in Business Design

A merger of consumer product innovators

While some have read the Gillett-Proctor & Gamble merger as leverage against Wal-Mart, James Surowiecki argues it was all about combining innovative like-minds:

A. G. Lafley, the C.E.O. of Procter & Gamble, denied that the acquisition had anything to do with the power of Wal-Mart. When he was pressed, he said, “The power has shifted to the consumer.” This may not be mere talk. In a world where brand names alone don’t confer power, the only way to prosper is to make products that genuinely improve (even if only marginally) on what came before. This is exactly what Gillette and P. & G. have done. Gillette’s razor line is one of the most lucrative businesses in history, mainly because the company has invested billions in technological innovation. This has allowed it to introduce a new razor every few years that costs considerably more than the one it’s replacing. And while historically P. & G. has focussed more on brand-building and marketing, in recent years it has invested heavily in innovation, too. The Swiffer mop and the SpinBrush electric toothbrush may not quite rank up there with penicillin or the Model T, but in the world of consumer products they count as real breakthroughs.