In 1999, Procter & Gamble made the organizational move that many other companies had done years before: decentralizing its research and corporate functions. Product development activities, plus supporting disciplines like packaging, analytical and regulatory, reported through an R&D VP to the SBU head. Corporate Research continued to report to the CTO. This change was unremarkable as SBU ownership of the innovation machinery has been a wellplowed field by other companies.
Today, however, after nearly a decade of decentralization, I detect a move to reaggregate P&G’s corporate functions. Specifically, the packaging, analytical and regulatory organizations will now report to the CTO who will be responsible for technical support to each of the SBUs, depending upon their needs and corporate priorities.
Organization designs tend to change and even recycle in as short as a decade. I’m not sure exactly what triggered this reaggregration, but it does acknowledge that the business units are not necessarily the best places from which to manage all business functions.
One of the characteristics of a great research organization is the ability to discover and access cutting-edge technologies relevant to the corporation’s business interests. Equally important to the creation of successful innovations are the connections made between people working on disparate technologies or accessing outside technologies under development around the world. Hence the term, “connect and develop” --a little technology from here and there in non-obvious applications and you have the potential for a great innovation. So, having more researchers in physical, virtual or social contact with each other is a good thing. Having them reside or in some cases isolated in SBUs can inhibit this free flow of ideas.
Benefits of Critical Mass
Other reasons to reaggregate are primarily associated with the benefits of critical mass. If there is a corporate need to assemble key experts against a critical task in a short time frame, it’s easier to lead from a central organization. There is a better chance that best practices and cutting-edge knowledge will be available to solve problems. There can be cost efficiencies derived from better asset utilization and less equipment duplication. There is a much better chance to have skilled leaders to manage a particular technical discipline. Finally, career management is just easier to do; mentoring is more accessible and performance evaluations are more objective.
Having each SBU manage its own packaging, design, analytical, and regulatory organizations takes a lot of effort to do well. In each case, there is a need to plan for individual careers across organization lines, to have access to cutting-edge technologies and just have enough expertise available when needed.
To be successful, reaggregation requires embedding resources in the business units but connected to the central group. There has to be a high level of transactions on budget and constant communications on programs and priorities. Each technical discipline must have a top leader with a broad span of responsibility and excellent interaction skills with SBU leaders.
New Corporate R&D Organization
P&G saw its corporate functions reduced from approximately 20% of the R&D organization in the ‘90s to 5% post-2000. Since then, the formal new product process was disbanded and there has been a dearth of truly new products.
The company has now recombined 27% of the total R&D staff into the new Corporate R&D organization. Will this move improve the innovation output of the total organization? Only time will tell, so stay tuned!
Nevertheless, it could signal the beginning of a broader pendulum swing back toward more centralized research.
The shift toward less spending on centralized research was spotted in a 1988 survey of 140 companies analyzed by then-CIMS director Alden S. Bean, who reported his findings at a meeting of the Industrial Research Institute and in the January 1990 issue of its journal Research-Technology Management (p.2).
Commenting on Bean’s findings, Philip H. Brodsky, director of Monsanto’s Central Research Laboratories at that time, expressed his concern that there would be fewer U.S. technology breakthroughs of the magnitude of the transistor.
Brodsky added that he wouldn’t be surprised “that after some period of time, progressive CEOs realize they don’t have any long-term goodies in their portfolios and that all their R&D output has been pretty short-term and incrementally- oriented. Then they’ll start moving back toward assembling more powerful long-range research groups.”
What do readers think—has that time arrived?
CIMS Industrial Fellow
Retired HR Director, P&G Worldwide R&D, Proctor & Gamble