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Jeff D. Davis

“Inside P&G’s Innovation Machine”. Jeff D. Davis. Global New Business Development P&G Pharmaceuticals Mason, Ohio. Agenda. P&G…the world’s largest consumer packaged goods company Inside P&G’s innovation journey Inside P&G Pharmaceuticals’ new innovation strategy. Who are we?.

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Jeff D. Davis

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  1. “Inside P&G’s Innovation Machine” Jeff D. Davis Global New Business Development P&G Pharmaceuticals Mason, Ohio

  2. Agenda • P&G…the world’s largest consumer packaged goods company • Inside P&G’s innovation journey • Inside P&G Pharmaceuticals’ new innovation strategy

  3. Who are we? • Over $68 billion in global sales • 300 brands in over 160 countries • #1 or #2 in 80% of our categories • 140,000 employees

  4. billion P&G’s 22 Billion-Dollar Brands

  5. 99% of US households purchased a P&G product in 2005.

  6. Three Global Business Units Beauty & Health Care $29 Billion • Cosmetics • Deodorants • Feminine Care • Hair Care • Personal Cleansing • Skin Care • Oral Care • Personal Health Care • Pharmaceuticals Household & Family Care $33.5 Billion • Baby Care • Family Care • Fabric Care • Home Care • Pet Health & Nutrition • Snacks & Coffee Gillette $6.4 Billion • Razors & Blades • Duracell • Braun

  7. P&G Growth Strategies 1 Core business: leading brands, biggest countries, winning customers 2 Portfolio shift toward faster growing, higher margin, asset efficient categories 3 Developing markets andlower income consumers

  8. 8 Leveraging P&G’s Core Strengths Innovation ConsumerUnderstanding Branding Go-to- Market Scale

  9. 10,000 market research studies each year

  10. Understanding Consumers

  11. Agenda • P&G…the world’s largest consumer packaged goods company • Inside P&G’s innovation journey • Inside P&G Pharmaceuticals’ new innovation strategy

  12. Historically P&G has Grown Through Internal Innovation

  13. What Happens if You Don’t Grow? • Year 2000 wake up call • >50% drop in stock price

  14. Sustainable Sales Growth Organic Target thru FY 2010 +4% to +6% Acquisitions & Divestitures Organic (excludes foreign exchange, acquisition & divestiture impacts)

  15. innovate how we innovate

  16. A Call to Action . . . “We will acquire 50% of our innovations from outside P&G” A.G.Lafley • President and Chief Executive • The Procter & Gamble Company

  17. connect research &develop C&D vs R&D…

  18. from 50% our labs

  19. through 50% our labs

  20. US Industrial R&D by Size of Enterprise Company Size <1000 employees 1,000 – 4,999 5,000 – 9,999 10,000 – 24,999 25,000+ Source: Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough (Harvard Business School Press, 2006), page 22.

  21. Crest Scratch N Sniff Pkg. Kandoo Wipes Swiffer Duster Crest New Tubes Tide Stainbrush Mr. Clean Magic Eraser SK-II Facial Mask SK-II Airtouch Foundation Clairol In-Store Shade Selector Charmin Fresh Mates PuR / Whirlpool Refrigerator Filters Pantene Sonic Comb Olay Vitamins Pringles Dips Old Spice Shave Gel Prilosec OTC Glad Press N Seal Olay Regenerist Metamucil Capsules Mr. Clean Autodry Visia Beauty Imaging OTC Drug Registrations Olay White Radiance Facial Mask Olay Daily Facial Pillows Crest Liquid Dentifrice Just a few examples of C&D . . . Pantene Hair Styling Products

  22. “Connect & Develop” Inside P&G’s Innovation Model • +35% of new products have elements that originated from outside P&G • Up from 15% in 2000 • R&D productivity has increased by nearly 60% • Since 2000 stock collapse • Share price has doubled • Our portfolio has grown to 22 billion-dollar brands

  23. Agenda • P&G…the world’s largest consumer packaged goods company • Inside P&G’s innovation journey • Inside P&G Pharmaceuticals’ new innovation strategy

  24. Over 100 years old . . . 1887 Vicks VapoRub launched by Richardson-Vicks 1901 Pepto-Bismol launched by Norwich

  25. P&G Pharma’s Strategic Model Acquire, Develop & Market…(Connect & Develop) • Strategic choice to exclusively partner, license or acquire all of our new drug candidates • How? Our new drugs will come from a network of academia, biotech and pharmaceutical industry relationships • Restructured our R&D and commercial organizations to excel at identifying, evaluating, negotiating and managing long-term, mutually beneficial partnerships.

  26. P&G Pharma’s Strategic ModelThe Best of Both Worlds… • Marketing Expertise and Unique Insights of the world’s largest consumer company • Personal Touch of a small pharmaceutical company with deep experience and proven capabilities in our focus areas You & P&G…Think of the possibilities

  27. P&G Pharma’s Strategic Model Acquire, Develop & Market Our New R&D Structure (July 2006) • We eliminated our Discovery organization (300 people) and most of their laboratories • We retained our complete Development organization (650 people). • We established a Search & Evaluate organization (35 scientists) who have responsibility for helping find and screen licensing opportunities

  28. focus areas musculoskeletal gastrointestinal women’s health

  29. P&G Pharma’s Strategic ModelWhy will it work? Strategically focused on 3 therapeutic areas where the patient plays an active role in managing their health • Musculoskeletal • Osteoporosis, Rheumatoid Arthritis and Osteoarthritis • Gastrointestinal • Ulcerative Colitis, Crohn’s disease, IBS and GERD • Women’s Health • Overactive Bladder, Incontinence, Menopausal symptoms * Corporate interest: hair growth and skin aging

  30. Our Pharma Partnering Experience

  31. Nastech Enters Into Supply Agreement with Procter & Gamble for Parathyroid Hormone (PTH1-34) Nasal Spray BOTHELL, Wash., June 6 /PRNewswire-FirstCall/ -- Nastech Pharmaceutical Company Inc. (Nasdaq: NSTK) announced today an agreement with Procter & Gamble Pharmaceuticals, Inc., a division of The Procter & Gamble Company (NYSE: PG), to manufacture and supply PTH1-34 nasal spray for the potential commercialization of this investigational product for the treatment of osteoporosis. This agreement further strengthens the collaboration between the companies that began with the development and commercialization agreement for PTH1-34 nasal spray that was announced on February 1, 2006. Recent deals…P&G and NastechFeb 2006

  32. Recent deals…P&G and AblynxApril 2006

  33. Recent deals…P&G & ARYxJuly 2006

  34. The real test of a successful alliance negotiation is not a signed contract with all desired terms agreed in full… …it is whether the companies share acommon vision,feel like thedeal is fair, arecontractually motivated to do what’s right,and canwork together over the long term! P&G Pharma Partnering Philosophy “Negotiate for Implementation”

  35. best the of both worlds

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