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Analytic Learning at P&G
For all the buzzwords, we learn again and again that the latest information strategy is really trickle-down knowledge gained over time from the biggest, brightest companies that have been there, done that, and moved on.
This has ever been the case with Procter & Gamble. I recall chatting years ago with then-CIO Steve David when P&G began offering its own proprietary product lifecycle methodology to consumer-packaged goods (CPG) competitors through a technology partner. In this case, P&G had determined the present value of a continuing project and offloaded the cost of future development to competitors while it forged new opportunities. The takeaway is that P&G was far enough ahead of the market that it didn't mind sharing previous innovations that might still be new to most of the industry.
Another reminder of competitive innovation at P&G came last week from a panel at a New York event (hosted by Harvard Business Review, and sponsored by Intel and SAS). The topic was analytic competition and the keynote came from Tom Davenport, who has already written on this topic in the December/January issue of BI Review. (Tom will have a second column on provisioning analytics in the March issue of BI Review. -ed)
Just as interesting was the ensuing discussion that included Glen Wegryn, associate director, global analytics, Procter & Gamble, who pointed out that analytics is nothing new at P&G. In fact, he said analytic initiatives at the CPG can be traced back to 1963, when they were managed under the executive-friendly guise of 'operations research.' "In 1968 we had an operations research group in which one of the analysts was Bob Herbold, who eventually became CIO at P&G and went on to Microsoft as COO," Wegryn says. "We had some false starts; in the 1980s there was another group that was basically out of the engineering organization that focused on qualitative decision analysis methods. That was a group of about 15 people [who did] simulation modeling, mathematical programming optimization and decision analysis." One of the lessons Wegryn took away from that initiative was that one director held the entire budget of that organization. "That director left the company, the replacement director came in, didn't understand what the group was doing and decided to cut it out," Wegryn says.
Most of the analysts found other jobs in the company or went on to other organizations, but within P&G, Wegryn says at the time there was essentially no career and no scaling or ability to harness analytic capabilities. But in 1992 a huge North American initiative was undertaken to look at manufacturing capacity and the structure of the distribution network. "One of the large projects we worked on resulted in annual cost savings of over $200 million. This was the result of applying analytic techniques to look at different options on how to consolidate the manufacturing base and where to locate our manufacturing plants. That's what we really built our capability on."
In the late 1990s, Wegryn's group grew as consumer driven supply chain structure came to the forefront and became a company-wide initiative on how to design and develop a supply network. "My organization grew up to support the IT function. We started with two people, and now we're about 20 people. Until about a year ago, we were always a bump on the side of the IT organization, not enough trouble to get rid of, but enough trouble to not really know how to exactly centralize us and really leverage our capabilities. Last year we redesigned ourselves and combined my operations research group of mathematical technology and analysis together with some marketing analysts within the company and consumer research analysts. Now we have a group of 100 analysts who had careers and were focused on strategic problems the company was facing according to market allocation, basic models and the application of deep mathematics to that type of analysis."
That is basically how analytics grew up at P&G. I asked Wegryn how his own group, still about 20 analysts, could manage what you'd expect would be a multitude of initiatives in a huge corporation. He said that about 80 percent of what his group does at P&G is one-off analyses. "Our job is really to sell confidence in decisions that are going to be made. During the course of any project, we are generally involved at the beginning as the project is structured. That's [where] we want to have the most influence; how the structure of a decision is going to move forward. Once the fundamental analysis and recommendation is delivered, we move out."
Wegryn made it clear that the long evolution of analytics at P&G was largely about structure and ownership, a good lesson for any corporation. In an era of ever-changing regimes, it's not uncommon for old plans to be quickly swept under the rug for reasons right or wrong. In either case -- if the knowledge base still exists -- I'll bet there are a lot of lessons to be extracted, and finally, chances to move on.
Jim Ericson is editorial director of DM Review, a SourceMedia publication. You can reach him at Jim.Ericson@sourcemedia.com.
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