Large, established businesses are being disrupted at different rates of change. Insurance and financial services are being disrupted by autonomous vehicles, Internet of things and blockchain. These disruptions are existential to their core businesses. In contrast, Consumer Packaged Goods (CPG's) are being disrupted to a lesser degree, in relative terms.
Or are they?
While CPG's aren't under a threat from autonomous vehicles, at least directly, they are under threat from changing consumer behavior and startups who are taking advantage of this insight.
Like 99% of all large enterprises, CPG's are really good at executing their known, proven business models. They are less capable of creating new, disruptive business models. Not only are they less capable because of the cultural and structural barriers that make them really good at execution, I propose it's virtually impossible for established CPG's to create truly disruptive innovations internally.
P&G seems to understand this.
When P&G noticed that large segments of consumers where sending their laundry out of the house to dry cleaners and wash & fold laundromats, they realized this change in consumer behavior is a threat to their existing business model. The traditional P&G model doesn't match up with an on-demand economy.
The most forward-thinking laundromats develop a simple ordering app where consumers can just order laundry pick up and delivery at their homes. Uber proved the model in spades and now virtually every consumer business can develop an on-demand mobile platform. This is particularly convenient and cost effective in urban environments where the population density is high. Startchup, a startup in Chicago, has developed a on-demand laundry service platform that provides the technical infrastructure to enable any laundromat to participate in a phone-enabled marketplace.
Through their work at 1871, a leading co-working space and innovation center in Chicago and an InsightStudios partner, Tide teamed up with Startchup to provide a Tide-branded laundry service called Tide Spin. Tide provides funding and a license to use the Tide brand name. Startchup provides the iOS and Android app and order management infrastructure as well as the laundry facilities to clean clothes. From a consumer perspective, this looks like a high-quality laundry service from Tide. Of course, the clothes are cleaned with Tide detergent and Downy fabric softener and both are co-branded on the Tide Spin website and mobile app.
Fortunately, I'm in the Tide Spin service area. After using their service for two weeks, I can honestly say it's the best laundry service in my area. My clothes come back smelling clean and fresh every time. I'll never have to do laundry again!
With its investment in Starchup and the creation of Tide Spin, P&G has fundamentally changed its consumer value proposition.
Value proposition for Tide detergent: Tide is tough on stains and easy on clothes when you are doing laundry.
Value proposition for Tide Spin: Leave the hamper to us. We will do your laundry for you so you can be free to do more important things.
Wow, that's a big difference! While the old model made consumers better at doing laundry, the new model provides consumers with more freedom by eliminating laundry all together. Powerful.
I find it remarkable, bold and visionary that P&G made the decision to create Tide Spin. This is not normal behavior for a typical CPG company. Instead of waiting for disruption to hit them, P&G is being proactive. As such, they are setting the terms for how their industry will evolve, and are not simply reacting to disruption when it's too late. Bravo.
I can tell you from first-hand experience not every CPG company is this bold or forward-thinking. In fact, many of them are quite the opposite. I already know who I'm betting on to survive on-demand disruption. Unlike Tide who looks outside itself for solutions, the companies that turn inward will die quick and painful deaths.
We are set to kickoff a Bootcamp next week where we will be teaching P&G'ers our Insight-Driven Iteration process for creating disruptive innovations. I can't wait to see what comes out of it.
Founder & CEO