure client satisfaction, service levels, user sensing, employee survey, scorecards, top-to-top connections with a 10-point scale for each category. Over past 3-4 years, $600M cost savings to date, 16% increase in user satisfaction, client sat at 8.7 (highest ever).

The IDS (IT) team has adopted a “Flow to Work” Design that attempts to breakdown traditional organizational "silos." People are encouraged to work across the organization and take a top-level business view on projects instead of focusing on their functional area or place on the org chart.

The acquisition of Gillette demonstrated some of the recent changes. P&G integrated Gillette and achieved all synergies in 15 months, whereas previous acquisitions of that size have taken 3 years. Marta’s org has 2000 people. Normally, people are on 2-year assignments. With 1/3 of organization, she’s trying to change so that folks have 6-month assignments.

Lessons learned

  • Maintain top-to-bottom focus on mission
  • Top management support is essential.
  • Communicate, communicate, communicate.
  • Commercialization is critical. All new technologies must find a home/purpose in delivering a product to market.
  • New models need new skills and capabilities.

P&G's green initiatives

  • Reduction of daily paper printing, focus on reducing consumption in facilities.
  • P&G has started measuring and reporting on carbon footprint for the company.
  • P&G is also involved in green initiatives with key customers (Walmart, Target) with a focus on the reduction of product packaging.
  • Reduction in travel: P&G is Cisco’s largest installation of tele-presence rooms. Global travel budgets reduced by 15%, IDS reduced travel by 40%, used a portion of the travel savings to fund video conferencing.
Now, I'm off to lunch. Late this afternoon, I'll be back on-line to blog about the afternoon sessions.

1 comment:

Luis E. said...

Hello Vinay, very good summary of Marta's presentation. Just a quick comment: Procter & Gamble is Procter and not Proctor.

Other than that, good post!