Sunday, June 8, 2003

The dot-com revolution


P&G leads the way in business by internet

By Cliff Peale
The Cincinnati Enquirer

[IMAGE] Robert Dixon (right) and Thomas Massung confer on P&G's campaign to conduct more business over the Internet, from handling consumer contacts to employee benefits to filling vendor orders.
(Ernest Coleman photo)
| ZOOM |
After bombing in the stock market three years ago, the Internet revolution is alive and well in the nation's biggest companies.

Shareholders in dot-com companies lost billions. But the same strategies that drove that craze are now established programs inside companies including Procter & Gamble Co.

The strategies are helping P&G cut millions of dollars in costs. They're also shrinking production cycles and improving communication among thousands of employees. All of this benefits corporate profits - and yes, stock prices.

"I don't see how a company of this scale can survive without the Internet being at the core," said Robert Dixon, vice president for information technology and leader of the "Leverage the Internet" program within P&G.

Leverage the Internet has focused on the way P&G deals with consumers, suppliers and customers, and employees.

• From Pampers.com to beinggirl.com, consumers are using P&G's Web sites more. P&G's corporate site, www.pg.com, hosted 1.87 million users in April.

• Suppliers in remote areas, who were still faxing or mailing order slips to P&G, are tapping into an Internet portal that automates the process.

• Employees now access virtually all of their benefit and job-related information over an internal Web site.

Big companies around the Tristate and around the world are making similar discoveries. Some, including P&G and General Electric Co., have earned high marks for integrating those programs with their basic business.

Large companies long have used technology to cut costs. But they've discovered that they can complete more transactions faster by plugging the Internet into even the most mundane corporate functions.

Jack Cassidy, president of Cincinnati Bell Inc., said the telecommunications company does similar things. Virtually all purchasing is done through electronic auctions, buying everything from copiers to services.

With consumers, Bell now is offering electronic billing through all of its business, with about 10 percent of wireless consumers signing on. Clearly, Cassidy said, that's the wave of the future.

And with corporate customers, Bell is providing data solutions that allow companies to concentrate on their core business, which provides a double benefit, Cassidy said.

"The good news for us is we provide the pipe," he said. "We get efficiencies on one end, and we make money on the other."

Creating an Internet-friendly culture takes years, said Christine Overby, a senior analyst with Forrester Research in Cambridge, Mass.

"This is about quick hits, small wins, and the systematic communication of those throughout the entire system," she said.

'Value creation'

Within P&G, Dixon is the voice of the Internet focus. Last summer, he got the seal of approval from chairman and chief executive A.G. Lafley, becoming the newest member of P&G's Global Leadership Council, the three dozen top executives who report to Lafley.

The 47-year-old Atlanta native is the second African-American on the CEO's top team at P&G. Trained as an engineer at Georgia Tech, he started at P&G's paper plant in Albany, Ga., but decided that he wanted to broaden outside P&G's network of plants and research hubs. He has managed information technology in P&G's baby-care unit since 1999.

Lafley's increased focus on using the Internet - "value creation" in Procter-speak - gave Dixon the organizational muscle he needed to nudge acceptance among employees around the world. He's done that by emphasizing that new technologies only matter if they get P&G more focused on consumers.

Milan Turk, director of global customer business development, said success for Leverage the Internet is measured not by new technologies, but by sales and profits.

"Everybody has a computer on their desk, and everybody who leaves the building has a laptop in their briefcase, but the point isn't to focus on the technology," Turk said. "It's all tied to business results."

Working without a defined budget, Dixon has identified people responsible for LTI in all of P&G's five major businesses and seven major geographies. He identified nine major goals last year, and is streamlining that to three goals now, isolating those that can be leveraged throughout P&G's 102,000 employees in nearly 80 countries.

Some tasks are easier than others. For example, P&G now does all of its "concept testing," or focus groups, over the Internet in the United States. Costs are 10 percent of what they once were, and the tests often are done in 24 hours, chief information officer Steve David said.

Dealing with consumers is a dicier proposition. Not all consumers want to use the Internet. Many just want to find their Tide on the store shelf, and that's that.

Other consumers, David said, feel "empowered" by the ability to opt into P&G's Web programs.

Much of P&G's Internet work is invisible to the consumer. Wall Street investors love it, because it cuts hundreds of millions of dollars in expenses.

The job, Dixon said, is far from done. When pushing the program to P&G managers in any part of the company, Dixon's role is half corporate executive and half cheerleader.

"It's just an intuitive feel, but let's push the envelope," Dixon urged a late April meeting on the E-procurement program at P&G's Winton Hill campus. "I think the pool (of savings) could potentially be much more than a couple of billion dollars."

'Now that's transformative'

"The business can do what they've always done, but they do it in a better way, so they replace the fax machine with the portal," says David Heppenstall, P&G's associate director of global purchasing systems.

He's on a conference call from England in late April, and Dixon is participating from his Winton Hill conference room.

"Then we say, 'You can do it better.' "

The subject is the supplier portal, started by P&G two years ago to replace paper transaction forms.

There are a "few thousand" suppliers using the portal now, but Heppenstall thinks that will multiply 3 to 5 times in the next few years.

Dixon wants to tap into P&G's existing service centers in Manila, Costa Rica and Newcastle, England to manage the growth and give suppliers all of the options they need. That could present a problem, because many of the functions at those centers are about to be outsourced after P&G signed a 10-year, $3 billion information-technology services contract with a unit of Hewlett-Packard Co.

"It'll be tough to get their attention in the next six weeks," Heppenstall says.

"Get some time with me in the next several weeks," Dixon replies. He says he'll talk to Global Business Services officer Filippo Passerini. "We need to play in this space and have the service ready to go sometime next fiscal year."

Next Dixon turns to Latin America, where the portal is not as widely used. But as a mid-sized player, it's "changed some of the rules," says Jose Ignacio Sordo, director of information technology for P&G in the Latin American market development group based in Caracas, Venezuela.

"They've been doing things one way, and technology is not one of their core functions," Sordo says of some of the smaller Latin American suppliers. "People sometimes are afraid. They say, 'If I don't do it, will you get rid of me?' ... Let's build reliability, something that works short-term."

People skills

Much of Dixon's work is not hard-core programming, but nudging people to drive changes through P&G's sometimes rigid corporate culture.

That skill took center stage when Dixon met with a group seeking to implement electronic procurement for P&G employees buying everything from computer repairs to professional services to office supplies. The baby and family care unit, which makes Pampers, Bounty and Charmin, has led the way. On office supplies alone, they're saving up to $2 million a year globally.

Until now, businesses have bought what they needed, then gone to accounts payable, a process dubbed "renegade spending." There were not enough discounts on large-volume buys, said Pat McCurnin, section manager in Global Business Services.

Employees are starting to take to the program, McCurnin says.

"If you think about Amazon.com as the gold standard, we're not there yet," Dixon says.

"Actually," McCurnin responds, "we're closer than you think."

E-mail cpeale@enquirer.com



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